Research in Motion: You’ve Got to be Kidding Me
A friend of mine recently said that he hopes he is never in charge of a company where the stock trades up after his departure. How about if the stock trades down 8.4%, upon your being promoted to CEO, after the guys in charge before you stuck did such a horrendous job that the market had been clamoring for their departure for years (the founders, no less)? Welcome to the executive boardroom, as President and CEO of Research In Motion Ltd. (RIMM), Thorsten Heins!
The day started with optimism for RIMM. The stock was up a lot (around 4.0%-5.0%). Early on, investors were applauding the reduced roles of founders Mike Lazaridis (moving to Vice Chair of RIMM and Chair of the new Innovation Committee) and Jim Balsillie (remaining a Director of RIMM). Then, the company held a call, and introduced the investing community to Thorsten Heins, where Mr. Heins decried that RIMM doesn’t need to make substantive strategic changes (no break-up of the business), only has a marketing problem (he is going to hire a Chief Marketing Officer) and in one of the most bizarre videos I have ever seen from an executive (see this link on the WSJ page) rambles on about how RIMM is a highly innovative high tech company. After the call, and seeing Mr. Heins, those remaining shareholders hanging on to RIMM for the hope of something good happening couldn’t sell fast enough. And you know what? I don’t blame them!
I have spent far too much time thinking about RIMM as a prospective investment (I really have, as I have blogged about it for a while, and have talked to anyone and everyone about the business). I remember my first Blackberry, as a young analyst at Goldman Sachs, and how useful and addictive the thing was (that was 2001). I loved the brand, and with the stock completely falling out of bed over the past year, I wanted to find reasons to own it. But I couldn’t, as every time I would sit down for dinner with friends, family, clients or anyone really, they were showing me their new iPhone and smiling ear to ear about ditching their Blackberry. RIMM has stopped making phones people want. Which is a real problem, because that is sort of what the business is supposed to do (and don’t even get me started about their failure in the tablet arena).
Had Mr. Heins even acknowledged that the problem isn’t in the marketing, but in the product itself, investors might have been less pessimistic. Instead, Mr. Heins put out a video talking about RIMM as an innovative company when the product hasn’t, for all intents and purposes, changed that much in a decade! I mean, the screen is bigger today (and they have color too). But the software still works about the same, and these guys still haven’t figured out a mobile way to get people on to the internet! It is one thing when Apple, Inc. (AAPL) out innovates you. It is another when Microsoft Corp. (MSFT) does (their phones are far cooler, and more nifty, than anything Blackberry has done in years, which says a lot, as MSFT is wonderful at coming very late to the party and at least in recent years, not doing a very good job when they get there). Mr. Heins seemed to try and pull a Steve Jobs, using all the positive adjectives in an attempt to “distort” reality. Unfortunately, RIMM has lost all goodwill with investors long ago, and telling everyone that you are innovative when you aren’t is not going to engender confidence. And frankly, you can’t pull a Steve Jobs unless you are Steve Jobs (a note to any CEO who tries).
RIMM doesn’t have a marketing problem. They have a product problem. I get it that a lot of people like the plastic keys, and don’t like a touch screen. That is 100% all that RIMM has going for it right now (as an example, my mother has a Blackberry, and is afraid of going to the iPhone, for just that reason), and that has been losing out to the iPhone and Android phones even still. How has RIMM capitalized on this? By shifting the product line to a combination of touch screens and touch/keyboard screens. That isn’t marketing. That’s just stupid, and being unaware of what your customer wants and needs from you.
Maybe I will be proven wrong and Mr. Heins will show himself to be a turnaround guru, finding a way to get RIMM into the top three in smartphones (as he asserts is the company’s goal, which, in and of itself, is kind of sad, as you would hope all businesses would aspire to being number one, not top three, but that is what it is) or better, do a deal and sell the company for a premium to the current price and put shareholders out of their misery (I wouldn’t bet on that outcome because if there was a deal to do, it would likely have been done, one would think). But listening to him today and seeing the response by shareholders, it is pretty clear that little confidence in a turnaround was inspired.
Final note: I know, for the remaining shareholders (and whatever bulls are out there), that Blackberry is killing it in India right now (until the iPhone gets to India, that is). I know that the product isn’t “bad” if you like a keyboard and are primarily interested in a decent battery life and the ability to get email. I also know RIMM has no debt, a lot of cash, is still profitable and has runway to survive for a long-time. I know the Enterprise business is a profitable business. But what is all of that worth? Considering the declining market share, the lack of innovation in years and now, a CEO who doesn’t appear to get it (and the old management still lingering and active, which was a big problem by all accounts), I would argue the option value on RIMM getting better isn’t that great. Better to deploy capital elsewhere.
This article was originally published by Robert Rubin at The Researcher Join our contributor network and submit a post powered by data and interactive charts.