Report: BlackBerry Maker RIM is Set to Boot Co-Chairmen After Struggles
January 3, 2012 12:32 PM
RIM prepares to finally make a long-awaited move to try to shake up management
Typically when businessmen or businesswomen make critical mistakes, it is the board that comes down on them breathing fire and wrath. In the world of corporate politics, the board is a crucial check and balance -- the legislative branch checking the power of the executive branch (the CEO/CFO/CTO/COOs).
I. RIM to Boot Balsillie, Lazaridis from Top Board Spot
But at struggling Waterloo, Ontario smartphone maker Research in Motion, Ltd. (
), that system of checks and balances was disrupted by a bizarre and long-standing arrangement in which co-founders and co-chief executive officers (CEOs) Jim Balsillie and Mike Lazaridis were also joint chairmen of the board. While John Richardson, formerly with the Ontario Teachers Pension Plan, served as the board's "lead director", he reportedly deferred far too often to the iron fist of Mr. Balsillie, who reportedly
exerts a tight controlling grip on the board
But in the wake of falling sales and a string of high profile embarrassments, RIM appears to be on the verge of bowing to shareholder pressure and shaking up the executive ranks. According to
The Financial Post
, RIM will boot Mr. Balsillie and Lazaridis from the co-Chairman spot, appointing Barbara Stymiest to take their place as Chairwoman of the board.
Jim Balsillie and Mike Lazaridis might not be smiling when RIM's board announces their decision. [Image Source: Globe and Mail]
Ms. Stymiest comes with some impressive business credentials. She served as the chief operating officer (COO) at the Royal Bank of Canada (
) and served head of the Toronto Stock Exchange.
Barbara Stymiest could become one of the most powerful people at RIM if she becomes RIM's first independent board chairperson. [Image Source: Peter J. Thompson/National Post]
Back in July, before much of the worst news for RIM,
shareholders were already growing antsy
. Northwest & Ethical Investments LP, which owns 2.6% of RIM’s stock, had proposed that RIM appoint one of the two co-founders to CEO and one to chairman, eliminating the joint role.
RIM's board responded by agreeing to an independent review of the company's leadership. The conclusions of that review -- led by Ms. Stymiest -- will be delivered on Jan. 31. If she indeed suggests the appointment of an independent Chairperson, it would be the first time in the company's history that either Mr. Balsillie or Lazaridis was not sitting in the role.
II. Hard to Argue the Move in the Face of Recent Woes
A small minority might feel such a move to be a power grab on Ms. Stymiest's part. But most agree that some sort of executive shakeup is necessary. The last few months have been pretty bad for RIM:
a major service outage
, leaving customers without messaging.
free premium apps as apology
unveils its great OS hope
, "BBX", a new smartphone OS based on QNX.
News arrives that
RIM has been sued
for scooping the name from an American software company's trademarked and active product.
At the debut of the BlackBerry Bold 9790, RIM's employees offer a 50 percent discount to the first 1,000 customers in Jakarta, Indonesia, provoking a riot. Many are injured and RIM employees are arrested.
Inebriated RIM employees
, representing their company on business, start a physical fight with flight attendants, forcing the flight to be diverted to Vancouver, off its course to Beijing. RIM apologies and fires the pair.
security is breached
allow jailbreaks, and raising concerns about BBX
it will miss its Q3 2012 revenue outlook
due to poor QNX (PlayBook) tablet sales.
More flaws in QNX's security are revealed,
RIM's feeble patching attempt.
RIM is barred from using the trademarked "BBX", is forced to rename operating system to "BlackBerry 10".
The NPD Group reports that RIM is fading fast in sales and only has an
8 percent market share
in the U.S., down from its peak of almost 50 percent.
Earnings targets are missed and the next generation
BlackBerry 10 operating system is delayed
due ostensibly to RIM's lofty goals for LTE performance.
The Globe and Mail
reports that RIM is preparing for a Jan. 11 hearing over whether it
stole the trademarked acronym BBM
from a Canadian broadcast advocacy who used the term for six decades.
RIM's stock has plummeted in price since the start of 2011. [Image Source: Google Finance]
About the only good news for RIM during this time period was the launch of a handful of promising smartphone devices such as the aforementioned BlackBerry Bold 9790. However, these devices failed to reverse the sharp decline in U.S. market share.
Perhaps the biggest disappointment for RIM is its relative flop in the tablets market. Its Playbook launched in April, but critics did not take kindly to the absence of RIM's popular email and calendar clients. Largely due to these missing features, most reviewers panned the device to varying degrees.
Sales have followed in suit, dropping from initial estimates of several million units in 2011, to the most recent estimate of 800,000 units in 2011.
III. RIM's Ponders How to Shake Up Management Without Worsening Plight
One issue facing RIM is how to change, when the management appears to be pushing to ride the status quo. While the top-level executives did elaborate in a December conference call about an aggressive early 2012 advertising push, their approach on the device side is expected to remain the same -- slow and iterative.
For those hoping for a shift, the question becomes how to enact that change.
On the one hand it's hard to justify resorting to a more extreme move such as firing the co-founders from
the co-CEO and co-Chairman spots. And given that the pair each holds 12 percent of RIM's outstanding stock it would be difficult to do so, as it would be almost impossible to kick them off the board entirely. And the pair did accept a pay cut to $1 USD/year, which at least was a decent gesture of contrition with regards to the recent struggles.
On the other hand RIM's profits dropped by almost 25 percent over the last year. That means that within a year or two more of seeing an accelerating backwards trend RIM could be in the red. And with only $1.5B USD in cash on hand, it's unclear if RIM could survive a dip into the red.
RIM does not appear to have enough cash to survive a prolonged dip into the red.
[Image Source: Google Images]
If RIM wishes to
, it clearly must reverse its losses and find its way back to the path of success, which brought it a 50 percent smartphone market share back in 2006. It's certainly not an inconceivable turn of events, but RIM certainly has its work cut out for it in the new year.
"I modded down, down, down, and the flames went higher." -- Sven Olsen
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