Queen Elizabeth once said she suffered an annus horribilis – a year so bad it couldn’t be said in English.
Jim Balsillie and Michael Lazaridis, the co-chairmen and co-CEOs of smartphone maker Research in Motion, would probably describe 2011 the same way.
They are on this year’s newsmakers list because of a series of events that has seemingly turned the tables on Canada’s premier technology company: It is losing market share, stock market value and respect.
IDC reported that RIM’s smartphone market share dropped from 15 per cent globally in third quarter of 2010 to 10 per cent in the third quarter of 2011. Shipments of BlackBerries fell from 12.4 million to 11.8 million smartphones during the same period.
Its net book value exceeds its market cap, a sign investors have no faith in RIM’s future.
The launch of its PlayBook tablet near the end of last year was greeted with complaints about the lack of software and sales this year have been lacklustre, there are delays in getting out a desperately-needed next-generation operating system, there are no exciting handsets right now to face the Apple’s iPhone and Samsung’s Galaxy, software developers would rather create apps for iOS and Android, and, arguably the worst, it took four days to bring October’s service outage under control.
Industry analysts, including Mark Tauschuk of London, Ont.,-based Info-Tech Research, said RIM underestimated the significance of the shift by companies to a bring your own device policy, opening the door for iPhones, iPads and Android smart phones.
As a result, there are increased calls for Balsillie and Lazaridis to resign.
“I think they’ve got no options left,” said Iain Grant, managing director of the SeaBoard Group telecommunications consultancy. While the stock market is over-reacting to events, “current management are victims of their own hubris,” he said.
RIM could not make either available for an interview for this piece, instead sending a lengthy statement, touting the company’s achievements this year, including releasing BlackBerry 7 smart phones, that it now has 70 million subscribers and launched a new music service. So we have no way of knowing how Balsillie and Lazaridis are coping.
But IT entrepreneur Jim Estill, whose 13-year stint on the board spanned the period from before the Waterloo, Ont., company went public until last December, shrugs it off. “I’m sure it can’t be very fun,” he said in an interview, “but you don’t do what they do if you haven’t been through a lot of controversy and had a lot of tough times.”
In 2006, he recalled, RIM lost a $600 million patent fight, “which was very dark days for the company. But they came back, such that nobody even remembers … within two years they recovered.”
Estill, who used to head computer distributor Synnex Canada and now is a partner at a venture capital firm, is a stout defender of the company, the board and its co-leaders.
PlayBook was released “a little bit too early,” he concedes, some of RIM’s marketing messages need to be clarified, the QNX/BBX operating system has had “some software misses.” But lay blame at the feet of men once crowned as untouchable? No.
“I don’t know anyone else that has taken a company from zero to $10 billion that would want to come in and run RIM,” he said. “Those guys are both great guys. And for the longest time co-CEOs worked awesome.”
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He listed RIM’s strengths: sitting on about $1 billion in cash. In its last fiscal quarter it scored a US$329 million net income.
Last year RIM spent something like $1 billion on research and development, he said. “The probability of them coming up with something [big] is pretty high. They have a lot of brilliant engineers, and they have resources and cash – that can let them buy a lot of things, reformulate the firm … I just don’t think they’re as weak as everybody thinks.”
But isn’t RIM losing market share in big markets? Markets go up and down, he replies — at one point Apple was going bankrupt. PlayBook? That’s “completely incremental” to the sales of BlackBerrys, he says. Besides, people don’t understand that the tablet is an extension of a BlackBerry, not an iPad competitor. BlackBerrys aren’t cool any more? “Cool comes in and out of fashion.”
Others also see positive signs. Computerworld U.S. quotes an IT industry market analyst at Canalys observing that BlackBerry sales in Europe, Asia and the Middle East are still going up. Last month’s service outage has hurt RIM’s reputation for reliability there, but he doesn’t expect it to have a substantial impact.
Similarly, Roberta Fox, president of the Mount Albert, Ont.-based Fox Group, which advises businesses on telecommunications, says none of her clients are abandoning ship. “We’re doing a couple of projects where we’re analyzing future mobile devices, and so far of the clients we’re working with they’re all still considering RIM to be in the play and part of their future. There’s been some disappointment with the PlayBook and its functionality. A bunch thought they were going to deploy them, but they’ve decided not to.”
On the other hand, Wind Mobile CEO Anthony Lacavera said demand for BlackBerries at the startup carrier is “plateauing.” He sees “explosive” sales of Android-based devices.
Yet he’s optimistic about RIM’s future because no other handset maker has the same level of integration with carriers.The company isn’t as weak as the stock market suggests, said Grant, noting RIM still has millions of subscribers. But even if it can pull out of its nosedive, he added, RIM will no longer be the dominant player in smartphones.