Vultures circle RIM management

Research In Motion's (RIM) co-CEO structure is under fire, and the vultures are starting to circle. After BlackBerry product miscues and a vacuum of new devices, RIM's fate is increasingly looking murky.

RIM's shareholder meeting is worth a listen, just to gauge the line between the realities of co-CEOs Jim Balsillie and Mike Lazaridis. In many respects, RIM's shareholder meeting was a replica of the most recent earnings call. Many questions and few answers — at least until RIM gets new devices rolling.

According to Balsillie and Lazaridis, the largest product launch in BlackBerry history is on deck to allay concerns. Some shareholders bought it. One shareholder bashed the analysts who had been panning RIM shares, yet also been typing up notes on their BlackBerrys. He got applause, but most folks were disappointed with RIM. One shareholder decried the lack of marketing for RIM at retailers.

Nevertheless, concerns mounted. To wit:

• Boy Genius Report has a nice tale of mismanagement inside of RIM. Publicly, management is defensive, and has a "What, me, worry?" approach. Behind the scenes, RIM is a mess, and has missed key product curves dating back to 2005.
• Bloomberg reports that RIM has six months to prove the need for a joint chairman CEO role. The push is to break up these roles to get better governance, and to potentially right the ship.

Through the entire hubbub, RIM's management has told customers to just hang tough because the best is yet to come. The jury is still out on that theory. "We are passionately engaged in what's best for this company," said Balsillie.

Here are the key points to watch going forward:

• BlackBerry 7.0 sales: if the largest launch in RIM history stops the bleeding and bolsters market share, the peanut gallery will shut up in a hurry. If sales are strong, RIM observers may even start cheering those QNX superphones on deck. If sales stink, RIM will have new management.
• Who will lead RIM? Balsillie and Lazaridis have noted that changing leadership would be too disruptive now. RIM's dynamic duo can lead RIM's rebound. To say that these two execs are on a short lease is an understatement.
• Can RIM's co-CEOs keep the company's employees on plan? To hear Balsillie talk about leaked memos and whether they were even real was a bit jarring. Balsillie said that employees are focused, but you have to wonder.
• Takeover talk. If RIM is rudderless, it will look like an appealing takeover target. RIM could go private (the most likely scenario) or could be acquired by Microsoft (less likely).

On that final point, National Bank financial analyst Kris Thompson said that RIM would fetch about US$23 billion if acquired. The valuation behind RIM — intellectual property, capital, products and future growth — would be tricky. Meanwhile, there's a short list of companies that could buy RIM.

Thompson wrote:

We expect RIM's global smartphone market share to fall below 10 per cent from about 14 per cent today. We're not confident that RIM will ever regain global smartphone market share above 10 per cent. Based on this assumption, our cursory analysis is that the company may be able to operate a successful niche enterprise business, and own a small percentage of the consumer market generating about $1.5 billion of operating cash flow per year ... Only a handful of potential acquirers that we have identified have enough net cash and investments to acquire RIM: Apple, Cisco, Google and Microsoft.

That short list of potential RIM buyers has flaws. Cisco is too distracted to buy RIM. Apple doesn't need RIM. Google is a possible acquirer, but fixing RIM would mean work (and three mobile OS flavours). Microsoft has Nokia.

In the end, RIM could either change leadership as Wall Street circles, or it could go private. One thing is clear: the pressure on RIM is intense.

Earlier this week, RIM also announced that over one billion apps had been downloaded from the BlackBerry App World.

Via ZDNet US