As recently as five weeks ago, Jim Balsillie, who helped build Research In Motion into Canada’s biggest company by market value, was showing no signs that he was about to step aside as investors pushed for management changes at the BlackBerry maker.
“We are more committed than ever to addressing the issues at hand,” Balsillie told analysts on a Dec. 15 conference call.
That all changed last week, when the Harvard University business graduate announced he’s leaving the firm he joined 20 years ago, giving up his roles as co-chairman and co-chief executive officer as the smartphone maker loses market share to Apple and Google devices. Mike Lazaridis, who founded RIM in 1984, is also surrendering his CEO and chairman roles.
“There comes a time in the growth of every successful company when it’s time for the leaders to pass the baton,” Lazaridis said. “Jim and I went to the board and we told them we think the time is now.”
While Lazaridis will stay on as vice chairman and head of an innovation unit at RIM, Balsillie will have no operational role and will remain a director after heading the business, finance and strategy areas for two decades at the Waterloo, Ontario-based firm.
“I remain a significant shareholder and a director and, of course, they will have my full support,” Balsillie said in a statement.
A native of Seaforth, Ontario, who grew up in the university town of Peterborough, Balsillie, 50, trained as an accountant and joined RIM in 1992. During his tenure, the firm transformed business communication, only to see competitors such as Apple seize market share when the technology spread to consumers.
While sharing the chief executive officer post with RIM co-founder Lazaridis, Balsillie developed a reputation for combativeness. His refusal to compromise cost the company hundreds of millions of dollars in a legal fight against patent-owner NTP and derailed his dream of owning a National Hockey League team. This year, it led to a shareholder revolt as he declined to step aside while RIM’s share price plunged.
“I’m the quant-jock from Peterborough who never quits,” Balsillie told students at Waterloo’s Wilfrid Laurier University in 2009. “You create this frame, this way of seeing things, and it manifests in everything you do.”
Lazaridis and Balsillie governed RIM in a unique arrangement as co-chairmen and co-CEOs. Lazaridis, who dropped out of the University of Waterloo after starting RIM in 1984, handled technology development while Balsillie took charge of the business side.
RIM, formerly a maker of equipment such as radio modems, introduced the BlackBerry in 1999. The “two-way pager,” as the company called it, proved a hit among Wall Street workers and gained widespread attention when BlackBerry service provided an alternative to jammed cellphone networks during the 2001 terrorist attacks in New York. Balsillie helped persuade carriers such as Rogers Communications and Cingular Wireless to support the new technology.
RIM’s revenue increased an average of 78 percent a year from 1999 to 2009. The company’s market value soared to $83.4 billion ($84.5 billion Canadian) in 2008 from less than $1 billion (Canadian) in early 1999. For parts of 2007 and 2008, RIM was the country’s most valuable company, topping Royal Bank of Canada. In May 2008, Balsillie’s stake in the company was worth $4.83 billion, according to a regulatory filing.
In November 2001, Arlington-based NTP sued RIM, accusing it of infringing on patented technology invented by Thomas Campana Jr., a Chicago engineer. Donald Stout, who co-founded NTP with Campana, would later say he would have settled the case for less than $50 million.
Instead, Balsillie denounced NTP as greedy and “avaricious” in a letter to the Wall Street Journal, lobbied Canadian and U.S. politicians to intervene in the dispute and tried to take the case, which RIM lost in a jury trial in 2002, as far as the U.S. Supreme Court. A $450 million settlement reached in 2005 fell through. RIM finally agreed to a $612.5 million deal with NTP in 2006.
As one of Canada’s best-known and wealthiest businesspeople, Balsillie used his fortune to engage in his favorite outside pursuits: world affairs and sports. In 2001, he founded the Centre for International Governance Innovation, which calls itself a nonpartisan think tank that researches global economics, security, development and environmental policy.
He was less successful in his other passion of hockey. He tried to buy NHL teams three times, seeking the Pittsburgh Penguins, the Nashville Predators and the Phoenix Coyotes. The league rebuffed him as it became clear he would move a franchise to Canada.
In May 2007, during the Nashville negotiations, NHL Commissioner Gary Bettman said Balsillie had assured him he had no intention of moving the Predators to Hamilton, Ontario. Less a month later, Ticketmaster began accepting deposits on “Hamilton Predators” season tickets.
At the same time, Balsillie faced a probe by the Ontario Securities Commission over backdated stock options. In 2007, the company restated earnings, reducing profit by about $250 million after finding it had assigned false dates to option grants to make them more valuable to recipients. Balsillie stepped down as chairman, and the OSC banned him from public companies’ boards of directors for a year in 2009. He rejoined RIM’s board in 2010, sharing the chairmanship with Lazaridis.
Investors forgave Balsillie’s missteps at the time as the company continued to increase profit and sell more smartphones than any company besides Nokia Oyj. When Apple entered the industry in 2007, Balsillie dismissed suggestions that it would threaten RIM.
“We have always had open competition in our space,” he told analysts. “This is no different. Consumers benefit from it, and we welcome it.”
After leading the market for eight years, RIM was unable to match Apple’s innovations. RIM’s first touch-screen smartphone, released in November 2008, was nicknamed the “BlackBerry Dud” by New York Times reviewer David Pogue. RIM’s PlayBook tablet, an attempt to counter Apple’s iPad, generated criticism for lacking its own e-mail program upon its release last April. The company has delayed its promised fix until February.
The sale of phones based on Google’s Android operating system worsened RIM’s plight. The firm’s share of the world smartphone market fell to 11 percent in the third quarter of last year from 19 percent in the second quarter of 2010, according to Gartner, a market-research firm.
RIM reported its first year-over-year decline in revenue since 2002 for the quarter that ended in August. Its shares plunged 75 percent last year, reducing the value of Balsillie’s stake to less than $500 million.
Balsillie publicly maintained optimism throughout RIM’s travails. When late Apple CEO Steve Jobs criticized RIM and Android products in October, Balsillie posted a response on RIM’s blog, saying Apple was misleading the public about the relative strength of the two companies’ sales. “We think many customers are getting tired of being told what to think by Apple,” Balsillie wrote.
Shareholder resentment grew as RIM’s stock tumbled. Northwest & Ethical Investments, a money manager, called for a split in the chairman and CEO roles in June. Another Toronto-based holder, Jaguar Financial, began a campaign in September to persuade RIM to shake up its management and sell parts of its business.
“The dilemma is that the U.S. went down the high-end smartphone market and the international market grew greatly,” Balsillie said. “So the question is where you put your resources? We couldn’t do both. We were explosive growth internationally. Do we leverage core franchise and go international, or do we move higher end for the U.S. market?”
Balsillie and Lazaridis had shown no inclination to step aside until now. The two CEOs did agree to reduce their salary to $1 a year while receiving other benefits. The gesture didn’t satisfy shareholders, whose tolerance for Balsillie’s obstinacy ran out with RIM’s shrinking profits.
RIM’s new CEO, Thorsten Heins, brings decades of hardware experience as he seeks to revive the company.
Heins, 54, joined RIM four years ago after more than two decades at engineering giant Siemens in roles including research and product management. The German native was one of RIM’s two operating chiefs, overseeing engineering, hardware and software.
Heins said that he promotes “creativity, innovation and free thinking” and that the company is ready to go head-to-head with its Silicon Valley rivals.
“We need to fight back and get stronger,” Heins said. “You will see and hear much more from us.”
Balsillie and Lazaridis said the decision to appoint Heins was theirs. Lazaridis, who founded the Waterloo, Ontario-based company in 1984, said the shift is a result of the company’s evolution and the introduction of new technologies that will give RIM more competitive products.
“He’s really excelled in every department he’s been responsible for,” Lazaridis said. “He became the natural choice.”
Heins’s top challenge will be to lead RIM’s transition to next-generation products running on a new operating system, which has suffered from delays. In December, RIM said the first BlackBerrys based on the new system, called BB10, won’t be available until later this year.
Heins said he plans to emphasize discipline in RIM’s execution to make sure the company sticks to schedules. “When you say we’re bringing a product to market, you make sure you execute,” he said.
With the transition to the new operating system, Heins says RIM will be able to compete more effectively for the customers it has lost.
“I’m not here to retreat from the U.S. market,” he said. “I’m here to take it up.”