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RIM Is Getting Too Successful for Its Customers' Good

The other day I looked at how Research in Motion (RIMM) is still king of the smartphone unit market, even compared to the Apple (AAPL) iPhone. However, with the recent outages, the question that arises is whether the company has designed its infrastructure to keep up with the pace of growth it's seen.

Two major outages in the period of a week is pretty bad -- far worse than the iPhone customer complaints about periodic bad connectivity at times through AT&T (T) in a number of ways. RIM touts its security and reliability to large corporate customers, so this type of issue becomes critical to enterprises that depend on technology. Unlike Apple, RIM has no one else who can obviously take the blame. When you look at the growth in subscribers, the pressure becomes clearer:

The numbers come from RIM's own earnings announcements over 12 sequential financial quarters up through the latest reported one. The total number of subscribers doubles about every five quarters, as you can see clearly in the following graph:

From the fourth quarter of its 2007 fiscal year to the third quarter of FY 2010, the number of subscribers has quadrupled. Chances are that RIM designed its infrastructure to scale, though perhaps did not realize how quickly it might have to.

Doing this sort of analysis for Apple is impossible because the company only reports the total number of units it is selling, not how many are going to new users. That's why we know that, depending on the quarter, anywhere from 50 percent to 60 percent of RIM's unit sales are upgrades for previous subscribers. (One caveat: it may be that sales to consumers getting their own cell phone accounts wouldn't show up in subscriptions, so take this with some salt.) I've often wondered what percentage of iPhone unit sales are similarly upgrades, which would give a different understanding of the product's practical influence.

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