They are the odd couple of the wireless world. One is a Turkish-born whiz kid who grew up across the border from Detroit and later dropped out of college to build an industrial display network for General Motors Corp. (GM ); the other, an ambitious tradesman's son from rural Ontario who glided through one of Canada's top colleges and Harvard Business School before settling into corporate life.
But as co-chief executives of Research In Motion Ltd. (RIMM ) (RIM), Mike Lazaridis and Jim Balsillie, both 43, are the quiet men behind the hottest wireless e-mail gadget around: the BlackBerry. Among the million-plus subscribers are such reported fans as Jeb Bush, Bill Gates, Sarah Jessica Parker, and Jack Welch. From the near-constant clicking in the halls of Congress to its spot on Oprah Winfrey's "favorite things of 2003" list, the BlackBerry has become almost shorthand for wireless e-mail itself.
The addictive little devices, introduced in early 1999, defy many of the stereotypes of high tech. They were spawned far from Silicon Valley in Waterloo, Ont., a quiet university town of 99,000 about an hour's drive west of Toronto. And RIM is no glitzy startup; Lazaridis founded it two decades ago to consult and develop technologies like the film bar-code readers that would eventually win him a technical Emmy and an Oscar.
Still, nothing has ever rocked RIM and its hometown like the BlackBerry. The brand has become the industry standard, far better known than its cryptically named parent, and a cultural icon to boot. Every major carrier wants to offer it to its customers. Everyone wants to work there. And that stock price! It has roared from $12.75 to $108 over the past year, and on Apr. 7 the company announced a two-for-one split. Lazaridis' stake is worth $782 million, while Balsillie's comes to $674 million. Even so, Balsillie has banned staff from checking the price at the office.
Instead, the co-CEOs have obsessed over the core product: e-mail that is automatically pushed to the BlackBerry as it's going to the desktop and can be instantly answered with an intuitive, thumb-operated keyboard. Notes Andy Brown, chief technology architect at Merrill Lynch & Co. (MER ): "People don't want wireless e-mail. They want a BlackBerry." But that may not always be so. The duo have forged deals with companies ranging from Microsoft Corp. (MSFT ) to PalmSource Inc. (PSRC ) to license BlackBerry software. Think "Intel Inside." And they recently signed a deal with Sun Microsystems Inc. (SUNW ) to extend wireless Web services to BlackBerry customers. The goal, says Balsillie, is "to enable wireless e-mail whenever and on whatever device people want."
But RIM's quirky duo are hardly alone in their passion for wireless e-mail. They face competition ranging from pocket PC devices to similar handhelds put out by Good Technology Inc., which just settled a patent lawsuit with RIM and agreed to pay royalties for using its technology. And they have their own legal battles with Virginia's NTP Inc., which alleges RIM and numerous other wireless e-mail operators infringed its 1990 patents. RIM lost the first round in court; the case is on appeal.
`SCIENCE IS THE CORE'. Still, the company's main challenge at the moment may be gearing up for explosive growth. With added features like voice, color screens, and international roaming, analysts predict that the number of customers could easily double this year, to 2 million. On Apr. 7, RIM said its subscriber base increased by 24%, to almost 1.1 million, in the fourth quarter ended Feb. 28. It also reported sales of $210.6 million, up 37% from the previous quarter, while profits rose 255%, to $41.5 million.
Those who know RIM attribute much of its success to the complementary relationship of its co-CEOs. Without Lazaridis, the silver-haired science buff who once won a special award from his public school for checking every science and math book out of the library, RIM would have no technology. "Science is the core of everything, yet we take it for granted," he says. And without Balsillie, the business maven who as a young father mortgaged his house and poured much of his net worth into Lazaridis' fledgling operation in 1992, it would have far less commercial success. As he puts it: "People capitalize on opportunities. They don't create them." He is the corporate strategist, the financial wizard, the negotiator, and the face of the company on Wall Street. Lazaridis is the science mastermind, the production guru, the dreamer, and the one who solves customers' problems. He likes to frequent physics lectures and read books like Sojourner: An Insider's View of the Mars Pathfinder Mission. But his real hobby is, well, thinking about RIM. Balsillie coaches his son's basketball team, races into Toronto for Maple Leafs hockey games, and cherishes time in his cottage on Georgian Bay.
Despite such obvious differences, though, the two men share some important similarities. First is their conviction, stretching back a decade, that people would one day want constant access to e-mail through a device they could hook on their belts. Balsillie, who joined the then-tiny outfit when Lazaridis wooed him from a customer to manage the business in 1992, calls e-mail "one of the most profound medium shifts we'll ever see." Lazaridis never doubted it for a minute. Even now, he gets visibly exasperated when RIM is treated like some kind of here-today-gone-tomorrow dot-com. "We've passed all the initiation by fire to get to 20 years old," he says, noting that RIM went public five years ago and now has a market capitalization of almost $10 billion.
They are equally relentless about pushing the BlackBerry. In 1999, they were so sure that it would just take a few days with one to get hooked that they hired "evangelists" to lend the devices out to executives on Wall Street. That helped the no-name Canadian company win contracts with a number of big firms. "You immediately saw everyone get it," recalls Leonard G. Rosen, a technology banker and managing director at Lehman Brothers Inc. (LEH ), which works with RIM. Soon, the company decided to let the network carriers offer BlackBerries to their customers. The payoff for RIM is clear: 65%-plus margins on the service and 35%-plus margins on the hardware, according to analyst Deepak Chopra of National Bank Financial.
Both men are building a legacy beyond the BlackBerry. Lazaridis donated about $100 million (Canadian) in stock to start Waterloo's Perimeter Institute for Theoretical Physics in 2000, while Balsillie gave $30 million to start the Centre for International Governance Innovation two years later. But they're nowhere near retirement. Defending RIM's niche will take all of Lazaridis' tech brainpower and all of Balsillie's strategic smarts. This odd couple is smack in the middle of the hot zone.
By Diane Brady in Waterloo, Ont.