Research In Motion Still Is Toast

by Tom Taulli | January 23, 2012 9:11 am

Research In Motion Still Is Toast

2012 already has seen one big executive shake-up in the tech world, when Jerry Yang resigned[1] from the board of directors of Yahoo (NASDAQ:YHOO[2]), a company he started 17 years ago. The following act came Sunday, when the co-chief executives of Research In Motion (NASDAQ:RIMM[3]), Jim Balsillie and Mike Lazaridis, let go of their positions — though both will remain on the board and continue to hold large ownership positions in the company.

All three of these leaders pulled off huge achievements. Yahoo pioneered the online revolution and RIM did the same for mobile. But in today’s hyper-competitive world, dominance can quickly evaporate.

In the case of RIM, the deterioration has been rapid. Until a few years ago, the BlackBerry maker had little to worry about. Its corporate business was solid and produced huge cash flows. RIM was able to then leverage this into the consumer market, which boosted its growth rate. Through BlackBerry, RIM was able to snag key relationships with carriers like AT&T (NYSE:T[4]) and Verizon (NYSE:VZ[5]).

But a huge problem was brewing — RIMM was failing to innovate[6]. Because of this, Apple (NASDAQ:AAPL[7]) and Google (NASDAQ:GOOG[8]) had a nice opportunity to capitalize on the break-neck growth in the smartphone business. Apple pushed things even further by creating — then dominating — the tablet category.

For the most part, Google has created a business model that focuses on high volumes and low costs. Apple, of course, has made a fortune on the premium side.

This has left little lunch for RIM. Instead, it must find a way to differentiate itself as other players, such as Microsoft (NASDAQ:MSFT[9]) and Nokia (NYSE:NOK[10]), invest in the market. The fight is going to be brutal.

This is why the leadership shake-up at RIM will not mean much. The company really needs a compete transformation, which is not likely to come from new CEO Thorsten Heins. He has been with RIM since 2007 and already has said that the company’s strategy is the right approach. In fact, on a CNBC interview[11], he said his role was not to turn the company around, and that he thought the company was undervalued.

This should scare RIMM shareholders. When a stock plunges more than 70% in a year, it’s usually because of more than a simple misunderstanding.

So for now, unfortunately, it looks like RIM will continue to lose market share. Its PlayBook tablet has been a disaster, and the new BlackBerry models are not expected to launch until late in the year.

While there likely will be frequent buyout rumors for RIM, they’ll probably result in nothing. The fact remains that it will be tough for RIM to gain any traction against the competition. As seen with other companies in the mobile industry — such as Palm — a comeback can be nearly impossible.

Tom Taulli runs the InvestorPlace blog IPO Playbook[12], a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling”[13] and “All About Commodities.”[14] Follow him on Twitter at @ttaulli[15]. As of this writing, he did not own a position in any of the aforementioned securities.

Endnotes:
  1. Jerry Yang resigned: http://investorplace.com/2012/01/jerry-yang-departure-ahoo-sale/
  2. YHOO: http://studio-5.financialcontent.com/investplace/quote?Symbol=YHOO
  3. RIMM: http://studio-5.financialcontent.com/investplace/quote?Symbol=RIMM
  4. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  5. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ
  6. RIMM was failing to innovate: http://investorplace.com/2011/12/rim-dont-expect-things-to-get-better/?preview=true&preview_id=83834&preview_nonce=7b36a468e3
  7. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  8. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  9. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  10. NOK: http://studio-5.financialcontent.com/investplace/quote?Symbol=NOK
  11. CNBC interview: http://www.cnbc.com/id/46094976
  12. IPO Playbook: http://investorplace.com/ipo-playbook/
  13. “All About Short Selling”: http://www.amazon.com/All-About-Short-Selling/dp/0071759344/ref=sr_1_1?s=books&ie=UTF8&qid=1302184310&sr=1-1
  14. “All About Commodities.”: http://www.amazon.com/All-About-Commodities/dp/0071769986/ref=ntt_at_ep_dpi_10
  15. @ttaulli: https://twitter.com/ttaulli

Source URL: http://investorplace.com/2012/01/research-in-motion-still-toast-rim-rimm-balsillie-lazardis-ceo/
Short URL: http://invstplc.com/1ftVvFf