CEO Gaffe of the Week: Research In Motion

Three weeks ago, I introduced a new weekly series, the "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the Worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week I want to highlight BlackBerry manufacturer Research In Motion's (Nasdaq: RIMM  ) trio of CEOs: Jim Balsillie, Mike Lazaridis, and Thorstein Heins.

The dunce cap(s)
Have you ever had one of those "where to begin" moments? Well this is one for me. Research In Motion has been a train wreck for the past year, losing market share faster than you can blink to Google's (Nasdaq: GOOG  ) Android and Apple's (Nasdaq: AAPL  ) iPhone. In their recently reported quarters, Google's sales jumped 25% and Apple's blew the doors off of analysts' expectations. As for RIM, it's sinking faster than the Titanic.

The biggest detriment to RIM has been its lack of innovation. Innovation is what allowed the BlackBerry to compete with the iPhone a few years ago, and now its lack of innovation is what's crushing the consumer side of its business. Essentially relegated to just the enterprise side of the mobile sector, RIM's smartphone market share has plummeted from 44% in 2009 to just 10% in 2011, according to marketing research firm NPD Group.

The primary culprits of RIM's demise have been co-CEOs Jim Balsillie and Mike Lazaridis who have steered the ship directly into an iceberg. The company's tablet, the BlackBerry PlayBook, has been rivaled in inferiority only by Hewlett-Packard's (NYSE: HPQ  ) TouchPad, which flew off the shelves only after its price had been reduced dramatically. Priced at only $199, a far cry from its original $499 price point, the PlayBook is still collecting dust on many retailers' shelves.

With shareholders lined up with pitchforks calling for their ouster, Balsillie and Lazaridis obliged by stepping down this week and installing former chief operating officer Thorstein Heins as the new CEO. And how did Mr. Heins begin his tenure as head of the sinking ship? He assured investors that "no drastic change is needed."

Now, if you're a RIM shareholder, I'll give you a few minutes to go bang your head against a wall and grab a Tylenol, because the "steady as she goes" strategy has been working so well for RIM thus far!

To the corner ... all three of you!
All sarcasm aside, this week's move looks like nothing more than the former co-CEOs installing a puppet head to run their company. RIM's strategy simply isn't working, and staying the course is the last thing investors want to hear.

RIM is committed to launching its BlackBerry 10 operating system later this year along with a new series of smartphones, but I still have my concerns. For one, the BB10 OS has been delayed on multiple occasions, so I'm wondering if it can even hit its end-of-the-year target. Secondly, RIM may run into the same issue that Nokia (NYSE: NOK  ) did with its in-house Symbian OS -- namely that no one liked it! That was the primary reason Nokia switched to Microsoft's OS last year. It would be a shame to put so much emphasis on its all-new BB10 OS and have consumers avoid the new product, but even that wouldn't surprise me.

These three stooges are set to go down with this ship unless they do something fast. Hope remains that RIM could find a buyer since it's still profitable and boasts a decent amount of cash on hand -- but don't hold your breath!

Do you have a CEO you'd like to nominate for this dubious weekly gaffe honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight. A special thanks to David Feldt for this week's recommendation via email.

Also, if you'd like a surefire way to avoid investing in companies with questionable leadership practices, I invite you to download a copy of our latest special report, "11 Rock-Solid Dividend Stocks." This report contains a wide-array of companies and sectors that are likely to keep your best interests in mind regardless of whether the market is up or down. Best of all, it's completely free for a limited time, so don't miss out!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Apple, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Google, as well as creating a bull call spread position in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.


Read/Post Comments (10) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On January 27, 2012, at 1:56 PM, etgh wrote:

    Of course the new RIM CEO is a "dunce". Your Apple "media rep" told you he was and you robotically print what you're told to.

    When is the media going to divest itself from this xenophobic tech bully with oceans of cash to spread around ?

    When are we going to see fair and objective reporting and technology reviews that truly help consumers make intelligent choices instead of dogmatic biased reports ?

  • Report this Comment On January 27, 2012, at 3:17 PM, lucasmonger wrote:

    Although I'm no fan of Blackberry, we quite frankly have no idea what magic they might have in the works. Maybe they do have the next best thing, and only time will allow them to flesh out the bugs and ship a wonderful product.... then the CEO won't be a liar.

    I have my doubts that RIM can pull itself out of impending bankruptcy, but Apple was in a similar position in 1997. Stranger things have happened.

  • Report this Comment On January 27, 2012, at 3:49 PM, etgh wrote:

    Lucasmonger....

    You're saying a company that makes money every quarter, keeps growing its customer base, is number 1 in over a dozen markets, has $1,5B in free cash and continues to turn out new products should just close up shop and go away ?

    Are you kidding ???

    Just because the competition has become more intense, doesn't mean you run away and hide, you keep going and make better products. The current crop of BB7 devices are on par with ANY smartphone on the market today.

    Don't be fooled by the biased media.

  • Report this Comment On January 27, 2012, at 7:45 PM, jelp2 wrote:

    This RIM bashing is getting old and boring. RIM is on the way up this year no matter how much old negativity is written about it. It time to forget your shorts and move on. As said in a previous post, OS7 devices are equal to and out perform many devices on the market, including, yes thats right, the iPhone in all incarnations. Sorry about your loss that the new CEO isnt breaking up or selling the business.

    Maybe all the bashing is really fear of RIM in the future market?

  • Report this Comment On February 15, 2012, at 7:50 AM, infektu wrote:

    This "RIM is going banktrupt" mantra can not even fool my grandmother anymore.

    RIM has been constantly turning profit since 1996, and recent quarters have seen this profit somewhat lower, NOT negative.

    If they stop making mistakes (building 1M units of something on which you have no sales feedback is one of them) they will be raking in 5-6-700M a quarter before they launch BB10.

    In 10 quarters they can buy themselves out of the market ant let the punters play the rumor game on Apple or whatever will be the flavour of the month.

  • Report this Comment On February 15, 2012, at 7:55 AM, infektu wrote:

    p.s.

    As for the little short players they better pay attention.

    There is more institutional buying these days, and these buyers are not easily swayed by silly articles on how "inept" somebody is. That is, they will not sell soon.

    With 47M shares short, up from 30M last month this is a gas tank waiting for a spark.

    Rushing to get out before others is one of the saddest scenes in any greedy pyramidal scheme.

  • Report this Comment On February 15, 2012, at 10:56 AM, ryanalexanderson wrote:

    > Nobody was prepared for Lehman Brothers, even up to the moment all the Lehman Brothers employees were escorted out the door.

    Hey, here's a helpful financial tip - a company has to have DEBT to go bankrupt.

    You know, long-term debt, short term debt...those rows on the balance sheet that have all zeros, in RIM's case.

    And that's even ignoring the pile of cash they have around, and regularly increase.

    I haven't jumped in on this yet, but sentiment is so delightfully negative on this one that it may be about time to hop in on a takeover. And it probably won't be some American rival - it'll be a Chinese or Middle-Eastern company or group that nobody over here has heard of. That's where their growth is these days.

  • Report this Comment On February 15, 2012, at 11:42 AM, sikiliza wrote:

    @ryanalexanderson - Oh, there are scores of companies without debt that went down due to poor management and a self-defeating culture. RIMM will have to completely reinvent itself in order to compete in the intense mobile space.

    With Govt departments now switching over to Apple products, that cash horde you are talking about will dry more faster than you think - and it takes a while for these govt contracts to come up for renewal.

    The entire company needs to change and it wouldn't matter if they brought in Tim Cook to run RIMM - Like Warren Buffett said, "When a good manager meets a bad business, it's the business's reputation that remains intact"

  • Report this Comment On February 15, 2012, at 5:15 PM, ryanalexanderson wrote:

    I repeat, RIM's growth prospects are outside the USA. Yes, I would never dream of RIM ever competing with Apple ever again in the USA.

    But when you start to see RIM post losses, shareholders will have the clout they need to force real change in management and culture. Or, as mentioned, a takeover.

    You can't force that kind of change when cash flows are increasing, even if the increase is anemic. Case in point: look at Apple's history of profits. Note the only years they were significantly negative - Steve Jobs was brought back in as CEO and turned the whole company around. It can happen.

    I'm not saying RIM is

  • Report this Comment On February 15, 2012, at 5:16 PM, ryanalexanderson wrote:

    ...going to be a high-flyer, but a P/E of 4? Just seems a bit silly.

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