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RIM's decline raises fears for Canadian innovation

Before a carefully-selected audience studded with high-profile business and political leaders and academic luminaries, a smiling Mike Lazaridis strode to the microphone, looking completely at ease.

Mr. Lazaridis was taking the podium at a conference on innovation Friday at the Perimeter Institute for Theoretical Physics in Waterloo, Ont. as very much the man of the hour. He had helped establish the Perimeter institute not far from the headquarters of the company he co-founded, Research In Motion Ltd. , as part of his quest to promote Canadian innovation.

"What is important to know is that innovation takes many different forms," Mr. Lazaridis told delegates. "How Perimeter innovates in its approach to basic research is different from how RIM innovates in the high-tech sector – and has advanced wireless e-mail in the modern smart phone."

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Mr. Lazaridis, who has donated $170-million to the Perimeter Institute and serves as its chairman, spoke only briefly. Speaker after high-profile speaker toasted RIM as a champion of Canadian tech success, and many lauded Mr. Lazaridis as well. Finance Minister Jim Flaherty called the RIM co-chief executive "a great Canadian," whose company helped to spawn an ecosystem of 700 technology companies and 150 research institutes. "All this in an area of Ontario, Canada, that once was the button, rubber and distillery capital of Canada. Waterloo Region has been a significant part of our nation's past and will undoubtedly make an extraordinary contribution to our nation's future."

But outside the Perimeter Institute, things are looking decidedly less rosy for RIM – and for the future of Waterloo, and arguably, innovation in Canada.

While RIM's success as an engine for innovation was extolled at the conference, investors were sending a very different signal about the company's future. RIM shares closed down 20 per cent Friday – falling $5.90 a share to $23.50 with more than 10 million shares changing hands on the Toronto Stock Exchange, and wiping $3-billion from the company's value.

The stock selloff came a day after the company once again reported disappointing earnings, leaving both critics and supporters in dismay, particularly over the disastrous sales of the company's high-end Playbook tablet, once-touted as fresh kickstart for the iconic smart phone maker.

As the company now fights to maintain market share for its signature BlackBerry phones in the world's biggest markets, to some industry veterans who dreamed of building an innovation engine in Canada based on the phone maker, the RIM story is turning into a familiar narrative of great expectations and dashed hopes.

RIM has come to play such a crucial role in fuelling the growth of other tech companies, particularly in the Waterloo region, that its troubles are now about more than one company or even one city. To some, the future of the Canadian innovation hangs in the balance.

Adam Chowaniec, a veteran technology entrepreneur, watched the decline and breakup of Nortel Networks Ltd., another public company that was a crucible of not just technology innovation but marketing know-how. Large public companies, like RIM, are crucial training grounds where young managers learn to market and sell breakthrough products, says the veteran technology entrepreneur. For Canadian companies encountering a small domestic market, being able to sell to the world is critical.

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With RIM in some danger, "we have to panic a little bit," he warned.

Whatever happens to RIM – if it prospers, is sold or dies – he worries that "we're losing these companies faster than we can create them. Soon we will have no public companies whatsoever in the technology space."

Mr. Chowaniec built one public semiconductor company which was taken over by a U.S. firm. Now he is engaged in defending another Ottawa company whose board he chairs, Zarlink Semiconductor, from a hostile bid from the United States.

With RIM in possibly irreversible decline, it could mean fewer skilled marketers who can venture out to build new enterprises. Success is not is not just built on technology, Mr. Chowaniec says, but "the ability to penetrate markets."

A company such as RIM serves as "an anchor tenant in the technology ecosystem," said Dan Muzyka, dean of the Sauder School of Business at University of British Columbia, who has studied innovation in Europe and North America

He sees RIM's problems as somewhat natural for companies that succeed with one breakthrough product and have trouble broadening their sights. He speculates RIM's leaders, having scored with one segment – the BlackBerry – concluded they could shift into an adjacent area like the tablet without the requisite market research.

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As for RIM, he said, "they are not dead. They do have a loyal successful marketplace."

The big issue, he added, is how they use this experience. "How do they leverage from here? What do they learn from this? What did they do to improve their processes? I wouldn't write them off yet."

Back at the Perimeter conference the mood was not panic but reassurance. Mr. Flaherty down-played the speculation RIM's troubles might imperil Canadian innovation, particularly in the research-rich Waterloo region. "We'll see continued substantial accomplishments by RIM and the other important Canadian innovative industries that we have," he said.

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