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RIM: Victim of Its Own Success?

With foreign governments lining up to kick sand in RIM's face, is the Canadian phone giant a victim of its own security success?

WATERLOO, Ontario (


) -- As foreign governments line up to kick sand in

Research In Motion's


face, is the Canadian phone giant a victim of its own security success?


Saudi Arabia's BlackBerry ban looming

and the UAE planning to

suspend email and browsing BlackBerry services on Oct. 11

, RIM is having a tough time.


has also been locked in security talks with the phone maker


Algeria is said to be reviewing BlackBerry use.

RIM's struggles have even threatened to overshadow the

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launch of the new BlackBerry Torch.

"In a perverse way, it just shows how secure RIM is," Mark McKechnie, an analyst at Gleacher & Co. told


, explaining that RIM's extensive security setup is actually antagonizing some foreign powers.

RIM, unlike rivals such as


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, has built its own secure Network Operations Centers (NOCs) to transfer encrypted data before it hits local providers' wireless hubs. The fact that these NOCs exist outside of countries' borders is the real reason why some governments are calling RIM's security into question, according to Brent Iadarola, an analyst at Frost & Sullivan.

"The paranoia, which I think is misguided, is due to the fact that the servers do not reside in the country," he said. "The truth is that RIM has the most secure solution in the industry."

For Gleacher & Co.'s McKechnie, RIM's problems are similar to


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recent privacy struggles in China.

"It's like a big brother thing," he said. "

But it's a testament to how secure RIM's network is."

RIM, which operates in 175 countries, employs a high level of encryption to protect customer data. "The BlackBerry enterprise solution was designed to preclude RIM, or any third party, from reading encrypted information under any circumstances," it said, in a statement emailed to


. "RIM cannot accommodate any request for a copy of a customer's encryption key, since at no time does RIM, or any wireless network operator or any third party, ever possess a copy of the key."

In some parts of the world, though, this is obviously an issue, prompting the recent furor over BlackBerry services. The UAE, for example, has cited judicial, social and national security reasons for its planned BlackBerry ban.

Experts expect RIM to reach some form of compromise with these governments, although Iadarola warns that building expensive NOCs in each country is out of the question. Building a regional NOC in the Middle East, however, where RIM is facing the biggest opposition, may alleviate local concerns, he said.

With RIM under

intense pressure

from Apple's iPhone and Google's Android operating system, though, the phone maker's international woes could not have come at a worse time.

"All of this publicity creates an opportunity for Apple, other handset manufacturers, and other mobile solution providers to take advantage," said Iadarola. "The average consumer out there just reads the headlines."

RIM's stock has dipped more than 7% in the last five days, although the company can at least count on its close relationship with enterprises and other governments to offset recent problems. The BlackBerry, for example, is the U.S. government's chosen smartphone, and President Obama is a fan of the device.

Long term, experts expect RIM's overseas security challenges to blow over, but fierce competitive challenges will still remain.

For McKechnie, RIM's tussles with the UAE and Saudi Arabia could ultimately prove to be a sandstorm in a teacup. "The bigger issue is the competitive overhang from Google and Apple," he said.

-- Reported by James Rogers in New York

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