RIM attempts turnaround

RIM acknowledges it has a problem. That's the first of at least 12 steps.

(Photo: Euardo Munoz/Landov)

A new direction for Research In Motion is starting to take shape under CEO Thorsten Heins, and it starts with an acknowledgement of the gravity of the situation. Heins began his tenure in January down playing the need for seismic changes at RIM, and dismissed the possibility of a breakup or sale of the company. He’s now weighing all options and would even consider a sale, though only as a last resort.

In a further sign of change at the beleaguered BlackBerry maker, former co-CEO Jim Balsillie departed from the company’s board just two months after he and Mike Lazaridis stepped down as co-CEOs. (Lazaridis remains a director.) “It’s nice tohave a clean break,” says Bill Kehler, an analyst with Edward Jones. Without Balsillie’s forceful presence on the board, Heins may be less constrained when making difficult decisions.

For now, he said in a conference call with analysts, his goal is to refocus on RIM’s traditional business users. The BlackBerry is losing traction in its core market as more corporations allow employees to use iPhones or Android-powered devices for work purposes. RIM was too slow to react to this trend. As recently as last May, Balsillie told attendees at the annual RIM conference he wasn’t seeing evidence of the bring-your-own-device to work phenomenon.

One new offering that could help RIM is BlackBerry Mobile Fusion, announced last year and officially launched this month.The software service allows corporate and government IT departmentsto securely manage multiple smartphones and tablets from a single console. Fusion is both a concession to competing devices moving onto RIM’s hometurf and a way for RIM to generate service revenue through the growth of its rivals. Kehler doubts the service will do much for the bottom line, however. “It does little to help the company ship more devices,” he says.

Indeed, RIM relies on smartphones, not services, for the majority of its revenue, and the decline in sales is worrying. RIM shipped 11.1 million BlackBerry devices in the fourth quarter, down 21% from the previous three months. Heins said RIM plans to use its existing BlackBerry 7 line to upgrade feature phone users to their first smartphones in overseas markets where the brand is still wildly popular.

That comes with challenges, too. First-time smartphone buyers are likely to opt for low-cost models, putting further pressure on RIM’s margins. And competitors’cheap Android devices will be fighting for those same users. “It’s going to be tough for RIM no matter what they do,” says Tom Astle, head of research at Byron Capital Markets in Toronto.

With no new products scheduled for release until the newBlackBerry 10 line debuts in the latter part of the year, RIM’s prospects are likely to worsen in the meantime. Heins seems well aware of the task in front of him.“This is not without risks and challenges,” Heins said of a turnaround during the call, “and there’s no guarantee of success.”