Winnipeg Free Press - PRINT EDITION

Blame the board for RIM's woes

It's done nothing to resolve crisis

  • Print

Our country seems incapable of building a lasting technological world beater. Remember Nortel? At its peak, it turned out to be just an illusion and a fraud. Now we have Research in Motion, which once embodied perfectly what it takes to succeed in technology: a new idea that immediately appeals to a lot of people and a sound execution. The company invented the smartphone (although it didn't start out as a smartphone maker) and owned the market for several years.

Today, it's on its knees. Apple has taken so much market share it now accounts for about half of global smartphone profits. Apple is clobbering RIM by understanding smartphones could be better; that they weren't just tools for executives; that the average person would want one; that web browsing was crucial to the evolution of the phones; that the phone was the centre of the digital lifestyle.

Apple also made slicker phones and advertised them better.

RIM sat on its heels and watched. Why such an inept response? After all, RIM owned the market. In my view, it's a question -- typically Canadian -- of a weak board of directors and a weak management team.

RIM has two CEOs, Mike Lazaridis, who is the techie, and Jim Balsillie, who was brought in to handle corporate affairs and marketing.

It's never a good idea to have two CEOs. You can't make a decision with two people running the show. Imagine a movie with two directors. You know it wouldn't be a good movie, and it would most likely come in over budget.

What else does two CEOs tell us? They both have oversized egos. After all, why can't one of them be CEO and the other president? Does it really matter that much? Only to someone's ego.

This week, RIM disappointed investors again by producing poor earnings and also announcing its new phones, which will make or break the company, will be delayed again, this time until the end of next year. Listening to the conference call, it was pretty clear the management team -- what's left of it -- has little idea what to do. The continued delays speak to serious problems with the new software or phones, or with execution (RIM laid off a lot of employees earlier this year, which may be playing a role).

There are calls from investors and analysts for a change in management, at the very least to get rid of the dual CEO role. Others want them replaced. Sadly, though, that won't happen. There's no succession plan, and many high-level executives have already bailed out. Who would take over?

The real failure at RIM, as in most Canadian corporate failures, is at the board level. Any big decisions, including management changes, are made by the board. And this board is frankly pretty weak as a whole. It should never have allowed two CEOs. It should have reined in Balsillie when he was running around trying to buy a hockey team and picking fights with the federal government while Apple ate RIM's lunch. It should have made sure there was a succession plan in case changes had to be made. It should never have approved a share buyback when the wheels were falling off the wagon. RIM has bought back and cancelled stock at much higher prices than the shares are now. That's not adding value to shareholders. Meanwhile, the two CEOs have been selling their stock systematically.

The board should have had the technical capacity to see the threat from Apple, and more importantly from Google, which makes the Android operating system smartphone makers like Samsung use for free. Android is arguably a bigger threat than Apple because Android phones have a big cost advantage.

But no. This board didn't see it. It didn't see anything. Directors in Canada, especially, are too often just seat fillers who rubber-stamp management's desires.

RIM has a chance to pull out of this nosedive. It has 75 million users and a good brand name. But if it doesn't execute better it's over. And that will be a shame because it could have been avoided with better governance.

 

Fabrice Taylor is an award-winning financial journalist and analyst and author of the President's Club Investment Letter. Email him at:

 

 

fabrice.taylor@gmail.com

Republished from the Winnipeg Free Press print edition December 17, 2011 B19

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Key of Bart - Take It Easy

View more like this

Photo Store Gallery

  • MIKE APORIUS/WINNIPEG FREE PRESS STANDUP - pretty sunflower in field off HWY 206 near Bird's Hill Park Thursday August 09/2007
  • MIKE.DEAL@FREEPRESS.MB.CA 100615 - Tuesday, June 15th, 2010 The Mane Attraction - Lions are back at the Assiniboine Park Zoo. Xerxes a 3-year-old male African Lion rests in the shade of a tree in his new enclosure at the old Giant Panda building.  MIKE DEAL / WINNIPEG FREE PRESS

View More Gallery Photos

Poll

Should the city grant mosquito buffer zones for medical reasons only?

View Results

View Related Story

Ads by Google