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RIM – The Investment Community is Finally Reacting – Glass Lewis & Co. is Correct
7/8/2011
By PJLouis
Tags: RIM, B;ackberry, wireless, smartphone, iPhone

http://www.informationweek.com/news/mobility/smart_phones/231001173

 

Well I feel vindicated. The folks from Glass Lewis & Company are absolutely, correct.


What is taking place here is what I have seen in dozens of restructurings involving telecom and technology companies:

• Entrenched management is looking out for themselves
• A Board of Directors that is failing to do its job - it is either naïve or just plain incompetent
• The company begins attacking critics through character assassination
• The company refuses to address the points made by the critics
• The company will begin making grandiose claims of taking action and telling people to wait
• The company refutes the criticisms by making claims it is taking aggressive action without detailing what it is doing


RIM’s reaction to the “anonymous” letter is typical of those who choose to trash rational opinions. You assassinate the character of the person who has stepped forward to present the facts.


RIM has never known to be good with direct consumer marketing. RIM has no real marketing plan to speak of. The company behaves arrogantly and ignores then end user. Since 2007, RIM has done nothing to counter the smartphone assault.

To claim the current version of the Blackberry as something comparable to an iPhone or any number of Android phones is delusional. The iPhone and all of the Android phones are far superior to the Blackberry. RIM has failed to meet the needs of the marketplace. The business user it currently serves can have access to wireless email and a range of media features the Blackberry does not provide. The executive management team at RIM has failed to keep pace with the market and is refusing to meet the needs of its investors.


By the way, not being a fan of Apple and its iPhone, says a lot for what I think of Apple and RIM.


The behavior of the RIM executive team is unconscionable.


If Canada wishes to avoid another Nortel, then the time to act is now.

While RIM has not done well in North American consumer marketing, it has
done well in Europe and to a lesser extent in the Far East.
Gerard6656 Gerard6656
7/8/2011 edit
As I have said in the past, success in overseas usually means nothing to Wall Street.
PJLouis PJLouis
7/8/2011
Based on my past experience, the executive team's public statements are indicative of a company in crisis.  The board's public statements show a board that is under total control of the Co-CEOs.  The board is failing its fiduciary duties to the shareholders.  If investors got off their rumps and took action, there would be two things I would do right away.  Get rid of the Co-CEOs; not just the positions but the people.  I would also replace the board.

The changes would be drastic but what I have found is that in situations like this drastic action is what is needed.  Assuming the COO is competent; the COO could temporarily run the company while a competent heads of marketing, product development, and product management are found.  There would be a moment of chaos in the company and turmoil in the markets but with the help of competent outside restructuring and turnaround professionals the changes can be made successfully.

I may be giving too much credit to what restructuring and turnaround professionals can do but I am not the sort of person to throw in the towel without a fight either.   I am sure the Co-CEOs are taking the same position but since the appearance of the iPhone the CO-CEOs have failed to do their jobs.  How many more months or years need to pass before RIM is forced into a distress scenario it will not recover from?
PJLouis PJLouis
7/8/2011
I agree, something like what you outline is badly needed.  Uniquely and
unfortunately, the board reports to the CO-CEOs and the shareholders are not
likely to replace them.

As I said before, there are probably enough new products (that currently do
not fit management’s vision) lying around that one or more of them could
become the future.  Like the Motorola’s razor, management and very likely
the large customers are saying they do not like these items.  However, I
would bet at least some of them make sense to consumers.

RIM also has the transition to the new OS.  That will take time and lots of
vetting.  This company has done only one major OS in its history.

PJ, you are right about the US analysts not paying attention.  The big
question for theses guys will be “How did the handset business generate so
much revenue and associated profit?”

Finally, we are all Monday morning quarterbacks and while this is
interesting I am not sure it is productive.
Gerard6656 Gerard6656
7/8/2011 edit
I understand everyone's concern that I am bashing analysts.  Frankly, they deserve to be bashed and the public needs to be educated about the role of the analyst.  I went through this kind of nonsense through the 1990s and the Internet bust.  Lots of hype and no substance, Shareholders being fooled, etc. 

I promise no more bashing - I am off my soap box.

However, the overall point I am making is that an investment firm is doing the right thing.  Glass Lewis & Company are correct in their statements.

The question now is when is the RIM Board going to wake up?

I am hoping RIM's executive team will listen to the outcry and criticisms being leveled at them.

Turnarounds are successful when the distressed company gets help early and takes internal action early.  If RIM does not take appropriate action soon, we could be looking at a corporate sale.
PJLouis PJLouis
7/8/2011 edit
What made RIM successful in the past is not what will make it successful in
the future.  As we approach 4G, RIM’s approach will lose even more luster.
I really don’t think management will listen.  Someone new has to see what
the company can do.

Gerard6656 Gerard6656
7/9/2011 edit