RIM CEO Has Rocky Start as Steady Approach Disappoints Some

Research In Motion Chief Executive Officer Thorsten Heins
Thorsten Heins, president and chief executive officer of Research In Motion Ltd. Source: Research In Motion Ltd. via Bloomberg

Research In Motion Ltd.’s Thorsten Heins got off to a rocky start to his tenure as the BlackBerry maker’s chief executive officer.

Investors clamoring for a strategic shakeup were instead told by Heins on a conference call this morning that no “drastic change” is needed. The comments sent the stock sliding, more than erasing a gain of as much as 7.6 percent in early trading.

RIM, which helped pioneer the U.S. smartphone market more than a decade ago, is betting on the management overhaul to stem falling sales and market-share gains by Google Inc.’s Android and Apple Inc.’s iPhone and iPad. Heins, a 54-year-old German native who spent more than 20 years at engineering giant Siemens AG, said that he promotes “creativity, innovation and free thinking” and that he is ready to go head-to-head with the Silicon Valley rivals.

“We need to fight back and get stronger,” Heins said in an interview. “You will see and hear much more from us.”

Heins, who is replacing co-Chief Executive Officers Jim Balsillie and Mike Lazaridis, joined RIM four years ago after more than two decades at Siemens in roles ranging from research and development to product management. He was one of RIM’s two operating chiefs, overseeing engineering, hardware and software.

RIM slumped 8.5 percent to $15.56 at the close in New York after rising as high as $18.29 in early trading. The stock has lost 89 percent since its peak in 2008, when soaring BlackBerry sales pushed RIM’s market capitalization to more than $80 billion, making it the most valuable company in Canada. Its sales have now declined for two straight quarters, and its market value stands at $8.2 billion.

Predecessors’ Influence

“I’m a German and this is what I like to talk about: the process discipline,” Heins told investors on the conference call.

In the interview, Heins said he plans to continue on the strategic path laid out by his predecessors. Lazaridis will be vice chairman and lead the board’s innovation committee, providing counsel to the CEO.

“It’s hard to see how this change can impact the company’s course,” Ittai Kidron, an analyst at Oppenheimer & Co. in New York, told investors in a note today. “RIM’s previous leadership is still involved so their influence is there and important. We believe this could make it difficult for Mr. Heins to make changes without their approval.”

‘Make or Break’

Balsillie and Lazaridis, who guided RIM together for two decades, said the decision to step down and appoint Heins was theirs. Lazaridis, who founded the Waterloo, Ontario-based company in 1984, said the shift is a result of the company’s evolution and the introduction of new technologies that will give RIM more competitive products.

“He’s really excelled in every department he’s been responsible for,” Lazaridis said. “He became the natural choice.”

Heins’s top challenge will be to lead RIM’s transition to next-generation products running on a new operating system, which has suffered from delays. In December, RIM said the first BlackBerrys based on the new system, called BB10, won’t be available until the latter part of this year.

“Getting this new operating system out has to be the key,” Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago, said in an interview. The new software “will make or break this company.”

Product Delays

Heins said the company’s focus on its own software will yield results in the long term. About 18 months ago, the company considered and decided against adopting another operating system, he said.

“Jim and Mike’s strategy of not sacrificing long-term value for short-term gain is the right one,” Heins said. “I share that value.”

RIM may consider licensing out its new operating system if other manufacturers are interested in it, Heins said. He also cited RIM’s 75 million subscribers, “strong balance sheet” and negligible debt as advantages.

The company had a nine-month delay in getting e-mail onto its PlayBook tablet computer, RIM’s response to Apple’s market-leading iPad. The technical difficulties and marketing missteps have left PlayBook shipments at a little more than 1 percent of those for the iPad.

Heins said he plans to emphasize discipline in RIM’s execution to make sure they company sticks to schedule.

“When you say we’re bringing a product to market, you make sure you execute,” he said.

No Retreat

At Siemens, Heins rose through the ranks of research and development, customer service, sales and product management. He ran several units of Siemens’s communication business and also worked as the division’s chief technology officer.

“Heins is a product execution guy, he’s not a visionary,” Ehud Gelblum, a New York-based analyst at Morgan Stanley, said in an interview. “Heins has to give people a reason why they need a BlackBerry. It’s going to be very difficult for him.”

Originally from Munich, Heins joined Siemens in 1984 after graduating from the University of Hanover. He is married and has two children, and his hobbies include bicycling, motorcycling, skiing and hiking.

Heins said his role will be in taking RIM “to the next phase.” Among his first moves, he said, will be hiring a new marketing chief to communicate with the consumer market.

With the transition to the new operating system, Heins says RIM will be able to compete more effectively for the customers it has lost. RIM, which dominated the U.S. smartphone market before Apple and Google entered it, had its share of sales drop to 16.6 percent in the three months ending in November, according to ComScore Inc. Google’s Android raised its share to 46.9 percent and Apple increased to 28.7 percent.

“We will be working the consumer market not at the expense of the enterprise,” Heins said. “I’m not here to retreat from the U.S. market. I’m here to take it up.”

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