The year of denial is over at Research in Motion. In a frank and overdue conversation with investors Thursday, new CEO Thorsten Heins finally admitted that the situation was dire and that “substantial change” is needed. Does he have enough time to effect that change?
RIM’s lowest point yet came Thursday amid a quarterly net loss, the first time the company has recorded a net loss in recent memory. The company was forced to write off inventory of BlackBerry 7 handsets, which aren’t selling particularly well in North America, and revenue plunged 24 percent compared to last year.
Just two months ago after taking the top job, Heins had insisted that RIM wasn’t in nearly as bad shape as outsiders believed. Stunningly, it would appear he had no real insight into just how bad things were at RIM before taking the top job: “the impression I had of RIM on day 2 as CEO is different from the impression, no, the facts, on week 10 as CEO,” Heins said Thursday.
Now that he gets it, things are going to change at RIM:
- The company is paring down its famously complicated management structure, with its multiple chief operating officers and fragmented decision-making processes. Layoffs are coming. Heins also cited “a lack of accountability” as a major problem that allowed RIM to fall from one of the world’s most respected mobile companies just five years ago to a running joke.
- It would seem that nearly all strategic options are on the table. Heins said RIM would consider licensing the BlackBerry software to other hardware makers. He said RIM would consider divesting parts of its business that are attractive to other companies. A patent sale seems a possibility, and RIM will definitely be entertaining takeover offers.
- In 2012 RIM plans to almost abandon the high-end of the smartphone market to focus on “incentivizing” (read: subsidizing) carrier partners and consumers to purchase BlackBerry 7 handsets as well as focus on international markets. That will increase pressure on its bottom line, and could lead to further losses.
- Jim Balsillie, who along with co-CEO Mike Lazaridis ran RIM into the ground and forced Heins into this predicament, is leaving RIM’s board. David Yach and Jim Rowan, two of the five executives currently listed on RIM’s executive management page, are also leaving.
Heins deserves a lot of credit for taking his lumps during the earnings conference call, which had to be painful for a man who spent the majority of his career at RIM believing a turnaround was just around the corner. But for all his promises of strategic reviews, cost-cutting, and focus, only one thing really matters.
RIM needs its BlackBerry 10 software to be a hit. Heins said he had seen prototypes of the software running over the past week and pronounced himself happy with the progress so far. He said he wants RIM’s products to be “aspirational high-end device(s) for people to stay ahead of the game.”
RIM has no choice but to live up to that goal, because the smartphone market is consolidating around two mobile operating systems: Apple’s iOS and Google’s Android. Even Microsoft, with more than a year of Windows Phone 7 as a well-received product available in the market, has found it impossible to gain ground against this double-headed monster.
Meanwhile, RIM has nothing but promises. Had RIM been willing to face up to these issues a year ago, when Lazaridis testily insisted that RIM’s problems were overblown and the invention of an Apple-obsessed media, the company might have had time to craft a turnaround. Now it’s out of options.
If BlackBerry 10 handsets are anything less than a smashing success, RIM will join Palm as the second casualty of the iPhone.