The company that Mike and Jim built is now the company that Thorsten Heins must fix.
When Mr. Heins took over as CEO of BlackBerry maker Research In Motion Ltd. from long-time co-chiefs Mike Lazaridis and Jim Balsillie in January, he inherited a stumbling giant. The previous quarter’s results were a disaster as RIM announced a delay of new smartphones meant to save the company, the now-departed chief executives slashed their salaries to a dollar, and the stock price tanked.
Mr. Heins will oversee his first quarter as RIM's CEO this Thursday when fiscal fourth-quarter results are released. Few expect any sudden improvements in the company’s fallen fortunes, and Mr. Heins has no shortage of challenges to attack.
RIM’s BlackBerrys have lost market share in droves, with products that seem uncool compared to rivals like Apple Inc.’s iPhone. Several analysts have cut price targets on RIM’s already battered shares, warning of weaker BlackBerry sales and the possible deterioration of RIM’s overseas expansion.
Mr. Heins’ views when taking on the top spot from his role as chief operating officer were that the company is basically on the right track, but needs to streamline its internal processes and get better at marketing. Some critics worried he hasn’t conveyed an urgent enough message about RIM’s need for change. Now with RIM’s trail-blazers gone from their co-CEO roles, it is Mr. Heins who will be answering in full for all of RIM’s troubles, and will be responsible for defining a clear strategy going forward.
“Thorsten needs to earn credibility,” says Kris Thompson, an analyst with National Bank Financial. “To start, hopefully he will answer questions directly. He (also) needs to issue conservative guidance and try to beat expectations.”
In the lead-up to Thursday’s results, analysts have become increasingly bearish on the company. Peter Misek of Jefferies & Co. Inc. cut his target to $12 (U.S.), said sales of RIM’s high-end handsets were slowing because of Apple and devices running Google Inc.’s Android software, and mentioned that sales may have also slowed in emerging markets such as Latin America.
Barclays Bank PLC analyst Jeff Kvaal said in a recent note that RIM’s current crop of BlackBerry 7 devices are “aging rapidly,” and that checks revealed demand for them was “poor.” Bernstein Research’s Pierre Ferragu warned that consensus estimates of results are likely too optimistic, and was pessimistic on the company’s outlook ahead of the BlackBerry 10 devices due out in late 2012 – which are based on technology RIM acquired by buying QNX Software Systems– and even after that.
“With the very disappointing strategic directions new management took, we recognize that remaining short on RIM is tempting,” Mr. Ferragu wrote. “We think the company will continue to lose traction until it showcases its next generation of products based on QNX, and the latter is very unlikely to generate renewed consumer traction.”
In the near term, though, there are several things Mr. Heins could announce, even if the company is still in the very early days of his leadership. He could unveil changes to the company’s senior management, detail tweaks to the internal processes he previously decried as taking too long to get innovation out the door or offer hints on strategic licensing deals for RIM’s next-generation software with hardware rivals, such as Samsung Electronics Co. Ltd.
“In many ways, his management can only just be starting to kick in at the higher level,” says a former RIM executive who did not want to be named. “He was actually leading manufacturing and sales prior to taking the full CEO role, so there is some degree of continuity. What I expect he should be able to report is that he’s … cleaning up distribution, working on sales and marketing in North America.”
Noting that heavy discounting of the PlayBook has jump-started sales of RIM’s much criticized tablet, the former executive added, “I think he might be quite bullish on PlayBook.”
EYE ON RIM’S RESULTS
What investors will be looking for:
* The new chief marketing officer that Thorsten Heins promised when he took over as RIM’s CEO.
* Whether RIM has, again, missed on earnings guidance.
* Clarity on RIM’s performance in the United States, RIM’s most valuable market, where BlackBerry market share has collapsed as Apple Inc.’s iPhone and devices running Google Inc.’s Android software see huge growth.
* Signs of RIM’s continued overseas success, at a time when RIM’s emerging market strongholds are seeing fresh competition from Android-using cheap handset makers, such as Huawei.
* Whether the latest BlackBerry 7 devices, such as the touch screen Bold 9900, are selling better than the pessimistic market impressions – and if so, in what markets.
* Fresh insight on what the PlayBook’s renewed sales mean for a renewed BlackBerry platform, particularly with regard to third-party application development.