RIM's ECC security becomes a sales nightmare

To think that robust Canadian security capabilities are becoming a pain for Research in Motion (RIM:TSX, RIMM:Q). One of the key positive attributes of the BlackBerry — Elliptic curve cryptography — has befuddled the police and military arms of the United Arab Emirates to the point that RIM may be kicked out of the UAE. Just as the wireless email service got rolling in the reqion.

According to Arabian Business, the nations of Kuwait and Saudi Arabia are equally concerned, and have asked RIM to allow them to monitor BlackBerry servers that are hosted in their countries. According to the same journal, India had similar concerns, and RIM appears to have bent over backwards to resolve them:

RIM has offered to share with Indian security agencies its technical codes for corporate email services, open up access to all consumer emails within 15 days and also develop tools in six to eight months to allow monitoring of chats, the paper said, citing internal government documents.

You have to ask yourself what the fuss is all about. Is Al-Qaeda using RIMs to plan attacks in the Gulf region? There’s a reason why there are no terrorist attacks in places like Dubai, and it has nothing to do with the local Intelligence community. This all seems to be have more to do with keeping tabs ala Rick’s American Cafe than terrorism prevention.

That being said, RIM has no choice but to offer UAE, Kuwait and Saudi similar “fixes” that seem to have calmed the Indian security forces. This is not yet underway apparently, as RIM has cancelled a launch party for the new Pearl 9105, which was to be held tomorrow at the Prive at the Dubai Armani Hotel, according to Arabian Business.

Return policies are even in place at UAE’s Etisalat, and it has announced a BlackBerry replacement packages…. The carrier clearly didn;t want to wait to see how RIM responds to the Oct. 11th deadline provided by UAE government officials.

The irony for Dubai is that it has built 20 million square feet of stunning office space at the DIFC with the marketing promise that British Common Law will prevail on every contract executed on the property, despite being based in downtown Dubai. Global giants such as Deutsche Bank, Goldman Sachs and Standard Chartered have joined hundreds of other firms to set up shop here on the premise that Islamic law wouldn’t prevail. To now bring down the hammer on RIM, citing security concerns, suggests that DIFC isn’t living up to its promise: you can have your laws, but not your BlackBerrys.

For all of the excitement around RIM’s announcement in New York today, the shorts will be pumping the fact that the BlackBerry is just too secure for many of its target growth markets. Obviously, RIM needs to find a solution, as I assume the Chinese government is just as interested in a “backdoor” as the Emirates. In the meantime, this is just another “headline risk” that will likely serve to keep a lid on the stock.

MRM
(disclosure – I own RIM)