By any measure, it has been a horrible year for Research In Motion (NASDAQ:RIMM).
The stock has sunk 81%, key executives have resigned, BlackBerry sales are falling, the PlayBook tablet has failed to fascinate consumers and a global network outage gave the company a black eye. Can new CEO Thorsten Heins turn the beleaguered tech company around?
Unfortunately for the German-born Heins, he doesn’t have much time. The five-year RIMM veteran was elevated to the top job from his COO position in January after the resignation of co-Chairmen and CEOs Mike Lazaridis and Jim Balsillie. RIMM’s board hoped the move would reassure investors, particularly since many analysts had lain all of the company’s troubles at the two leaders’ feet.
RIMM suffered more management changes last week. Ann Brenner, senior vice president of the BlackBerry platform, and Alistair Mitchell, a vice president for BlackBerry’s instant-messaging service, are both out. That, combined with a 25% drop in sales in the last quarter, further increases pressure on Heins to put a turnaround strategy in motion fast before investor confidence erodes even more.
At first glance, the low-key Heins seemed an unlikely choice to succeed bold entrepreneur Lazaridis and born salesman Balsillie. Before joining RIMM in 2007, Heins spent two decades at Siemens.
Heins surprised analysts and reporters in an introductory video days after assuming the RIMM position by saying the company did not need a radical change of course .
Since then, Heins has reconsidered. “Since I last spoke to you in January, I undertook a comprehensive review to accept the state of RIMM’s business,” he said during the company’s fourth-quarter earnings call on March 29. “It is now very clear to me that substantial change is what RIMM needs.”
Heins is now on the hot seat. Here are five things he needs to do to turn RIMM around:
1) Pick a Plan and Stick With It
It can be a good thing when a CEO is flexible enough to change course if he or she determines that the initial decision was not in the company’s interests. In fact, slavishly holding to an unworkable plan because you don’t want to appear weak or vacillating is the pinnacle of folly. But investors are reasonably concerned when a CEO commits to stay the course, then abandons that course a few weeks later.
That usually signals one of two things: Either the CEO didn’t understand the depth of the challenges he would be facing or he changed his opinion in response to critics. RIMM needs a CEO with a big enough vision and strong enough discipline to lead the company back to greatness. Heins will need to convince analysts and investors that he’s the right man for that very big job.
2) Compete Harder in the Smartphone Arena
Back in 2007, when Apple (NASDAQ:AAPL) introduced the iPhone, The Guardian newspaper asked Lazaridis about the competitive threat posed by the device. “How much presence does Apple have in business?” he replied. “It’s vanishingly small.”
Five years later, that’s no longer the case. Of the top five global smartphone vendors, Apple is now in first place, with a 23.5% share of fourth-quarter smartphone sales. Samsung (PINK:SSNLF) was in second place, with 22.8%, and Nokia (NYSE:NOK) was third, with 12.4%, according to a recent IDC study.
RIMM fell to fourth place, with 8.2% of the market. Heins must get the BlackBerry 10, which utilizes an advanced platform, to market as quickly as possible to recover market share. Early word is that the new smartphone won’t be delivered until late this year. That’s a big problem for the company.
3) Fine-Tune the 4G PlayBook
When RIMM’s PlayBook tablet premiered last April, it wasn’t ready for prime time. The operating system was buggy, functionality was limited and few people wanted to buy it. The company likely will launch its new 4G PlayBook at May’s BlackBerry World event. RIMM may have only one last serious shot at the tablet market, so Heins needs to make sure this PlayBook is ready for Game Day.
4) Seriously Consider a Sale of the Company
RIMM is investigating a full array of options — from licensing BlackBerry software to being acquired, Bloomberg reports. Heins has also said a sale is not in the cards right now and that the company will focus first on bringing in partners to enhance product functionality in areas such as video and music. He has suggested that RIMM might get out of the hardware business altogether — a move investors likely would not take well since it would ravage the company’s value proposition.
If BlackBerry 10 has a good launch, however, that might make a sale easier and more beneficial to all sides.
5) Rediscover Innovation
RIMM was responsible for one of the greatest paradigm shifts in the history of communications, but that’s not enough to guarantee its continued viability. It created a market that rivals have largely captured, and Heins finds his company playing catch-up.
All tech companies need to keep reinventing themselves and moving on to the next thing. If RIMM is to recapture its past glory (and profitability), Heins needs to be both CEO and Chief Innovation Officer.
If he can’t make the transition, he needs a chief marketing officer who’s also an entrepreneur and market visionary.
The bottom line: Heins has an extremely tough job ahead of him. About the only good news he can count on is robust growth in the smartphone market. Total smartphone shipments hit 491 million last year — 61% higher than in 2010 — and double-digit growth will continue for the foreseeable future, according to IDC.
Heins needs to put all of RIMM’s problems behind him — including the global network outage and the BlackBerry 10 delays — and craft the balance of discipline and innovation the company needs to rise from the ashes.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned stocks.
