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RIM results, Balsillie’s exit prompt growing concern

It's not as if the markets had no warning.

In the weeks leading up to yesterday's announcement of Research In Motion's quarterly results, a seemingly endless parade of analysts weighed in with ever more dire predictions of impending doom. With the company already on shaky ground as it tried to build buzz around an aging product line months before the expected release of BlackBerry 10-based smartphones later this year, the financial results were expected to confirm what everyone already suspected: that things at RIM will get worse before they get better. If they get better at all.

By most accounts, the results failed to meet even those lowered expectations, as the company reported a $125 million net loss, a 25 per cent drop in revenue — from $5.56 billion to $4.19 billion -- 21 per cent fewer BlackBerrys shipped compared to the previous quarter and huge writedowns due to reduced value of inventory and goodwill.

Heins making the company his

While investors predictably hammer the stock over the company's performance to-date, the more meaningful story is taking place on RIM's campus itself, as CEO Thorsten Heins begins the process of reshaping the company in his own image. Ex-CEO Jim Balsillie has resigned from the board, no longer directly connected with the company he had co-led with Mike Lazaridis for over 20 years.

Chief Technology Officer David Yach and Chief Operating Officer Jim Rowan are out amid reports of senior executives — most of them senior and executive vice-presidents — being shown the door. Sales and marketing staff are also receiving pink slips in what appears to be an accelerated push by Heins to distance himself from his predecessors and prepare the company for whatever comes next.

His actions are notable because they directly counter the stay-the-course message of his first few days in the corner office in January. Heins was roundly criticized then for praising the policies of his predecessors Balsillie and Lazaridis and saying he saw no need to rewrite a script that had erased 90 per cent of shareholder value over the last four years as RIM failed to adapt to changing consumer demand for touchscreen-based, user-friendly, app-rich devices.

"I don't think that there is some drastic change needed," he said at the time, triggering a hearty round of vitriol from shareholders who said the last thing the company needed was a handpicked insider without the stomach to make the necessary changes to see RIM through its most challenging chapter yet.

The stepped up housecleaning, a strategic review that leaves the door open to partnerships, joint ventures and/or licensing deals, as well as the decision to stop providing guidance, are clear signs Heins is looking ahead and not back and is finally responding to market criticism that RIM's predicament is far more dire than he let on two months ago. Deciding to narrow the company's focus on its core enterprise customers is another sign that Heins understands the need to consolidate resources and give up on dreams of ever being a broad-based vendor again.

Software holds the key

That lean-and-mean future starts and ends with software, long RIM's weakest link. The company had earlier announced it would distribute about 2,000 devices running the new BlackBerry 10 operating system to developers starting in May to give them a better feel for the new software — and to entice them to create apps for the platform.

Of all the challenges facing RIM right now, courting developers could very well be the most significant. BlackBerry devices have long been legendary for being difficult to program. Developers shy away from coding for RIM because programming tools are generations behind those available for competing Apple and Android devices, which can dramatically increase the amount of time it takes to complete an app.

Repeated promises to shore up the tool set and work directly with developers to help them build their businesses around BlackBerry have failed to create any kind of app-related buzz: Developers have abandoned RIM in droves, leaving its 10,000-title BlackBerry app world light-years behind Apple's 685,000-strong iTunes App Store and Google's 500,000-app Android Market. No matter how great the BlackBerry 10 hardware and software is when it finally goes live, the new offerings will need apps — and lots of them — to survive.

As dark as the numbers are for RIM right now, it faces at least one or two additional quarters of softening results before it has anything new to offer increasingly disinterested consumers. The next few months — pivotal because the company must survive on fast-fading last-generation devices while next-generation offerings are prepared for launch — will ultimately determine whether RIM remains a freestanding entity or ends up as yet another footnote of Canadian technology, a shining star that paid so little attention to what was going on around it that it allowed competitors to leave it behind for good.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expresses are his own.