Is This RIM’s Last Official Lap?

RIM has hired, of all things, a law firm to build a restructuring plan for the company. A law firm? Are you kidding me? I knew RIM was in trouble. That’s pretty obvious to all but those who wilfully choose to ignore reality. But if the board of directors believes that RIM’s salvation is to be found in a bunch of lawyers, then that board is not truly intent on trying to save the company.

Why A Law Firm?

Now, don’t get me wrong. A lot of lawyers are really smart people. I know a few, and believe me, they are very bright. But to expect someone to find a way to rebuild the company, whose primary focus and interest is in the law, is a bit much. I’m not even sure how they can really help in terms of valuation and structuring of a breakup. Their job is to apply the law. It is about the interpretation and understanding of contracts, in knowing how to apply precedent, in being able to navigate the rules of things like securities law, intellectual property law and such. Lawyers are a critical part of putting together a deal. You need someone with competence, training and experience to make sure that the agreements are built correctly. But they aren’t the ones identifying the valuable assets, figuring out how much they are worth, and finding buyers. They aren’t the ones to develop product plans for rebuilding the business.

This looks and feels far too much like they’ve hired the mortician to dress up the deceased. A plan to break up the company and sell off the pieces would primarily involve either a finance team, a strategic planning/consulting team, or both. An attempt to rebuild/remake the company with the core assets intact would have involved a product person, and real product person, not the engineer masquerading as a product person like they have now.

In short, having a law firm in a key role in “restructuring” sounds like the board has basically given up. They tried the short-term “let’s make the investors happy” changes by removing Balsillie and Lazaridis from the top of the org chart, pushing Balsillie aside completely and having Lazaridis off to the fringes. They were seen (rightly) as the guys who got the company into the mess they are in now. Balsillie apparently had a plan to transform the company into a network and infrastructure provider, but the board got scared. Whether the plan would have worked or not is still in question, but it was at least something to break the current cycle.

Repetition and Insanity

RIM’s current activities are unsustainable. No one wants yet another mobile operating system (particularly when the leading mobile OS, Android, is essentially free to obtain). As it is, other operating systems which are strong on paper (Windows Phone 7, WebOS) are either stagnant or dead. Blackberry OS is dying. A new version isn’t going to be substantially better, and unlike Android, doesn’t come with a ready-built inventory of half a million apps (and growing). The definition of insanity: doing the same thing over and over, but expecting different results. RIM released 2 new versions of the OS in 2 years (v6 in 2010, v7 in 2011). It didn’t help. They released new hardware. It didn’t help. They did try to branch out with the Playbook in 2011. It didn’t help.

I still maintain that RIM could have a future along the same lines as the Balsillie plan: as an infrastructure company. It is the oft-overlooked portion of the business where they are very strong, have modest competition, but a proven track record. Sure, being part of the background isn’t very sexy. It isn’t something you can point to at cocktail parties (at least normal cocktail parties) and say “we built that” and have people go “ooo” and “aaaah”. Not building handsets doesn’t look very exciting. But the reality is that the handset business is in trouble, and a new OS is unlikely to change that. There is limited appeal for yet another operating system for guys like HTC and Samsung. Samsung in particular is already invested in their own operating system, Bada, along with Windows Phone and Android. Why would they want to add a 4th operating system to the mix?

The best RIM can hope for with their operating system and handset business is a one-time transaction to exchange it for cash. The buyer is picking it up for defensive purposes (ie. the patent portfolio). That cash could then be used to build up the infrastructure, including expanding BBM support to other devices. It would allow RIM to continue to be an important player in the mobile computing space, and perhaps expand to also integrate desktops and notebooks. It could be something they could build on, perhaps adding some kind of cloud computing service that is aimed more at mobile devices. RIM is pretty good a building secure, reliable and scalable infrastructure. They should take advantage of that skill.

“Hope” Is Not A Plan

But I don’t expect a law firm to figure this out. I’m still uncertain what the board hopes to accomplish. Maybe they think they can fool the shareholders into believing that a restructuring is coming, but in reality a proper restructuring and recomposition isn’t waiting in the wings. Perhaps it was much like when they moved Lazaridis and Balsillie aside: it window-dressing to address the immediate complaints of the shareholders and the market, but it doesn’t actually address the fundamental problem. I won’t talk about deck chairs and sinking ships, but you get the idea. It is easier and less risky to do some redecorating, rather than patching the holes.

It tells me that, perhaps, the board doesn’t actually have a plan. Maybe they continue to believe that if they just run in a circle faster, things will work themselves out for their benefit. Maybe they are sticking with the “we hope it all works out” approach, which isn’t a plan. If you want to sell off assets, you hire finance guys who make that happen. If you want to salvage the product, you hire product people to make that happen. You hire lawyers to help, but they aren’t the primary actors in these sorts of activities.

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