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Much depends on launch of heavily hyped new BlackBerry
After several technical blunders, two unexpected delays and one major shakeup in its leadership, BlackBerry-maker Research In Motion is about to raise the curtain for its new smartphone devices in hopes that consumers share the excitement.
The unveiling of the phones and operating system today marks the start of an advertising blitz that will stretch to social media, the Super Bowl and beyond as RIM tries to regain the cool factor that was once firmly in its grasp.
If all goes according to plan, the event will also mark the end of a troublesome 12 months that has seen RIM try to stay afloat while its future was constantly in question by outsiders, and its stock price tumbled to the lowest level in about a decade.
While the first hurdles to overcome today are the opinions of tech analysts and investor reaction, the true measure of success – actual sales of the phones – is still weeks away.
As a crowd of thousands gathers at Pier 36, a massive entertainment venue on the shores of Manhattan, chief executive Thorsten Heins will step onto the stage holding the BlackBerry that has been at once considered the company’s last hope, but also its biggest hurdle.
Just over a year ago, when Heins took over the top spot at RIM, the smartphone maker was in a state of flux as its marketshare tumbled in North America against growing competition from Apple’s iPhone and various devices on the Android operating system.
Analysts had widely blamed the lack of leadership from former co-CEOs Jim Balsil-lie and Mike Lazaridis as the reasons that RIM failed to innovate its way out of trouble, but they also said that Heins had much to prove in hardly any time.
The company was in a bubble, insisting it hadn’t lost its footing in the smartphone industry, even though from the outside their downfall was indisputable.
But as the dust settled from Balsillie’s exit in March 2012, Heins began to face the realities of RIM’s problems and launched a major overhaul of its middle management and deep cuts to its operations.
While Heins preferred to call it removing a “little fat on the hips,” the changes at RIM were a far more strategic and complex surgery.
The company closed some of its manufacturing facilities and announced plans to lay off about 5,000 workers, as it aimed to save $1 billion across RIM’s operations by February 2013. Heins reached that savings goal, and he did it three months ahead of schedule.
“He is probably one of the least dogmatic people at RIM,” said Carl Howe, vice-president of consumer research at Yankee Group.
“I think he learned from his predecessors.”
Despite all of the changes, Heins was still up against the fact that development of the BlackBerry 10 operating system was woefully behind schedule. Already delayed from a launch in 2011, the CEO was forced in June to further push the debut into 2013, missing crucial sales periods like the back-to-school and Christmas holiday shopping seasons.
While analysts hated the idea of another delay, it also bought the company some extra time to tweak the software to capitalize on the weaknesses of competitors’ smartphones.
One of those features is the BlackBerry Balance technology, which allows one phone to operate as both a business and personal device entirely separate from each other. Another one lets users seamlessly shift between the phone’s applications like they’re flipping between pages on a desk.
The BlackBerry Messenger chat program will also get an update that includes video chat and screen sharing options.
RIM’s executives also began an aggressive campaign last year to win the developer community. Under its previous leadership, the BlackBerry had practically ignored the growing popularity of smart-phone applications for services like Netflix, Skype and Instagram.
A sea of change was coming under its new leaders, and Heins had managed to at least steady a company that was swaying on its pillars by coming up with unconventional ideas.
As the BlackBerry lost steam in North America and Europe, he turned to developing countries like Indonesia and Nigeria to keep revenues flowing in the near term. In those places, consumers were hungry for low-cost smart-phones and the BlackBerry was still considered a status symbol.
The decision helped RIM keep its subscriber base steady, and maintain its $2-billion cash reserve, which was set aside for emergencies. It will use some of that money to promote the new phones.
“Up until now I think everything (Heins) laid out in terms of his plan … he’s shown that he’s executed on it,” said Richard Tse, an analyst at Cor-mark Securities Inc.
“In terms of what they’ve done on the development side, in terms of streamlining the operations and preserving the cash, I think he’s done a very good job to date.”
Investors aren’t satisfied with all of his decisions, however, especially when Heins unveiled a rough plan in December that will likely eat into the lucrative service fees charged to BlackBerry subscribers.
Heins told analysts on its most recent earnings conference call that RIM plans to launch an a la carte menu of services where both enterprise customers and casual smart-phone users can pick their packages. The change would likely mean reduced revenues in one of the most lucrative areas of its business.
RIM stock ended Tuesday down 56 cents, or 3.44 per cent, to $15.71 on the Toronto Stock Exchange, following a 7.6 per cent slide Monday.
As of Friday, RIM stock (TSX: RIM) had soared 50 per cent during January.
However, there are still questions about whether RIM will exist in its current form this time next year. Some analysts have said the company will eventually be forced to sell off at least its hardware division, if not more.
“They’re in such a difficult position that I can’t think of a management change that would help them get out of it,” Tim Long of BMO Capital Markets. “Clearly there are people out there that think the BlackBerry 10 is going to be something that gets them back on the map. We don’t think so.”