BlackBerry CEO Asks for Patience With Company Strategy

By Jeffrey Burt  |  Posted 2013-07-10

BlackBerry CEO Asks for Patience With Company Strategy

BlackBerry CEO Thorsten Heins, just weeks after having to explain disappointing quarterly financial numbers, had to go before investors to discuss how his long-term plans for the embattled company will eventually return it to where it can compete against the likes of Apple and Samsung.

During the company's shareholders meeting July 9, Heins preached patience and the need for a long-term view when discussing BlackBerry, which he said is still in the early stages of a difficult turnaround and that its BlackBerry 10 operating system—and accompanying devices—is still relatively new to the market.

"While we have made all this great progress and while we are proud of what we achieved in the first phase of our transition, we are still in the midst of a major complex transition of this company," he said. "And like most of these major transformations of companies, progress can be volatile and it can be volatile in the short-term basis."

On the same day that Heins spoke with shareholders, reports indicated that BlackBerry is preparing for another round of job cuts, beyond the 5,000 layoffs done in 2012. According to a report in the Wall Street Journal, BlackBerry executives are getting ready to cut even more employees—mostly middle managers—from the company's 11,000-person workforce. Among those already fired was Richard Piasentin, BlackBerry's vice president for sales in the United States, who was let go in June.

During his talk with shareholders, Heins indicated that competition in the United States is particularly tough.

"While we are satisfied with the reception of BlackBerry 10 in various regions, we fully understand as the management team that we still have a way to go in the U.S. market as the most ferocious and the most competitive market in our industry," he said.

BlackBerry—formerly known as Research In Motion—at one time was the world's top mobile phone maker. However, starting with the introduction of Apple's iPhone in 2007, the company has been battered by such smartphone makers as Apple and Samsung, and has seen customers flee to rivals and its fortunes fall. During the company's fiscal 2013, it lost 3 million subscribers, bringing its subscriber base to 76 million.

Heins is leading the company in a three-step transformation effort to reverse BlackBerry's downward spiral and make it competitive again. The first phase—which involved restructuring the company and workforce and launching the much-delayed BlackBerry 10 OS—is complete. The next step is to drive sales of products based on BlackBerry 10 to make them more competitive with devices from Apple and those running Google's Android mobile OS.

In addition, BlackBerry executives want to move the company's focus beyond just mobile communications and into the mobile computing arena, where its technology can be leveraged in such areas as automotive technology, health care and machine-to-machine communications.

The company in January launched the first BlackBerry 10-based device, the Z10 smartphone, and later released the Q10. However, despite initial excitement around the touch-screen Z10, sales have been lower than had been expected. In June, BlackBerry officials announced that in the second calendar quarter, they had shipped only 2.7 million BlackBerry 10 devices, and they represented only 40 percent of all the smartphones the company shipped during those three months.

BlackBerry lost $84 million in the quarter.


BlackBerry CEO Asks for Patience With Company Strategy

In speaking with investors, Heins several times said BlackBerry 10 devices are still in their infancy, with the Z10 having only been introduced in January.

"We are five months into our platform transformation that we anticipate will drive growth for future smartphone devices, greater enterprise efficiencies and new mobile computing opportunities for many years to come," he said. "While many will judge the company's short-term success on unit sales over a single quarter, we are not a devices-only company. We also run a global institute data network and services, businesses, delivering the best enterprise-to-enterprise and enterprise-to-workforce securities, and our strategy and investments this year are aligned to grow our business in these domains."

Heins also questioned whether BlackBerry was the victim of overly optimistic analyst expectations.

"Guidance is very difficult to provide during this transition in areas such as unit volumes, [BlackBerry Enterprise Services] 10 deployment, service fees and cost structures, as all of these areas are undergoing significant change as we speak. Because of this, we don't provide specific guidance," he said. "With little visibility on these items, expectation in the first quarter in areas the companies does not guide were beyond what the company actually could realistically achieve, and our results significantly … disappointed against [Wall] Street's expectations."

During a question-and-answer period, investor Vic Alboini of Jaguar Financial, who in the past has proposed breaking up the company and selling parts of it off, broached that issue again. Heins was noncommittal, but said that before any strategic option is chosen, the company needs to be in a strong position in the market and financially.

"You have to create value, and the value of the company 15 months ago was very less than what it is today," he said. "I was talking about the new product—BlackBerry 10, BES 10 and BlackBerry Messenger—going across platform, and that's all about driving scale into the market to increase that value of the company. This is what I and my management team are totally focused on. Are we ignoring the landscape around us? No … but the point is we've got to have a strong position in the market. We've got to have a strong position in the enterprise and in the services domain, and then whatever happens, we'll take a look at this."


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