RIM’s Co-CEOs Hand Reins to Heins, Challenges Remain

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Research In Motion

We had long been expecting the leadership shakeup at Research in Motion (NASDAQ:RIMM). It finally happened this Sunday when the company announced the replacement of its co-Chief Executive Officers Jim Balsillie and Mike Lazaridis with Thorsten Heins as the President and CEO. [1] The shakeup is not surprising as the company continues to struggle against Apple (NASDAQ:AAPL) and Google’s (NASDAQ:GOOG) Android ecosystem in the smartphone and tablet market.

RIM’s share price has plummeted to eight-year lows, and the company’s turnaround will be a huge challenge in front of Heins. Our $16.50 price estimate for RIM stock is about 3% below market price.

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See our complete analysis of RIM here

Pressure on management had grown

RIM’s investors were left frustrated by the company’s performance over the last year. The management’s unwillingness to budge exacerbated this problem for investors. RIM even turned down takeover offers from Amazon (NASDAQ:AMZN) and other potential buyers with management opting to fix problems on its own (see RIM’s Takeover Talks Grow Stronger as Amazon, Microsoft Take Closer Look). The company was criticized for a lack of innovation that is much needed to survive in the fast changing mobile world.

Challenge remains in front of new leaders

It will be a huge challenge for Heins to turn the company around and stop the slide in the market share.  In December last year, RIM announced that the first BlackBerrys based on the new system called BB10, won’t be available until the latter part of this year. This announcement did not go well with investors hoping for a quick turnaround. The company also suffered a nine-month delay in getting e-mail onto the PlayBook tablet. Although PlayBook OS 2.0 software update had some important features, we believe these features should have been present in the first place (see RIM Playbook OS 2.0 Still No Game Changer).

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Notes:
  1. RIM’s Press Release, January 22nd, 2012 []