RIM's Heins fights back: Reading between the lines

RIM's Heins fights back: Reading between the lines

Summary: RIM's chief executive Thorsten Heins, writing in The Globe and Mail, defends his company and asks for its customers not to "count BlackBerry out." What he said is valid, but what he didn't say is just as interesting.

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TOPICS: BlackBerry
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"Delusional," says editor-in-chief Larry Dignan. Editor Andrew Nusca instead felt pity: "He's certainly trying," he said. 

RIM headquarters (Credit: RIM)
A "death-spiral" was at the center of the controversial message after BlackBerry maker Research in Motion's chief executive Thorsten Heins spoke on a Canadian morning television programme. 

"This company is not ignoring the world out there, nor is it in a death spiral," he said.

But a few hours later, Heins cranked out his iPhone BlackBerry --- naturally --- and penned a piece to The Globe and Mail, describing how he "understand[s] the frustration and impatience" of the company's shareholders, and stated how it was not "at the end" and RIM will "empower people like never before."

Line by line, let's see what he wrote, analyse it until our eyes bleed, and judge for ourselves how doomed the company is.

"As President and CEO of RIM, I understand the frustration and impatience of RIM's shareholders and their eagerness to see the company start to surface the underlying value we all know exists at RIM. But we do not believe RIM is a company at the end."

Interesting. Nice start: get in there quick with the apology. To give him credit, he didn't "bury the lede". That said, RIM's tumbling share price --- currently 2 percent down from Tuesday's close at $7.35 a share, in turn down more than 75 percent in the past 12 months --- can't be generating much love from shareholders.

And Heins is right: RIM isn't at the end. It's on its deathbed, but it hasn't slipped off its technological mortal coil yet.

"We believe RIM is a company at the beginning of a transition that we expect will once again change the way people communicate."

A transition, for sure. Exactly what the transition entails however remains unclear, but it's unlikely that by this time next year RIM will be its own independent company. The chances are that by the time RIM slips to $5 a share, on top of its $2.2 billion cash savings, it will be an attractive buy to Amazon, Google, or Apple, but most likely Microsoft.

Failing that, the bankers brought in earlier this year will split off the company and sell off as much as it can to anyone willing to buy it.

"As we prepare to launch our new mobile platform, BlackBerry 10, in the first quarter of next year, we expect to empower people as never before." 

Crucially, RIM hasn't said why BlackBerry 10 --- once thought to be the company's saviour --- has been delayed. It's about time investors sought answers, and RIM coughed up a hearty excuse. All RIM said is that it will push back the release of new BlackBerry 10-loaded smartphones to Q1 2013. A leaked roadmap corroborated this.

I wouldn't be surprised, however, if it was a RIM-orchestrated leak in a bid to add 'confirmation' to its announcement.

"BlackBerry 10 will connect users not just to each other, but to the embedded systems that run constantly in the background of everyday life --- from parking meters and car computers to credit card machines and ticket counters."

But how? There's no point in being cryptic now of all times. The buzz needed to be generated weeks if not months ago. Developers are at the core of any smartphone operation, not just the smartphone makers or the networks. 

Take this example.

In June, Skype had surpassed more than 70 million downloads on Android devices. Yet, Skype still isn't on my BlackBerry because it's "not available" on any other network besides Verizon, let alone in the United Kingdom where I live. Popular business apps still aren't available on the 'business-like' BlackBerry platform.

Why? Seriously, why? RIM has yet to incentivise the platform by paying third-parties to build apps for its platform, and will only do so once BlackBerry 10 is out the door.

For a successful smartphone to break into the market, mobile application developers need to know what they're facing and what they can take advantage of in the platform of their choice. If Heins is hinting at NFC technology for wireless payments of parking meters, for example, then damn well say it. Don't be coy: say what you have to say.

But I suspect at this point RIM isn't saying much because even at this late stage in the game, it doesn't actually know. Don't make promises you can't keep, so RIM isn't making any. 

"I am the first to admit that RIM has missed on important trends in the smart-phone industry --- especially in the consumer domain, focusing on its core value system for successful products and services. We are working diligently on BlackBerry 10 in order to provide a compelling experience for our loyal enterprise customers and consumers."

And again back to the consumer perspective. RIM failed to compete amid the onslaught of Android and iOS phones. comScore currently pegs the BlackBerry platform share at 11.4 percent of the overall market, another steep decline from the trailing three-month average, dropping by a whole 2 percent.

At the same time, it's important to note that RIM currently generates most of its revenues through its BlackBerry smartphone sales to the business and enterprise market. It's worth keeping the enterprise firmly as customer number one, while still making its future smartphones 'compatible' with the consumer market.

It's not an "either/or" approach: it's an "and both." 

"As this market grows and includes more people in more countries, there is more room --- a true need, really - for alternatives."

Ah, I'm glad he mentioned this. RIM has recently made a push in the emerging markets, particularly in India and Indonesia --- with vast populations and a burgeoning consumer desire for entry-level smartphones --- but it is part of a short-term strategy to prop the company's profits up --- or lack thereof --- until it can push BlackBerry 10-powered smartphones out to the more lucrative Western markets.

"To that point, some of what I read and hear is thoughtful and insightful; some, frankly, is just plain wrong."

This one's easy. Talk, for goodness sakes. Back to your share price: when RIM was rumoured to have hired Goldman Sachs for "strategic advice," its share price rose by 5 percent in the matter of hours. Good news can bring a company back up. Or maybe Heins' silence means there's nothing but bad news?

There is, however, some good news, but Heins buried it down the page. 

"The company's global subscriber base continues to grow, to more than 78 million people in 175 countries. In many of those countries --- some of the fastest growing markets in the world - RIM is the top smart-phone [...] RIM's reliability and security make it the first choice for countless government agencies and are part of the reason more than 90 per cent of Fortune 500 companies deploy BlackBerry in their enterprises."

This should not go unmentioned: this is good to know. But compared to its rivals, RIM still controls an integral chunk of the revenue-turning enterprise market.

"RIM has no debt. The company also has more than $2-billion in cash on its balance sheet, and generated $710-million in operating cash flow in its first quarter. [...] Unfortunately, that requires us to become a much more focused and smaller organization."

Didn't mention the first-quarter operating loss though, I noticed. An operating loss means a company is spending more than its generating in income. At that point, it's no longer a business; more a loss-making entity. It's already expecting a second-quarter loss, and in spite of the 5,000 pink slips that will be dished out in time for the festive season, it will burn through that $2 billion cash in a matter of months.

"These are just the steps we're ready to announce. As has been reported, RIM has hired outside advisers to help me and the other members of the executive team think about the business in new ways and to explore a range of alternatives that leverage our core strengths and build on the BlackBerry brand."

Heins will be seen as the fall-guy, that is for sure. Heins was the guy they pulled up from the lower ranks in a panic. It was Jim Balsillie and Mike Lazaridis --- the company's co-founders --- who weighted RIM down like a lead balloon and set in motion a chain reaction of just plain awfulness.

If anyone should be to blame, it's the board for not poaching a senior executive from a rival firm, or as I see it, corporate 'fresh blood'.

Topic: BlackBerry

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6 comments
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  • I keep saying this..

    I remember well when Apple brought Jobs back and everyone said they should have found "fresh blood" and how one man could not turn the company around. Those people were wrong on both counts.
    NoAxToGrind
    • So you're saying Heins is the second coming of Steve Jobs?

      If you aren't, it would seem to invalidate your comment. If you are, well, we'll know for sure in less than a year.
      gfeier
  • Emerging Economies

    As an old Ex-Pat I have frequently pontificated on the value of attention to emerging markets. Today many of these nations, you mention two stars, have positively healthy GDP's and could indeed save RIM. After all, the US is anaemic at best and Europe could turn into a latrine.

    Where I remain unsure in this argument is whether the near free Asian "knock-off" BlackBerries will undermine RIM sales and credibility. However, if BlackBerry Service and Security are valued by these subscribers then RIM should weather that storm. My first Apple was a fake and it never gave me what I had NOT paid for.

    I most wholeheartedly agree with your other comments on the culpability of Lazaridis & Balsillie. Their innovative prowess were, after very few years, overwhelmed by managerial insight and ineptitude. They could, if desired, make yet more millions, touring the Business Schools explaining their folly. Dressed in sack cloth and ashes, naturally.
    unlockworldwide
  • beating a dead horse

    is neither educational nor amusing
    ForeverSPb
  • Bzzzt

    [ul][i]Didn't mention the first-quarter operating loss though, I noticed. An operating loss means a company is spending more than its generating in income. At that point, it's no longer a business;[/i][/ul]No, you're the one who has it backwards. Heins said the company "generated $710-million in operating cash flow in its first quarter." Accounting losses can go on for quite a while as long as the cash flow is positive. That's not to say the positive cash flow is good news; it's most likely due to the contraction of the business and the need to buy fewer parts and pay fewer people every quarter. So it can't go on forever. But it does mean that there's no immediate threat of not being able to pay people or the tax collector, and hence no immediate threat of having to close the doors. Operating losses by themselves can't close the doors.
    Robert Hahn
  • I sometimes wonder why...

    the writers of zdnet together with its Editor-in-chief are not hired to run RIM. By the way you guys write, I get all the more delusional because it seems that you guys know a lot better and should be the ones running RIM, or the companies that should be buying RIM over, but why are you here? #!@#!!
    Samuel Koh