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Emerging markets mean more growth for RIM

MONTREAL - Most emerging economies don't want to risk a backlash by throwing out BlackBerry maker Research In Motion, which also needs these markets for international growth, analysts say.

MONTREAL - Most emerging economies don't want to risk a backlash by throwing out BlackBerry maker Research In Motion, which also needs these markets for international growth, analysts say.

Reports out of India on Tuesday said RIM has been given until Jan. 31 to satisfy demands by that government to have access to its encrypted email and instant messaging services.

"No country wants to be the country that is so undemocratic that they kick out BlackBerry," said analyst Tavis McCourt of Morgan Keegan & Company.

India is an emerging power and Dubai is trying to become a major business hub in the Middle East.

"My impression is look — if China allows it and you don't, you've got a serious public relations problem as a country," McCourt said from Nashville, Tenn.

RIM (TSX:RIM) couldn't be reached for comment on Monday to confirm it received an extended deadline from India.

The benefit of having a highly secure device is that RIM wins a lot of government and business clients, McCourt said.

"The downside of it is you have to work with various government regulations around the world to be able to sell in those countries."

The Canadian company is looking to emerging markets in Asia, Africa and Latin America for more growth, as the North America smartphone market gets more competitive with players like Apple, Google-powered Android phones and Microsoft's Windows Mobile 7 operating system.

On Friday, the United Arab Emirates backed off a threat to shut down BlackBerry instant messaging, email and web browsing over security concerns.

The Waterloo, Ont.,-based company has repeatedly said it doesn't have access to encrypted data on its users smartphones and wouldn't cut any special deals with any particular country.

RIM sends emails and instant messages through one of several servers it has globally where data gets encrypted for business users. Consumers have a lower level of security.

Indian officials have said they want real-time access to encrypted data to fend off any terrorist attacks.

MKM Partners analyst Tero Kuittinen said it's in the interests of RIM and the countries involved to reach an agreement and not to have the BlackBerry maker forced to leave over security concerns.

"It's not the kind of publicity these countries would want," he said from New York.

Kuittinen said there will be some impact on sales again in the Middle East in the current quarter and there's still a negative "overhang" on RIM's stock.

"Wall Street hates issues that it cannot quantify or it feels it can't really get its hands around. The degree of uncertainty may make these issues actually look larger than they really are."

Some of the "intentionally harsh" language that has come out publicly from some of the countries has simply been a negotiating tool, he said.

Although RIM isn't expected to give details of its agreement with United Arab Emirates or of any eventual agreement with India, RIM could install servers in that country to satisfy security concerns, he said.

William Blair & Co. analyst Anil Doradla said prolonged security issues will further affect BlackBerry sales internationally.

"RIM is at a critical juncture in its life cycle," Doradla said from Chicago.

"It's faltering on its share in North America. It's a company that cannot afford to continue on with issues on the international front."

 
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