Tech Talk News: RIM Replaces CEOs as it Struggles to Answer Apple

Research In Motion Ltd. (RIM) shook up its top management, replacing co-Chief Executive Officers Jim Balsillie and Mike Lazaridis, who guided the BlackBerry maker for two decades and struggled to compete against Apple Inc. (AAPL)

@Yungjohnnybravo @TatWZA

Thorsten Heins, a chief operating officer who joined RIM four years ago from Siemens AG, will replace the pair in the CEO post effective immediately, RIM said in a statement. Director Barbara Stymiest will take over as chairman, as the two also cede their co-chairmen positions. Lazaridis, who founded RIM in 1984, will become vice chairman; Balsillie will remain a board member without any operational role.

The shakeup comes after Balsillie and Lazaridis showed little sign of being able to stop Apple and Google Inc. (GOOG)’s gains as the Silicon Valley companies remade the mobile-computing market with devices such as the iPhone and iPad. Waterloo, Ontario-based RIM’s stocktumbled 75 percent last year as sales slumped, and the two men, both 50, drew investor criticism for releasing products without the features necessary to compete.

Still, Lazaridis, Balsillie and Stymiest all said the decision to step down was the men’s own and not a response to outside pressure. The shift is a result of the company’s evolution and the introduction of new technologies that will give RIM more competitive products, Lazaridis said.

“This marks the beginning of a new era for RIM,” he said in an interview. “It was a bit of bumpy ride. We’ve done it as best we could. Thorsten is the ideal choice. He has the right skills at the right time.”

Plunging Sales

RIM’s share of the global smartphone market sank to 11 percent in the third quarter from 15 percent a year earlier, according to research firm Gartner Inc., stung by customer defections to the iPhone, and handsets that use Google Inc.’s Android software, including Samsung Electronics Co.’s Galaxy.

RIM, once the most valuable company in Canada, fell 3.2 percent to $17 at the close in New York Jan. 20, giving it a market capitalization of $8.9 billion. RIM has lost 88 percent since its peak in 2008, when soaring BlackBerry sales pushed its market value to more than $80 billion. Last quarter, sales fell about 6 percent to $5.17 billion.

The company faced a Jan. 31 deadline to report the findings of a review of its management structure. RIM agreed to the review to fend off an effort to overhaul management by investor Northwest & Ethical Investments LP, which had proposed the company split the chairman and CEO roles.

‘Leaderless Company’

Still, other investors led by Jaguar Financial Corp. (JFC) kept pushing for leadership changes and called for RIM to divide into separate companies, seek a merger or sell itself. Investors owning 8 percent of RIM supported the effort, Jaguar has said.

RIM is hurt by “management dominance and a lack of board oversight, which leads to a leaderless company,” Jaguar CEO Vic Alboini said in October. “The timing is very ripe now for a new CEO to step in.”

Speculation that the drop in RIM’s value will lead to takeover approaches drove the company’s stock to one-day gains of at least 5 percent more than 10 times since the beginning of August. RIM didn’t put itself up for sale or consider a sale, according to a person familiar with the matter, who couldn’t comment for attribution because the information isn’t public. Tenille Kennedy, a spokeswoman for RIM, said the company’s policy is not to comment on rumors or speculation.

‘Secular Loser’

RIM’s market-share slump in the past two years was driven by the U.S., where consumers were quick to adopt Apple and Android devices. RIM, which dominated the U.S. smartphone market before Apple and Google entered it, had its share of sales drop to 16.6 percent in the three months ending in November, according to ComScore Inc. Google’s Android boosted its share to 46.9 percent and Apple increased to 28.7 percent.

The BlackBerry, which gained popularity among bankers, lawyers, executives and politicians for its reliability, has also began losing its hold of the corporate market as more companies allow workers to use iPhones and Android handsets.

The BlackBerry is “a secular loser to Apple and Android devices,” Ittai Kidron, an analyst at Oppenheimer & Co. in New York, told investors in a note last month. There are few signs RIM can recover as “execution issues remain a drag,” he said.

As the U.S. market evolved, RIM decided to place more emphasis on growing international sales, Balsillie said in an interview. While sales in Asia and Latin America rose, they weren’t enough to offset the slump in North America, resulting in RIM’s first revenue drop years in nine years in September.

“The biggest dilemma was the U.S. market went down the path of mobile high-end computing on a 4G platform, and our products were suited for a global marketplace,” Balsillie said. “The greatest dilemma was resources and capacities, where do you put them. We couldn’t do both.”

Former Siemens Manager

With Heins, 54, RIM is banking on an executive who has remained largely in Balsillie’s and Lazaridis’s shadow. In July, he was named to the enlarged position of chief operating officer for product and sales, overseeing engineering, hardware and software.

In an interview, Heins cited RIM’s 75 million subscribers, “strong balance sheet” and negligible debt as advantages. He said the company’s focus on its own software will yield results in the long term. About 18 months ago, the company considered and decided against adopting another operating system, he said.

“Jim and Mike’s strategy of not sacrificing long-term value for short-term gain is the right one,” said Heins, who worked at Siemens for more than 20 years before joining RIM. “I share that value.”

RIM’s strategy of relying on its own software mimics that of Apple. Other handset makers, such as Samsung, HTC Corp. and Motorola Mobility Holdings Inc. (MMI), have boosted sales by using the Android software Google gives away for free.

Product Delays

Last year’s promotion of Heins, a German national originally from Munich, was part of a plan to accelerate product development. Still, the company’s missteps since have included delays with a new operating system the company is betting on to challenge Apple and Google. In December, RIM said the first BlackBerrys based on the new system, called BB10, won’t be available until the latter part of this year.

The company also suffered a nine-month delay in getting e- mail onto the PlayBook tablet. The technical difficulties and marketing missteps have left PlayBook shipments at a little more than 1 percent of those for Apple’s market-leading iPad.

Innovation Chief

Heins’s challenge isn’t just fighting Apple and the Android-camp led by Google, which dominate the smartphone and tablet markets. He will also need to fend off competition from Microsoft Corp. (MSFT), which is working with carriers such as AT&T Inc. and device manufacturers including Nokia Oyj (NOK1V) to gain ground in the smartphone market.

RIM’s PlayBook meanwhile is now just one of dozens of tablets seeking to gain share from Apple’s iPad. Amazon.com Inc. (AMZN)’s newest such device hit store shelves on Nov. 14 and quickly surpassed more-established tablets from Samsung Electronics Co. and Barnes & Noble Inc.

Lazaridis founded RIM when he was a senior at the University of Waterloo in Canada. The company began working on wireless products three years later, developing a pager that evolved into what is known as the BlackBerry. Balsillie, a 1989 graduate of Harvard Business School, joined RIM in 1992.

In addition to his vice-chairman role, Lazaridis will run the board’s innovation committee. He said he will work closely with Heins and provide strategic counsel.

‘Here to Fight’

Lazaridis also said he plans to boost his RIM stake by $50 million. Balsillie said he will remain a significant shareholder. They each own about 5 percent of the company now.

Stymiest, a former Royal Bank of Canada executive, became a RIM director in 2007. She previously was a partner at Ernst & Young LLP and chief financial officer of BMO Nesbitt Burns Inc. RIM will also name Fairfax Financial Holdings Inc. CEO Prem Watsa a director, bringing the number of board members to 11.

As part of the overhaul, Heins said he will also seek a new marketing chief for the company. Balsillie had taken over the those duties after RIM’s first marketing chief, Keith Pardy, left in March, less than two years after joining the company.

“We are in a competitive world, but we believe in our own strength,” Heins said. “I’m here to fight.”

[bloomberg]