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RIM doth protest too much: the earnings call breakdown

RIM doth protest too much: the earnings call breakdown

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We just listened in to RIM's quarterly earnings call to see what co-CEOs Jim Balsillie and Mike Lazaridis had to say about the their disappointing financial numbers, product delays, and layoffs coming later this year. The feisty CEOs mentioned several times that people "on the outside" might not really understand what's going on inside RIM, so they laid it all out for us, citing a very familiar-sounding "transition period." Sounding more than ever like the Palm of yesteryear, they defended RIM's past and future strategy - one that is looking just as dubious now as it did during Blackberry World last month.

The biggest question on many minds has been the progression of the BlackBerry smartphone - even with the improvements they're bringing to BlackBerry 7 it looks decidedly behind-the-times when compared to Android or iOS. They defended not making a "hard cut over" to the QNX platform, saying that making the switch earlier was impossible anyway because the dual-core processors they need are just now hitting the market. Mike Lazaridis said that it would have caused a "product void for most of 2012." We're assuming he meant 2011 there (update: probably referring to RIM's fiscal 2012), but the implication was clear: RIM is definitely committed to delivering BlackBerry 7 smartphones for the foreseeable future. In fact, in response to a later question, it looks like RIM will keep BB7 phones on the market on the low end when they start selling high-end "superphones" based on QNX in the first quarter of 2012.

If you haven't heard, those BlackBerry 7 phones (most importantly the BlackBerry Bold 9900 and 9930) won't be hitting until late August. RIM contends that BB7 is such a majorly new platform that it's taking longer to get through certification than expected. Mike Lazaridis:

We were already well down a development path to the next-generation BlackBerry handsets when we realized that in the US the features and performance arms race demanded that we upgrade the chipset and port BlackBerry to a higher-performance platform. This was an engineering change that affected hardware and software timelines and pushed out entry into carrier certification labs.

It's not clear when RIM had this sudden realization, but whenever it was it probably wasn't soon enough. That's setting aside the fact that what we've seen of BB7 to date, it doesn't seem that radically new to us, but RIM held the line on that explanation pretty firmly. As for the delay of 4G-enabled BlackBerry PlayBooks to the fall, no explanation was given. Oh, and while RIM reported 500,000 PlayBooks shipped, they refused to talk specifics on actual sell through numbers.

As far as RIM the company is concerned, Balsillie and Lazaridis refused to characterize the impending layoffs as a "restructuring" or a "reorganization." Instead they said that the company has grown so fast so quickly that it's only natural for them to make cuts right now. That may well be true, but announcing them alongside new guidance that suggest a 20 percent cut in share price certainly makes one wonder if that's the whole story.

One more thing absolutely isn't getting reorganized: the dual-CEO setup RIM has had for many years. Balsillie and Lazaridis have clearly heard calls from investors and analysts to change how they run things and they are having none of it, going so far as to dare somebody to suggest outside leadership could help:

Neither of us could have taken the company this far alone and that completing the transition and taking the company to the next level of success and growth is also something neither of us can do alone. It's something that would be incredibly challenging to someone from outside the company to manage successfully at this critical time in RIM's development.

RIM and its two CEOs have never been much for speaking with humility and while the poor quarters behind them and ahead of them have leavened their tone a bit, it still feels like there's a significant disconnect between the realities of the market and the company's rhetoric.

Mike Lazaridis said today "We also understand that RIM has taken a unique path and why we do things the way we do may not be obvious from the outside" - no Mike, it's not. RIM's current strategy is to continue to string along the current BlackBerry OS while trying to ramp up a still-not-really-finished QNX platform on the Playbook. Even if you accept their argument that this is the right play, "on the outside" the product delays and lowered guidance reveal a company that's not well positioned to compete in the short term. However, it's a long game as RIM (once again echoing Palm) stressed: "we're still at very early beginnings in this whole smartphone revolution." Just because it's "early beginnings" doesn't mean that RIM has the luxury of time - they can't let any more product delays happen. We've been watching Palm sit in a near-perpetual "transition period" for four or five years now and that's not something even the once-mighty RIM can afford.