Research In Motion Annual Meeting Quiet, But Clock Is Ticking

Research in Motion (RIM) and its co-CEO/co-chairman duo of Mike Lazaridis and Jim Balsillie have been quite the controversy magnets for some time. The company’s performance tanked, causing many to question the leadership. An anonymous open letter allegedly from a senior RIM executive had some brutal things to say about company management.

Yesterday, at the company’s annual meeting, it seemed as though they had successfully dodged a major embarrassment in the form of a proxy vote to force a split of chairman and CEO roles. But they’re now on a countdown to either the company blasting off – or them getting blasted.

RIM’s competitive performance has been atrocious. In its last earnings call, the company announced the first significant downturn in unit sales of BlackBerry smartphones, the company’s single most important product line. Even though it introduced a tablet called the PlayBook, the news was like saying that McDonald’s suddenly found itself selling fewer hamburgers. And the company then forecast even lower sales for this quarter because it continued to be slow in getting new competitive products to the market.

The problems have been evident for a few years. Increasingly, investors, analysts and governance experts have been calling for a split between the CEO and chairman roles. The idea was that Lazaridis and Balsillie had worked together too long and that management had become stagnant as a result.

RIM shareholder Northwest and Ethical Investments (NEI) called for a proxy vote to make the CEO and chairman roles separate and to have an independent director serve as chairman. Both ISS and Glass Lewis advised shareholders to vote for the measure.

The chances of that sitting well with Lazaridis and Balsillie were slim to none. Both are on the record saying that no one else inside or outside the company could run it as well as they do. So RIM talked NEI into dropping the proposal by promising to form a committee to study the question.

Lazaridis and Balsillie may have dodged the bullet, but they didn’t count on the ricochet effect. Glass Lewis analysts took a hard stance, saying that the ‘appointment of independent board leadership does not require further study, but rather concrete action’ and that it was ‘underwhelmed with the board’s continued avoidance of a commitment to appoint an independent chairman.’

Even if RIM kept the issue out of a vote, it only further irritated investors. ‘There doesn’t seem to be the urgency in addressing meaningful matters,’ says Paul Taylor, chief investment officer of BMO Harris Private Banking, who oversees $14.5 bn, including RIM shares. ‘It seems like it committed to study the matter but has it committed to a change? Not really. It’s a bit disappointing.’

At the AGM, some shareholders ‘castigated the company’s management for its strategic missteps’, although all the directors were reelected.

But Balsillie and Lazaridis apparently kept to the same story they’ve been telling for some time: everything is about to turn the corner. It had better, because they may be just about to run out of time. NEI is giving them six months to prove they need to retain their titles for business reasons, and the stock is current trading at about $28, down from the nearly $150 a share it saw in 2008.

[Article by Erik Sherman, IR magazine]

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