An aligned blog on Research in Motion

5 mins. to read

In 1997, Laszlo Birinyi of Birinyi Associatates announced his top stock picks for the year, including the fledgling Apple Computer Inc. among his five choices.  At the time, Apple had a steadily declining market share and was nearing bankruptcy, yet still Birinyi commented that it would turn around because it “has its fans and its products.”  At the time, Apple’s stock had dropped to a low of $6.56 and the Cupertino based business seemed inevitably doomed.

Laszlo Birinyi of Birinyi Associatates

Knowing he needed to do something to keep the company from going under, then-Apple CEO Gil Amelio made the decision to purchase NeXT for $402 million from Apple Co-Founder Steve Jobs. Much like the Google and Facebook acquisitions of today, Amelio was not only after the company’s innovative new OS, but was interested in bringing back the young thought leader at its helm. This acquisition effectively brought about both the technology and leadership changes Apple required to reverse the company’s direction immediately and entirely.  As hindsight now tells us, anybody who heeded Laszlo’s advice in 1997 is likely a very, very rich person today.

Apple monthly stock chart over the last 10 years

Fifteen years later, Birinyi appeared on CNBC to announce his top picks for 2012.  He included another tech industry giant that had spiraled downward to a single digit stock price in naming BlackBerry manufacturer Research in Motion (RIM).  If Birinyi was savvy enough to predict Apple’s resounding return, then he likely sees enough similarities between the companies to provide full faith in a RIM recovery.

Like Apple in 1997, RIM has declared publicly that they will be focused on building only the products they are best at in order to serve the existing core market of dedicated enterprise users.  This is much like the way Apple simplified its product line with the release of the iMac and its operating system with OS X. RIM is also taking cues from Apple by building out a deeper end-to-end system of integrated hardware and software that is very rarely open to outside partners or developers beyond a closely controlled approval system.

Closed systems like these are inherently expected to be free of bugs and have flawless integration, making them much more attractive to today’s consumers. Let’s be honest, there’s no excuses for not getting it right when you’re in control of the build from the ground up. Having said that, BlackBerry has recently hinted at becoming more open source in an attempt to try and establish new lines of revenue. Like the release of BlackBerry Fusion, supporting security and management of non-BlackBerry devices through their enterprise server, and the announcement that they would be supporting Android apps on their PlayBook tablet.

RIM’s issues aren’t just about their seemingly out of date product lines. In January 2012, the clamoring of board members to fix RIM’s dual-CEO structure of Jim Balsillie and Mike Lazaridis was finally appeased when both were removed in favor of current CEO Thorsten Heins.  Balsillie remained a board member until March, while Lazaridis shifted one notch down to Vice Chair of Board.  Lazaridis immediately indicated his sentiments about the transition, stating, “I am so confident in RIM’s future that I intend to purchase an additional $50 million of the company’s shares, as permitted, in the open market.”

While comments like this temporarily instilled badly needed investor faith, they did not imply the complete transformation of power and authority that Jobs once demanded (and thus, received) from the Apple board during his return in 1997.  Though he was technically a part-time CEO (iCEO) at first, due to his additional commitments to Pixar, Jobs was still awarded true designation of control over the company. This allowed him to instill his “reality distortion field” which convinced project teams to complete things they once thought impossible.

RIM CEO Thorsten Heins

Since his appointment to the CEO position, Heins has been taking an offensive strategy and, even amidst thousands of layoffs and decreasing market share, has been viewed favorably by the press, employees and investors alike. His charismatic personality and open-minded approach to the business is exactly what the company needs right now. He’s even gone as far as to hire a search firm to help the company find more US tech experience for their board.

Another part of the explanation for RIM’s decline includes mediocre sales of its BlackBerry PlayBook tablet (only 1 million units sold as ofMarch), in a tablet market where revenue is expected to hit $120 million in 2012, as well as multiple pushbacks of the release date for its upcoming BlackBerry 10 OS.  BlackBerry’s US smartphone market share dropped from 13.4% in February to 11.4% in March; however, don’t be fooled by this decrease, as it has mainly been attributed to a drop in new product sales and not in current user base.  Much like Apple, under Jobs, the team at RIM is not afraid to push back release dates with the expectation of perfection.  Only the future will tell if BlackBerry can execute the same level of innovation, though early teases and developer previews of the upcoming OS show definite promise.

The true saving grace for RIM will have to come in form of a one-two punch; successfully releasing BlackBerry 10 (when ready) and following up with hardware innovations of equal esteem.  RIM is obviously aware that the fate of the company resides on a successful BlackBerry 10 release, which is why they have not been afraid to delay it until it’s ready for general market.  Assuming they do get it right, the true testament will come in the innovations that follow. RIM has already stated publicly that the first BlackBerry 10 devices being launched will be touch screen only; however, we’ve also been reassured that their famous qwerty keyboard will not be abandoned completely. Apple’s comeback one-two punch came in similar fashion, first releasing the radically successful iMac hardware and then complementing it with the release of Mac OS X.

First images of BB10

Unfortunately for RIM, their future rests heavily on the back of BlackBerry 10, which needs to accomplish the near impossible task of what the iMac in conjunction with OS X did for Apple. If they can’t pull off a similar leap back into relevance, even their remaining audience of enterprise users will likely start looking elsewhere.  But if Laszlo Birinyi’s historical hindsight lays itself out like an Apple authored blueprint, then RIM is headed to a healthy place in the near future and you might want to start thinking about investing heavily in the company’s stock while it’s still affordable.

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