RIM investor confidence 'in the pits'

A high profile Berenberg Bank analyst has penned a damning open letter to RIM’s two-headed CEO, warning that there must be major changes or the company faces certain doom.

Adnaam Ahmad begins by telling them he has been closely following technology for 13 years, and warns that success is in the ecosystem and not just in hardware product cycles. While Google and Apple understand this, he says “since the inception of this smartphone revolution, RIMM, under your stewardship, has lost its sway”. Clearly reflected by, Ahmad says, the “80 percent decline in your stock since March 2009”.

He tells the CEOs that they have “joined the ranks of Ken Olsen, who stated ‘there is no reason for any individual to have a computer in his home'” just as Microsoft and Apple were making the most of that in the 80s. Ahmad cited two RIM flops, the BB7 and Playbook, as proof that the CEOs are entrenched in denial or the company will join the ranks of other once-mighty, now-extinct companies like Kodak and Polaroid. 

The analyst says what we’ve been saying for a while now – that companies like Good Technology are making RIM and its unique smelling point of strong security redundant. RIM just doesn’t have the egosystem to succeed, he suggested.

Ahmad makes three points in his letter which he believes RIM must listen to or fail. First, he recommends RIM focuses on services – by opening up its Network Operations Center and licensing technology to the other ego-systems. That will, he believes, at the very least protect RIM’s existing subscriber base. Or it could give RIM the opportunity to grow its subscription base if the competitors go for it.

Lazaridis and Balsillie were told they must de-emphasise on hardware. “There is no way you are going to be able to compete with Samsung in hardware given its ability to innovate quickly,” Ahmad warned. “Spinning off, shutting down or selling your hardware business is the ultimate goal,” because RIM hasn’t a snowball’s hope in heck of outgunning Apple and Google.

Finally, RIM must increase its transparency. He claims RIM abandoned its subscriber base over the past few years – by opening up disclosure it could kick-start the healing process with shareholders.

Ahmad signs off by saying ultimately, RIM needs to win back the hearts and minds of investors, as its credibility is “in the pits right now, to put it mildly”.

The damage has been done, which industry watchers are expecting will be reflected in today’s earnings call. The Playbook was a monumental flop but remains part of the company’s key strategy and BBX is taken about as seriously as the Newton.