Mixing the Berry

Dividing RIM ignores the most compelling argument for an integrated hardware+software solution: Apple

“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill

Early Research in Motion (RIM) insiders used to describe the company as “lightning in a bottle,” and credited the leadership team of Jim Balsillie and Mike Lazaridis as largely responsible for the company’s phenomenal success. At the time, the U.S. government was the company’s biggest customer, and legal firms and banks were quickly adopting the BlackBerry to securely and seamlessly tether their employees to their desks and launch the 24-hour work day.

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Companies loved the productivity. Networks loved the higher fees. Business users loved the access to information. And RIM shareholders loved the growth. Then, on June 27, 2007, everything changed. The release of Apple’s iPhone disrupted dozens of competing products in the maturing smartphone market, offering an incredibly stable and high-performance mobile ecosystem with all the bells and whistles consumers wanted, like a camera, multimedia playback, and an intuitive web-browsing experience.

RIM’s response – strategically speaking – was painfully short-sighted.

“There will never be a BlackBerry with an MP3 player or camera,” Lazaridis would say in meetings. “People won’t buy an iPhone because it doesn’t have a battery as good as a BlackBerry.” Despite the company’s phenomenal early growth and substantial market share (one out of every five smartphones sold in 2006 was a BlackBerry), insiders reported that RIM lacked a grand strategy or a robust product roadmap, focusing instead on a portfolio of pet projects like designing the world’s greatest mobile speakerphone. In the face of an existential threat, the company has been reactive in the worst possible way.

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With tech titans Apple, Google, and even Microsoft grabbing ever-larger slices of the expanding smartphone pie, RIM seems unable to muster anything more than a cosmetic upgrade of its original keyboard + encryption + battery-life formula. Perhaps more troublesome is the fact that the company’s co-CEOs don’t seem to care, and that their ambivalence has put considerable downward pressure on RIM’s share price over the last two years.

RBC’s Mike Abramsky highlighted RIM’s structural troubles in a recent report, which has sparked a public debate about the future of the company, and, perhaps more profoundly, about Canada’s ability to foster technology giants that don’t eventually self-destruct.

Abramsky’s key recommendation is to “Split the Berry” into independent hardware and software units, which he suggests might compete more effectively as separate entities than as part of a united RIM. In a thoughtful exploration of the potential value that could be unlocked, his analysis suggests that if “BlackBerry” and “RIM Smart Devices” were floated separately, the companies would be worth roughly twice what RIM trades at today ($30 billion versus $15 billion).