Canadian tech town feels BlackBerry's decline

June 10, 2012 by ROB GILLIES
In this Monday, Jan. 23, 2012 photo, a man with an umbrella walks past part of the Research In Motion campus in Waterloo, Ontario, Canada. These are troubling times for Waterloo, the town of 100,000 that was transformed by Research In Motion's BlackBerry into Canada's Silicon Valley. (AP Photo/The Canadian Press, Chris Young)

(AP) — President Barack Obama couldn't bear to part with his BlackBerry. Oprah Winfrey declared it one of her "favorite things." It could be so addictive that it was nicknamed "the CrackBerry."

Then came a new generation of competing smartphones, and suddenly the , that game-changing breakthrough in personal connectedness, looks ancient.

There is even talk that the fate of Research In Motion, the company that fathered the BlackBerry in 1999, is no longer certain as its flagship property rapidly loses market share to flashier phones like Apple's iPhone and Google's Android-driven models.

With more than $2 billion in cash, bankruptcy for seems highly unlikely in the near term, but these are troubling times for Waterloo, Ontario, the town of 100,000 that was transformed by the BlackBerry into Canada's Silicon Valley. RIM is Canada's most valuable technology company, an international icon so prestigious that founder Mike Lazaridis and its other driving force, Jim Balsillie, are on an official government list of national heroes, alongside the likes of Alexander Graham Bell.

RIM's U.S. share of the smartphone market belly-flopped from 44 percent in 2009 to 10 percent in 2011 according to market researcher NPD Group. The company still has 78 million active subscribers across the globe, but last month RIM issued a warning that it will lose money for the second consecutive quarter, will lay off workers this year, and has hired a team of bankers to help it weigh its options. Last July it slashed 2,000 jobs.

Of RIM's 16,500 remaining employees, 7,500 live in Waterloo, a university town 90 minutes' drive from Toronto, where everyone seems to know someone who works for RIM.

John Lind says RIM's impact on his field, commercial real estate, is enormous. "We talk about RIM in hushed tones in this region because no one wants to be negative about it, no one wants to be seen as not on their side," he said. "But people are saying, 'What would this region look like without RIM?'"

The decline of the BlackBerry has come shockingly fast. Just five years ago, when the first iPhone came out, few thought it could threaten the BlackBerry. Now Chief Executive Thorsten Heins says his employees "are getting asked all the time, 'What's going on with you guys? What happened? I mean RIM is the star of Canada and what happened to you guys? And how bad is it going to go?'"

RIM's software is still focused on email, and is less user-friendly and agile than iPhone or Android. Its attempt at touch screens was a flop, and it lacks the apps that power other smartphones. Its tablet, the PlayBook, registered just 500,000 sales to Apple's 11.8 million in the last quarter despite a price cut from $500 to $200, well below cost.

RIM's hopes now hang on BlackBerry 10, a new operating system set to debut later this year. It's thoroughly redesigned for the new multimedia, Internet browsing and apps experience that customers are now demanding.

Heins, formerly RIM's chief operating officer, says he can turn things around with BlackBerry. He took over in January after the company lost tens of billions in market value and founder Lazaridis stepped down along with co-CEO Balsillie.

In this Tuesday, May 24, 2011 photo, screens display share prices for Research In Motion, top, and Apple Inc. at the Nasdaq MarketSite in New York. These are troubling times for Waterloo, Ontario, Canada, the town of 100,000 that was transformed by Research In Motion's BlackBerry into Canada's Silicon Valley. (AP Photo/Mark Lennihan)

RIM was once Canada's most valuable company with a market value of $83 billion in June 2008, but the stock has plummeted since, from over $140 share to around $10. Its decline is evoking memories of Nortel, another Canadian tech giant, which ended up declaring bankruptcy in 2009.

"It has to be very sad," BGC Financial Partners analyst Colin Gillis said from New York. "I feel for those people up there because what else are you going to do — work at the Apple store that just opened in the mall?"

But Waterloo is home to more than 800 tech companies and is certainly no company town, many here insist. Smaller firms like e-learning company Desire2Learn have doubled their head count in the last year, and Google has opened an office here.

Tad Homer-Dixon, chairman of the Center for International Governance and Innovation, a Waterloo-based think tank, likens Waterloo to Rochester, New York, where the blow of Kodak's bankruptcy filing is cushioned by the network of startups the company helped to spawn.

"They've taken an enormous hit because of the collapse of Kodak, and Waterloo will take an enormous hit assuming that RIM ultimately vanishes from the scene, but I think the overall economy and region has been so fundamentally changed by RIM that it will actually do very well," Homer-Dixon said.

Homer-Dixon says RIM's impact on the city has been staggering.

His think tank was created by RIM's Balsillie, and he also is a professor at the Balsillie School of International Affairs at the University of Waterloo. Balsillie and Lazaridis have together donated more than $400 million to the community. Lazaridis has donated $150 million to the Perimeter Institute for Theoretical Physics, which he founded in 2000 and which attracts the involvement of such giants of physics as Stephen Hawking.

"Ten years from now BlackBerrys will be in the Smithsonian but these institutions will hopefully still be thriving," Homer-Dixon said.

Lazaridis, 51, remains on RIM's board. Canadian billionaire Prem Watsa, a fellow board member, calls the Turkish-born Greek immigrant a genius who pioneered the smartphone. "It really would be unfortunate if anything happened to RIM, and I'd like to do whatever I can to help," Watsa said.

In an interview with The Associated Press at RIM headquarters in Waterloo, Heins said he won't try to compete head-to-head with Apple but will try to build on RIM's strengths, such as its dominance of the corporate smartphone market. RIM says more than 90 percent of Fortune 500 companies use BlackBerry and that more than a million North American government workers rely on BlackBerry's software security.

But Heins acknowledges RIM failed to quickly adapt to the emerging "bring your own device" trend, in which employees bring their personal iPhones or Android devices to work instead of relying on BlackBerrys issued by their employers.

That's where BlackBerry 10 comes in — delayed but not too late to vie with the new Apple iPhone expected this fall, or so Heins hopes.

"At the end of the day if the product is good you can always come back," Heins said. "There's many examples of how that has happened. I'm not that scared about this, frankly."

Other tech companies have indeed recovered from the ropes. The late Steve Jobs said Apple was less than three months away from bankruptcy when he rejoined it in 1997, and it's now the world's most valuable company.

Homer-Dixon said it's amazing that RIM in Waterloo got this far, considering it has had to compete with Silicon Valley, "the most powerful engine of innovation that humankind has ever created."

Neither Lazaridis nor Balsillie has given interviews about RIM since stepping down, but Homer-Dixon suggests Balsillie is well prepared for a change of fortune.

He recalls being on a boat in the Arctic in mid-2009 with Balsillie, who talked about the importance of luck in building a tech giant. A crew member asked where RIM would be in five years.

"He said, 'Well the smartphone industry is a rapidly expanding market and I think we'll retain a segment of it.' Then his last words were 'I don't think RIM will go bankrupt, but who knows.'"

Explore further: RIM loses another senior executive


Related Stories

RIM loses another senior executive

May 28, 2012

(AP) -- Struggling BlackBerry-maker Research In Motion Ltd. said Monday that it is losing another senior executive as its chief legal officer is retiring from the company after 12 years.

RIM releases belated new PlayBook software

February 21, 2012

Research In Motion released a free upgraded operating system for its struggling Playbook computer tablet on Tuesday, almost a year later than it first said it would.

RIM shares fall on disappointing results

September 15, 2011

Shares in Research In Motion (RIM) fell sharply in after-hours trading on Thursday after the BlackBerry maker said it shipped fewer smartphones and tablet computers than expected in the quarter.

RIM cutting 2,000 jobs, COO retiring

July 25, 2011

BlackBerry maker Research In Motion (RIM) announced Monday it was cutting 2,000 jobs and that its ailing chief operating officer planned to retire.

Recommended for you

Cryptocurrency rivals snap at Bitcoin's heels

January 14, 2018

Bitcoin may be the most famous cryptocurrency but, despite a dizzying rise, it's not the most lucrative one and far from alone in a universe that counts 1,400 rivals, and counting.

Top takeaways from Consumers Electronics Show

January 13, 2018

The 2018 Consumer Electronics Show, which concluded Friday in Las Vegas, drew some 4,000 exhibitors from dozens of countries and more than 170,000 attendees, showcased some of the latest from the technology world.

Finnish firm detects new Intel security flaw

January 12, 2018

A new security flaw has been found in Intel hardware which could enable hackers to access corporate laptops remotely, Finnish cybersecurity specialist F-Secure said on Friday.

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

2 / 5 (1) Jun 10, 2012
If RIM is pegging it's future on the BB10 OS, then it already out of business.

People don't purchase smart phones for the OS. They purchase them for the games and other apps that run on them, as well as the telephone feature of course.

The OS is irrelevant to the consumer once it provides a basic set of features that provide for the above applications.

There is one exception of course, and that is the issue of OS cost. An OS that needs to be licensed adds to the cost of the device. And an OS that is closed adds to the cost of the apps running on the device.

BB10 will be closed and first generation buggy. Authorship costs are high, and applications aren't there, and a new OS negatively affects the existing software base.

RIM management has gone from rudderless to delusional.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.