January 23, 2012 2:26 am

New RIM chief executive admits to challenges

Thorsten Heins, Research in Motion’s new chief executive, concedes that the Canadian manufacturer of BlackBerry smartphones and the PlayBook PC tablet faces challenges, particularly in the US market where it has been losing market share to competitors including Apple.

But the German, who took over the beleaguered company this weekend after Mike Lazaridis and Jim Balsillie stepped down as co-chief executives, insists that RIM remains financially strong and that no fundamental change in direction is needed. However, he indicated that RIM would refocus its efforts in the US on the corporate market where some companies have been switching to rival devices.

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“This company has scaled dramatically fast over the past four years,” he said. “There were a few bumps in the road. This is what happens when organisations grow that fast. But it is an issue of success, not an issue of failing.”

Shares in RIM have fallen by more than 75 per cent during the past year. The decline reflects a series of missed financial targets, management missteps and product delays together with increasing competition, particularly in the US market, where RIM’s share of the expanding smartphone market is falling.

However, Mr Heins, who paid tribute to the “vision” of Mr Lazaridis and Mr Balsillie who he said created the smartphone market, said RIM would remain focused on innovation and its long-term growth opportunities rather than short-term financial considerations. He said he would strive to correct what RIM executives described as “perceptions not matching reality”.

Mr Heins, who joined RIM as senior vice-president for hardware engineering after what RIM’s new chairman Barbara Stymiest described as “an extended search”, and became chief operating officer for product and sales in August 2011, said he believed RIM still had potential.

“I am excited and honoured to be appointed CEO,” he said, adding that RIM had a strong foundation on which to build. “Make no mistake, I am here to succeed and to help RIM into its next decade of success.”

Some analysts have suggested that RIM could face financial pressures this year because of declining margins and slower sales in its more developed global markets including the US. But Mr Heins rejected such concerns.

“We have a strong balance sheet with approximately $1.5bn in cash at the end of the last quarter and negligible debt. We reported revenue of $5.2bn in our last quarter, up 24 per cent from the prior quarter, and a 35 per cent year-to-year increase in the BlackBerry subscriber base, which is now over 75m.”

During an interview on Sunday with the Financial Times, Mr Heins defended RIM’s decision 18 months ago to build its own operating system based on the acquisition of a company called QNX rather than adopt a shared operating system such as Google’s Android, which many of its competitors have done.

“Mike and Jim took a bold step 18 months ago when RIM purchased QNX to shepherd the transformation of the BlackBerry platform for the next decade,” Mr Heins said. “We are more confident than ever that was the right path. It is Mike and Jim’s continued unwillingness to sacrifice long-term value for short-term gain which has made RIM the great company that it is today. I share that philosophy and am very excited about the company’s future.”

He acknowledged, however, that with the benefit of hindsight, RIM would be in a better position today if it had been able to bring devices based on its new operating system to market sooner, but he emphasised that the development of BB10 is “a long-term software play” and not just about new devices.

During the past decade RIM successfully parlayed its success in the corporate market – where its devices were favoured by business executives and IT departments because of their security and reliability – into the consumer market where much of the company’s growth outside North America has come from.

However, RIM’s position in the corporate market – where about 250,000 companies run its enterprise software – has been under attack since the launch of Apple’s iPhone in 2007 and smartphones from Samsung, HTC and Motorola based on Google’s Android operating system.

RIM’s management has been criticised by some analysts for being slow to respond to this and other competitive threats, but Mr Heins said: “We have a strong footprint in the enterprise and make no mistake, I am not just going to fortify it, I am planning to add to that position.”

RIM’s boardroom changes are unlikely to answer all the concerns of increasingly impatient investors, but they should go some way to addressing the demands of dissident shareholders who had demanded changes in RIM’s corporate governance.

A committee of independent directors appointed to consider this issue had been due to report by the end of this month, although RIM insisted on Sunday that the decision of Mr Lazaridis and Mr Balsillie to step aside had been theirs and long planned.

While both men have stepped down as co-chairmen and chief executives, both are sizeable shareholders and will have a continuing role in RIM.

RIM co-founder Mr Lazaridis, as vice-chairman, will work closely with Mr Heins to offer strategic counsel, provide a smooth transition and continue to promote the BlackBerry brand worldwide.

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