Bloomberg News

BlackBerry Debut Provides Steve Jobs Moment for CEO

January 28, 2013

RIM CEO Thorsten Heins

Research In Motion Ltd. Chief Executive Officer Thorsten Heins. Photographer: Brent Lewin/Bloomberg

Research In Motion Ltd. (RIM) Chief Executive Officer Thorsten Heins, whose comeback plan has gained investor support in the past year, now faces the bigger test of winning over smartphone buyers.

Heins, who became CEO in January 2012, will take the stage in New York on Jan. 30 to unveil new BlackBerry 10 phones -- a product line that is likely to determine the future of both RIM and Heins’s career. The event is similar in scale to Apple Inc. (AAPL:US)’s much-anticipated product rollouts and will test the marketing skill of the 55-year-old CEO, an engineer by training who will have to prove his mettle as a consumer pitchman.

“This is RIM betting the farm -- it’s that big, it’s that important,” said Ramon Llamas, an analyst at IDC in Framingham, Massachusetts, who is headed to New York to attend Heins’s speech and press conference. “It’s one thing to work internally to right the ship, get the staff in place, and get the products and services all set. When you bring it externally, that’s a whole different ballgame.”

Just as Steve Jobs returned to Apple Inc. in 1997 and breathed life into the company with a fresh approach and new products, Heins has already made his mark since taking over a year ago. He cut 30 percent of RIM’s workforce, hired marketing and sales chiefs, and expanded cash reserves to $2.9 billion. Part of that stockpile will fund a promotional blitz for BlackBerry 10, including a TV commercial during the Super Bowl Feb. 3.

RIM’s stock has more than doubled (RIMM:US) from a late September low, a sign investors like Heins’s strategy and expect the new phones to make the Waterloo, Ontario-based company competitive again. Still, some doubts remain. The shares tumbled 7.8 percent to $16.18 at the close in New York today as shareholders wait for more information on the BlackBerry 10.

Divided View

Analysts are divided on whether RIM can reach beyond the pent-up demand for replacement phones from the BlackBerry faithful and win back consumers who dumped their BlackBerrys for Apple’s iPhone and Samsung Electronics Co. (005930)’s Galaxy, which runs on Google Inc.’s popular Android platform. Six analysts rate RIM a buy, 22 give it a hold recommendation, and 19 call it a sell.

Rebecca Freiburger, a RIM spokeswoman, declined to comment, referring back to RIM’s Jan. 25 statement that it will air a Super Bowl ad and market BlackBerry 10 through Facebook and Twitter as part of a “broad integrated marketing campaign.”

Losing Share

RIM needs an attention-grabber if it is to reverse six quarters of declining sales (RIMM:US) and a steady loss of market share. RIM was poised to finish 2012 with a 4.7 percent share of the global market, compared with almost 90 percent for Apple and Android combined, research firm IDC said last month. As recently as the first quarter of 2011, RIM had a 14 percent share.

Even so, RIM is outperforming those companies in the stock market. Apple has dropped 35 percent to $439.88 in the past four months on concern its growth is slowing, partially because of competition with Android. Google has gained less than 1 percent to $753.67 in the same span.

While the first BlackBerry 10 touch-screen model to reach consumers will have some interesting aspects, it lacks a major distinguishing feature to stand out from its peers, said Brian Blair, an analyst at Wedge Partners. That handset will begin arriving in stores in February, while the BlackBerry 10 with a traditional keyboard will follow at a later date.

“I have yet to see the key feature in BB10 to get people to leave iPhone, Android or Windows,” said Blair, who is based in New York. “It will look good, with sleek hardware, but I expect only one quarter of decent sales before I see a decline.”

What Hook?

While most BlackBerry models have had keyboards, some, including the Storm, have used touch screens. This will be RIM’s first device with no buttons on the main surface.

“With no keyboard, in the initial model, what is the hook?” Blair said.

To convince carriers and retailers that BlackBerry 10 is different, Heins and Chief Marketing Officer Frank Boulben have been crisscrossing the globe on the lone company jet -- a second plane was put on sale as part of Heins’s drive to squeeze out $1 billion in savings this year.

Heins has said the software represents the end of the “in- and-out” paradigm where users have to hit the home button to exit one program before entering another one. Instead, the new platform, which is built on QNX software that’s used to run nuclear power plants, allows you to peek at your e-mail or calendar without leaving the application you’re running.

Home Button

IDC’s Llamas disagrees with the contention that RIM’s new handsets lack distinguishing features, even if at first glance the touch-screen model shares the smooth, glass surface of the iPhone or Galaxy.

“When was the last time you had a smartphone that didn’t have a home button?” Llamas said. He saw the phone at RIM’s September developer conference in San Jose, California.

The virtual keyboard also offers innovations, RIM says. The device makes word suggestions right above the key it thinks you’ll type next, and learns over time where on a given key your finger strikes to reduce typing mistakes.

Even if the Jan. 30 event is drawing comparisons with Apple product debuts, that doesn’t mean that Heins or his deputies should try to mimic the on-stage routine of the late Steve Jobs, who would use words like “magical” and “revolutionary” before revealing his devices, as he did for the iPhone in 2007 and the iPad in 2010.

Litmus Test

“They need to be their own company, they need to set their own pace,” said Gus Papageorgiou, an analyst at Scotia Capital in Toronto. Heins has “done a pretty good job so far, but it seems like the big litmus test is coming,” he said.

Papageorgiou upgraded his rating on the stock to the equivalent of a buy last week, saying analysts’ consensus for BlackBerry 10 sales may be too low. He said RIM should ship 51.6 million devices in fiscal 2014, which begins in March. That includes 29.8 million BlackBerry 10 models. Apple sold 47.8 million iPhones last quarter.

Though bankers, lawyers and government workers remain the heart of RIM’s customer base, the company has to broaden its BlackBerry 10 marketing pitch beyond the “true multitasking” device tag line it’s been emphasizing recently, said Kris Thompson, a National Bank Financial analyst.

RIM must pay attention to the growing bring-your-own-device trend in the workplace and the blurring of the lines between what is a professional and a consumer, he said.

“I know they’re targeting the ‘prosumer,’ but you’ve got to remember that consumer and enterprise are becoming one person now,” said Thompson, who is based in Toronto and rates RIM the equivalent of a sell. “They need to improve the brand so it makes users feel cool again.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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