No one ever reached top management in a public company without a touch of arrogance. How else can you stay a strategic course in the face of investor resistance? And mobile device vendor Research in Motion (RIMM) has displayed a fair amount in the past, like when co-CEO Mike Lazaridis walked out in the middle of a BBC interview in April because he didn’t like the question:
However, too much of a good thing can be a bad idea. RIM and its CEOs Lazaridis and Jim Balsillie offered excuses and attitude to analysts and investors disturbed by the company’s inability to stay abreast of competitors Google (GOOG) and Apple (AAPL). And the investors, who always have the last say, punished the stock.
Last quarter’s news wasn’t good. The smartphone market is growing at double-digit rates but unit sales of RIM’s flagship product, the BlackBerry smartphone, dropped for the first time in years, as you can see in the following chart we created from RIM’s financial reports:
If that wasn’t bad enough, RIM forecasts even lower sales this quarter -11 million to 12.5 million.
Planned workforce reductions and selling 500,000 units of its new PlayBook tablet couldn’t make up for the dismal results, which were ‘primarily related to the age of the BlackBerry product portfolio and the delays in new product introductions,’ according to Balsillie.
And yet, as calls for management changes increase – Lazaridis and Balsillie are also co-chairmen – the dynamic duo dismissed the concept. Balsillie nixed the idea of splitting their roles and said no one from outside the company could do a better job. In other words, mind your own business because we know what we’re doing.
The company has done this in subtler forms, as well. During the latest earnings call, an analyst asked for sell-through numbers on the PlayBook. Balsillie would only say ‘we are very pleased with the sell-through’. RIM has regularly reported sell-through numbers for BlackBerrys in the past. Why the sudden change in approach? Keeping the actual numbers quiet can only give rise to the suspicion that maybe consumers aren’t buying PlayBooks as avidly as the distribution channel.
Last September, the company stopped announcing growth of service subscriptions because, as Balsillie said, ‘net subscriber account additions are increasingly difficult to forecast’. In other words, RIM essentially said it wasn’t willing to provide ammo for outside critics. Freeze out investors, however, and you invite them to freeze you out in return, as this year-long RIM stock chart from Yahoo Finance shows:
The analyst downgrades and selloffs continue. Sometimes it’s wiser to be humble and listen when people point to the brick wall you’re about to hit.
[Article by Erik Sherman, IR magazine]
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