Even After Shakeup, RIM Still Behind the Eight Ball

RIM announced that chief operating officer Thorsten Heins will replace co-CEOs Jim Balsillie and Mike Lazaridis. Balsillie and Lazaridis built the firm into a top device manufacturer during the past two decades, but have struggled in recent years to compete with  Apple AAPL and  Google GOOG in the smartphone market. The co-CEO structure has turned into a handicap during this time, with mixed visions leading to poor execution. A change in the top role is an opportunity to bring a more focused direction to the firm.

The change at the top does not alter RIM's disadvantaged competitive position, though. The firm's smartphone market share has plunged from 20% to 12% in the past eight quarters, indicating that RIM has failed to deliver compelling devices. RIM is now betting its future on a next-generation operating system acquired from QNX. However, the BlackBerry 10 smartphones based on the new operating system will not be available until the second half of 2012. In the meantime, RIM is trying to compete with the latest-generation iPhone and Android devices, with BlackBerry phones that represent the last gasp of design from a dead operating system. This makes it difficult to hold on to existing customers and limits the firm's ability to court developers, putting the BlackBerry ecosystem further behind the competition.

To survive, RIM must deliver compelling devices with the BlackBerry 10 launch. Even then, the firm will still be late to a game where momentum is critical, but compelling devices could spark a turnaround. It is difficult to have confidence in the design and execution around the BlackBerry 10 smartphone launch, which is still two quarters away. Furthermore, as we have detailed in previous notes, we view an acquisition of RIM as unlikely and see few short-term solutions to bail out investors.