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Jean-François Nobert
Articles (13) 

RIM Success Lies in Paradox

July 06, 2012 | About:
Success Lies in Paradox

1-Company history and business


“Research In Motion Limited (RIM), incorporated on March 7, 1984, is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services, RIM provides platforms and solutions for seamless access to information, including e-mail, voice, instant messaging, short message service (SMS), Internet and intranet-based applications and browsing. RIM technology also enables an array of third party developers and manufacturers to enhance their products and services through software development kits, wireless connectivity to data and third-party support programs. RIM’s portfolio of products, services and embedded technologies are used by thousands of organizations and millions of consumers around the world and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, the BlackBerry PlayBook tablet, software development tools and other software and hardware” sources: Reuters.

1.a-The success story of Research and Motion from 1984 to 2008:


RIM is a great Canadian success story. Mike Lazaridis a giant of Canadian industry, has introduced many technological innovations since he started his business in 1984. The most well-known is certainly the Blackberry, a revolutionary product that enabled people to send email via a small portable device using a small keyboard. Many other features were added to the device over the years, enabling it to be used as a cell phone, web-browser, and much more.

If Mike was the genius in technology, the brains on the business side was Jim Balsillie, a MBA graduate from Harvard with a PHD from Wilfrid Laurier University. Jim joined Research in motion in 1992, and he previously worked at Sutherland and Schultz, a small technology firm where he learned everything about running a company.

The combination of the knowledge and know-how of these two exceptional men has made Research in Motion a world leading brand.



1984- RIM founded by University of Waterloo engineering student Mike Lazaridis

1988- RIM becomes the first wireless data technology developer in North America

1992- Jim Balsillie joins RIM as CO-CEO with Mike Lazaridis

1992- RIM introduces the first Mobitex mobile point-of-sale solution

1996- RIM introduce the [email protected] Pager and RIM OEM Modem

1997: RIM goes public and is listed on the Toronto Stock Exchange

1997- RIM introduces the RIM wireless PC Card

1999- RIM introduces the BlackBerry wireless email solution

2002- RIM introduces the BlackBerry 5810 with built-in phone


2003- RIM introduces new device with color displays, while maintaining superior battery life

2004- RIM introduces the Award winning Blackberry 7100 series with SureType keyboard technology


2006- RIM introduce the incredibly sleek and stylish BlackBerry Pearl Smartphone World Edition

2008- RIM introduces a variety of next generation smartphones, including the BlackBerry Bold, Black Berry Storm and BlackBerry Curve 8900.

October 2008- RIM named one of Canada's Top 100 Employers

August 18, 2009- Fortune Magazine named RIM as the fastest growing company in the world with a growth of 84% in profits over three years despite a worldwide recession

1.b- 2007-2011: Big challenges, new competition, decline in market share: Management does not seem to recognize the threat and opportunity:

In 2007, Research and motion was at the peak of its popularity. Politicians, celebrities, businessmen and even teenagers around the world were excited by this reliable, efficient and secure product. But unfortunately, the capitalist system being what it is, when success is recognized, it usually doesn’t take too long before a competitor decides to try to emulate and profit off of that success.

In this case, it was Steve Jobs who saw the potential in this market. Jobs pushed the limits of innovation when he introduced the iPhone, a new device able to give to its user even more functions than the Blackberry using what he called “Apps”. The real decline in market share for RIM began in the U.S. when new competitor Google released the new Android smartphone system, grabbing market share at a faster pace than Apple. Although their market shares were declining, the management of RIM kept the focus on the hardware that made them successful. In finance, projecting last month’s growth into the future can lead to really bad decisions, and what made you successful in the past can hinder the ways you think about the future. It’s important to always try to stay one step ahead of the competition, and to not let past successes influence future decisions.



January 2007 - Steve Jobs unveils the iPhone

June 2007 - iPhone1 is released

February 2007- Jim Balsillie on the threat from the iPhone: "[Apple and the iPhone is] kind of one more entrant into an already very busy space with lots of choice for consumers … But in terms of a sort of a sea-change for BlackBerry, I would think that's overstating it ."

April 2007 - Jim Balsillie on the iPhone: "Again, I have said this before and I will say it again; Apple has done the industry an enormous favor because they basically told the world to expect a media player [the iPod] as a software feature on a good smartphone. As the leading smartphone Appliance Company and Platform Company, we could not buy that kind of validation for $100m."

May 2008 - Mike Lazaridis "The most exciting mobile trend is full Qwerty keyboards. I'm sorry, it really is. I'm not making this up."

September 2008 – Android 1.0 is released

January 2009 - Market share of Blackberry begins to decline in the U.S.

April 2010- Mike Lazaridis on the tablet market: "So the question you have to ask yourself is when it comes to tablet, what market or what opportunities, still, it's solving, what problem is it solving, and is it just a replacement laptop? I think that's a difficult one to judge."

September 2010- Mike Lazaridis announces RIM's new tablet, a 7in PlayBook tablet, which doesn't have any apps compared to the thousands of apps available for the 10in iPad.

November 2010- Jim Balsillie On tablet apps versus web apps – where Steve Jobs had publicly reversed his position in 2007 away from web apps to on-device apps: "There may be 300,000 apps for the iPhone and iPad, but the only app you really need is the browser. You don't need an app for the web ... You don't need to go through some kind of SDK ... You can use your web tools ... And you can publish your apps to the BlackBerry without writing any native code."

April 2011: During an interview with the BBC, RIM co-CEO Mike Lazaridis ended the session prematurely when asked a simple question on the recent security issues regarding the Middle East. BBC reporter Rory Cellan-Jones asked Lazaridis about the situation to which he responded: "You implied that we have a security problem; we don't have a security problem ... we've just been singled out, because we're so successful around the world. It's an iconic product, used by business, it's used by leaders, it's used by celebrities, it's used by consumers, it's used by teenagers, we were just singled out."

June 2011, RIM announced its prediction that Q1 2011 revenue will drop for the first time in nine years.

1.c- 2011 Management recognize their mistake, focus on growth in a growing market and more revenue from services and software.

The evidence of the loss of market share, combined with a lot of pessimism about Blackberry and RIM in North America, have probably made management realize that some changes needed to be made, and that they have made a huge mistake not recognizing the potential of their competitors. RIM has decided to focus their energy in the fastest-growing markets: Latin America, Asia, Europe, the Middle East and Africa. They have also tried to change their platform to better respond to consumer trends, and they released a better, more secure Operating System for the Blackberry7. This strategy has been enough to maintain RIM’s diminished position for the time being.




October 12, 2011- The Blackberry Internet Service goes down in North America. "Since launching BlackBerry in 1999, it's been my goal to provide reliable real-time communications around the world. We did not deliver on that goal this week, not even close," says RIM CEO Mike Lazaridis in an online video posted Oct. 13 after service outages occurred in parts of Europe, the Mideast, Africa and North and South America. "You expect better from us, and I expect better from us."

December 2011- Lazaridis and Balsillie both ask to have their salaries reduced to $1 per year, a gesture many observers regard as an acknowledgement of the financial troubles facing RIM.

1.d- 2012 RIM Racing again the clock, time for reorganization, Focus on innovation:

January 2012 began with many drastic changes for RIM. The first, and most notable, was that Balsillie and Lazaridis decided it was best for the business to leave as Co-CEOs, and left their place to new CEO Thorsten Heins a young, talented executive that had been working for RIM since 2007.

The current focus for RIM is to work on the development of their next device, the Blackberry10 BB10, a new smartphone that is supposed to be “revolutionary,” according to Heins. The company also announced the CORE program (Cost Optimization and Resource Efficiency). “The program is focused on delivering operational savings through various initiatives, with financial objectives for the program targeted to drive at least $1 billion in savings by the end of fiscal 2013.” The new direction also delays the release of the BB10 to the first quarter of 2013. With the market share of blackberry declining and revenue decreasing worldwide, investors have reacted to these announcements with a lot of pessimism.


January 2012- RIM names Thorsten Heins CEO. Lazaridis and Basillie resign. Mike Lazaridis: "There comes a time in the growth of every successful company when it’s time for the leaders to pass the baton. Jim and I went to the board and we told them we think the time is now.”

March 3, 2012- RIM ships 11.1 million BlackBerry smartphones, a 21 percent decline from the previous quarter. It is the first decline in the quarter covering Christmas since 2006

June 2012- RIM delays the make-or-break launch of its new BlackBerry phones until 2013 in a devastating setback to the company

1.e- 2012-2013 Outlook what to expect

Here a good resume of what we should expect from RIM in the coming year:

Source RIM Q1 Fiscal Result:

“The Company expects the next several quarters to continue to be very challenging for its business based on the increasing competitive environment, lower handset volumes, potential financial and other impacts from the delay of BlackBerry 10, pressure to reduce RIM’s monthly infrastructure access fees, and the Company’s plans to continue to aggressively drive sales of BlackBerry 7 handheld devices. The Company expects to report an operating loss in the second quarter of fiscal 2013, as RIM continues to invest in marketing programs and continues to work through the transition to BlackBerry 10, as well as the Company’s fixed costs being allocated over a lower volume of shipments. This outlook excludes the impact of charges related to the CORE Program.”

2-Financial Strength:

Judging from news reports and popular opinion, many assume that RIM is close to bankruptcy. Although their financial strength has declined considerably from its peak, it’s still not quite as bad as it seems for RIM. To give you an idea, the Z-Altman score of the company is at 3.5, above 2.9 (the limit of the safe zone) and far from 1.1 (the distress zone) that predicts 72% of bankruptcies. The quick ratio is at 1.75, and they have $1.54 billion of cash and no debt. The management is trying to maintain good liquidity in order to avoid further problems. A company that currently has no debt can hardly go bankrupt next year, so I believe that they still have an opportunity to make turn their company around in the wake of the coming release of the Blackberry10.

Although they are not facing imminent financial catastrophe according to their future outlook, with no visible catalysis until next year’s launch of their new smart-phone, there’s a good chance that this condition can deteriorate before the release of the BB10 platform.

Comparison Research in Motion vs Apple.




As we have seen, Balsillie and Lazaridis had a really good track record running RIM until 2008. They created a great product that used to have great success worldwide. They made mistakes, and they recognized them, and in my opinion the best managers are not those who are perfect, but those who are able to recognize their mistakes and improve upon them. They have pushed the limits in their field and tried to avoid the worst-case scenario for their company by recently making a good long-term decision when they realized their mistakes. They have been humble enough to give control of the business to Thorsten Heins in order to produce the greater good for RIM’s shareholders.

Although Lazaridis left his position as CEO, he kept a position on the firm’s Board of Directors, and he is currently one of the biggest shareholders of the company. The case of RIM is different in this regard than many other public companies, and the fact that Lazaridis is the one with the most to lose in this episode means it’s in his best interests to help RIM get back on track.

As we also know, Hamblin Watsa Investment Counsel Ltd. increased their ownership share over time in RIM. Mr. Prem Watsa himself join the Board, having one of the best, if not the best, investors and businessmen of the world on your team is a considerable competitive advantage.

Thorsten Heins, the new CEO, is very optimistic about the future of the company. He seems focused on the long-term viability of the firm, not on the next quarter result, and that’s great, because RIM needs some major re-structuring and a dramatic change in the way they think about their platform in order to stay competitive over the long-term. The Blackberry 10 could be what puts the company back on track.



RIM is currently trading for its liquidation value, in my calculation, this is really an estimate, this is no really scientific method and no deep research as well, i only discount the value of asset of the balance sheet. If you plan to use this number i would invite you to do your own research my number could be too high or too low. I also add 25% of the intangible, since we know that RIM has $3.3 billion in intangible assets, I thought that 25% of that amount, $843 million, was be very conservative valuation considering that they recently paid $770 million to acquire part of the Nortel Patent portfolio. At the current price, I see that buying share exposes you to a low risk of losses and a strong chance of a good return on your investment if the fundamentals improve with the release of the Blackberry10 platform as well as a turnaround of the business in the next 4-5 years.




1-Even if the stock is trading for the liquidation value of its assets, while not owning long-term debt, I see some risk. First, the next quarters are going to be challenging, and we can already expect that their sale could drop at a faster rate than their expenses, so there’s good chance that the liquidation value of the business will diminish, as will your margin of safety, before 2013.

2-The major risk is the release date of Blackberry10. Buying shares of RIM is like betting that BB10 is going to be a success and, most importantly, be released on time. However, even if BB10 fails, investors still have some security in their investment based on the worth of the assets of the business.

3-In the technology sector, new competitors can emerge very quickly, and there’s always the risk that the competition releases a better, more appealing product for customers than the BB10.


In technology business the need for constant innovation and the constant monitoring of opportunity and threat are the key for success over the long-term. I believe that if RIM succeeds in the release of the BB10, there is a good chance that the company will begin a new era stronger, more flexible, more efficient, and more successful, delivering a positive return for their shareholders over time.

The decline in the business profitability combined with the present level of uncertainty has made the price of the share decline significantly. The good news for us, Value investor, is the fact that at the current price, the shares are trading for the value of liquidation of its assets, and this is kind of opportunity is exceedingly rare for a company like RIM. If the release of BB10 is a success, the chance of an impressive return is significantly higher. If not, there is some possibility shareholders will ask for liquidation of the assets in order to avoid losing too much of their investment.

Betting heavily on RIM, given the risk and competition in the field, would be wrong, in my opinion. My personal technique regarding this case would be to allocate a certain amount of your portfolio to that stock, for example x% depending on your confidence level base on the fact from your own analysis, keeping a part of it in cash and to increase you ownership as the margin of safety increase either through fundamental improvements or the stock price decline. This way you will avoid a big loss in case this investment turns to be a value trap.

If we take a look at the past, Value investing have given better result than any other investing technique over time. Buying when people are really pessimistic and selling when people are really optimistic.

As Mike Lazaridis wrote in 1997: "Success Lies in Paradox".

Disclosure: If you consider buying it I would recommend making your own analysis because you need to be confident if you decide to buy it, there’s good chance that the stock price could go lower. I could have been wrong on my analysis or you could have a different way of investing than I do. In the case that the business turnaround the stock could give you a good return in the next four to five years. Even in this case you should understand it yourself in order to plan your exit and to understand the weakness of the business that could affect the underlying value and fundamental of the business.


2008 to 2012: Annual Report, Research In Motion.

2011 to 2012: Quarterly Report Research In Motion.

1. http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=RIM.TO

2. http://www.notablebiographies.com/newsmakers2/2006-A-Ec/Balsillie-Jim-and-Mike-Lazaridis.html

3. http://www.eluta.ca/top-employer-rim

4. http://tech.fortune.cnn.com/2011/06/17/how-the-iphone-and-android-sandbagged-the-blackberry/

5. http://www.cbc.ca/sports/hockey/story/2009/05/05/sp-timeline-balsillie.html

6. http://www.cbc.ca/news/canada/story/2012/01/23/rim-lazaridis-profile.html

7. http://www.guardian.co.uk/technology/2012/jun/29/rim-chiefs-best-quotes

8. http://news.bbc.co.uk/2/hi/programmes/click_online/9456798.stm

9. http://www.thestar.com/business/article/1018124--nortel-gets-4-5-billion-for-its-patents

10. http://business.financialpost.com/2012/01/24/watsa-needed-several-assurances-on-rim/

11. http://www.nytimes.com/2012/07/09/technology/new-delays-at-blackberry-maker-to-be-questioned-by-shareholders.html?pagewanted=all

Rating: 3.2/5 (27 votes)


Tkervin - 5 years ago    Report SPAM
"......._ I would be really surprised that the companies and country would spend millions to change when they already have a reliable, efficient and secure system, so the moat is probably not their hardware but much more their service and software......."

I would be less surprised. I know of smaller firms with a few hundred employees that have made the switch. Why? Continual pressure from employees. Governments will be slower, (I think that there are still a few Air Traffic Control radar sets that use vacuum tubes!), but private industry will move quicker than you think.

Of course I gave RIMM a fair value vote of $5 in Oct. of last year so I am a bit biased......
Jean-Francois Nobert
Jean-Francois Nobert - 5 years ago    Report SPAM
Thanks for you're comment Tkervin you have a good point.

For the smaller firm and for everyday life you are right, especially until the release of BB10 if it turn well...

Althought i could be wrong but at 12,4$ of tangible book a share while the stock is at 8$ i believe that there is a good margin of safety even if smaller firm are going to change until 2013 it will not affect to much the undervalue of the new business model, but as i said i could be wrong. Good thing you made youre own research and don't buy if your not confident.

Here a good argument i've found to support mine, why the biggest firm would probably not leave RIM, if your a fortune500 business or a country you can't afford to have security weakness, RIM use to have some in the past but they fix it, i'm sure they learn a lot from there mistake. it's now the saffest way i know, but i'm no genius in technology, just saying what i find out in my ressearch and it's close to the following quote from the financial repport of 2012. A management that learn from the pas,t live for the present and have great hope for the future is a great management.

Source RIM annual repport 2012:

A key aspect of competitive differentiation among industry participants involves the inclusion of a sophisticated NOC in the system architecture. RIM pioneered the use of a sophisticated multi-node centralized architecture responsible for the routing of messages to and from devices. The key benefits of the NOC are message delivery reliability, network utilization efficiency and security. By isolating firewalls from the devices, NOCs avoid the need for numerous simultaneous inbound connections through the firewall which is a significant security consideration for many IT managers. Other benefits of NOCs include eliminating the opportunity for Denial of Service Attacks against the firewall, protecting against bad packets reaching devices, and enhancing service quality by providing advanced compression and by acting as a buffer between the limited capacity of wireless networks and the massive capacity of the wired environment.

It is important to note that some of the cost of operating the NOC is often charged directly to carriers by the solution vendor as is the case with RIM. Carriers typically include the infrastructure access fee within data plans at the same or lower prices than data plans provided for solutions without NOCs partly because of the superior network efficiency of NOC-based systems. As such, end users get a better performing solution with a superior security model at the same or lower cost to products without NOCs.

CSP2014 - 5 years ago    Report SPAM
i believe that he could suceed at propaging is entousiasme, exceitment, energy and truth beleve in the new plateform it could be a real way for investor to have confidence back and persuade them of the transition and the posibility of a great return for them over the long run. I think that will be the key catalysis to bring back the confidence to it's shareholder

Umm spellcheck? A bit surprised GuruFocus would publish something like this. Not to be mean, but it's pretty clear you did not even read over it once. It makes it hard to take the article seriously.
Jean-Francois Nobert
Jean-Francois Nobert - 5 years ago    Report SPAM

Thanks for the comment CSP2014, Just correct that with a new article... 12/07/2012

Kfh227 - 5 years ago    Report SPAM
BB10 can fail in the US. It needs to succeed in places like India. That's what i love about RIMM though. Extreme bias in the USA by investment houses that operate on hte gruop think principle. All while RIMM is actually not doing that bad on a global basis.

RIMMs future is not the USA or corporate use in the USA. It is adoption of the BB10 in developing nations including India.

I want to write an article on RIMM. Now is a great time to buy in. If I have the time I will write it.
Jean-Francois Nobert
Jean-Francois Nobert - 5 years ago    Report SPAM
Thank Kfh227, for your comment.

I had the same idea I was also eager to write an article on the subject with really few time to write it. I publish this article as I tough the timing was good for the value contest with stock price trading close to the liquidation value of the business if you include tangible asset that have a certain worth. So there’s good chance I’ll continue re-editing it as the time goes and give me more time to write. If you don’t have time to write a full article just writes some comment on youre analysis here, i can even put it in this article and quote you, else it could be also great to read your artcile :)

With the transition you are talking about Kfh227 and the release of the BB10 that look like revolutionizing I see really good possible gain in a time frame of 4-5 year with the price close to liquidation, with the really low level of debt in the present time meaning better chance for shareholder to have their claim in case that BB10 turn bad and RIM decide to liquidate the asset, in a 1 to 2 year horizon I see the downturn risk as quite low. This is one of the few opportunity I see where head you win big and tail you don't lose that much. With the price at such a discount, extrem bias is the word, Although With the price going so low it's sad to see that there could be a lot of people that are loosing a lot of money selling share of a business under the value of the tangible book!

RIM seem really in a transition mode from USA to International. As what we can see the new management is really positive on the future and able to talk about their mistake of the past and not afraid to talk about it. They are in a transition mode and are focusing to bring the company back on track; it’s quite exciting to be able to follow this great story.

To prove your point Kfh227 here’s a quote from “Management’s Discussion and Analysis of Financial Condition and Result of Operations, For the tree mount ended June 2, 2012, page 13”:

<. The overall BlackBerry subscriber base continued to grow in all regions in the first quarter of fiscal 2013 except for North America. The overall increase was partially offset by a decrease in the ARPU, caused by a shift in the mix of the Company’s subscriber base from higher tiered unlimited plans to prepaid and lower tiered plans. BlackBerry tiered service plans continued to drive growth in the Company’s subscriber base in the first quarter of fiscal 2013, specifically in the international markets. The total BlackBerry subscriber base was over 78 million as at the end of the first quarter of fiscal 2013. The growth in international markets was offset by continued weak results in the first quarter of fiscal 2013 in the United States where a 12% decline in the subscriber base has caused service revenue to decline by 21%. The Company expects net subscribers in the United States to remain under pressure and will be looking to international markets to help maintain and grow the base. The Company also expects ARPU to continue to decline in the second quarter of fiscal 2013 due to the anticipated mix of the Company’s subscriber base discussed previously. The Company continues to be dissatisfied with the performance of the business in the United States.>>

Peter_burke_ceo - 5 years ago    Report SPAM
bb10 = meego. they will likely release one proof of concept device. I fully expect them to make a strategic shift to wp8 or android probably slightly before the bb10 device is released to dismal sales. there will be another leg down in the shares once the change in strategic direction is made.
Jean-Francois Nobert
Jean-Francois Nobert - 5 years ago    Report SPAM

Tanks for the comment Peter_burke_ceo you could be right i don't really have an opinion on that regard. It’s quite hard to know with s going to happen in the future we will see. But as you said BB10 could be something close to meego, a OS that is really fluid. I think the new management will release something really good, because they are really optimistic about it. But we don't know we will see, at the current price trade for the liquidation value it s a case where there is a lot to win and little to lose.

Jean-Francois Nobert
Jean-Francois Nobert - 5 years ago    Report SPAM

I invite you all to read the article of Kfh227 it's a really good article it's a good complement to my analysis, thank Kfh227 for sharing:


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