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RIM placates shareholders for now, but greater challenges are ahead

Admissions and denials at RIM's annual general meeting.

Co-chief executive Jim Balsillie speaks at the Research in Motion annual meeting in Waterloo, Ontario, Tuessday, July 12, 2011.(Photo: Dave Chidley/CP)

For an event that was billed as a showdown between Research in Motion and its beleaguered shareholders, the company’s annual general meeting in Waterloo on Tuesday was a relatively tame affair. This is not particularly surprising. Shareholders who lost faith in the company have likely already fled amid a 53% drop in RIM’s stock price so far this year. Those who remain believe the company will bounce back. At least one attendee donned a T-shirt bearing the phrase, “THE RIMPIRE STRIKES BACK.”

Long-term observers of Jim Balsillie and Mike Lazaridis may have noticed a slight change in their tone, however. Yes, they were supremely confident about RIM’s prospects, but there was a small element of contrition in their speech. Lazaridis, for one, acknowledged what everyone already knows: RIM has fallen behind competitors in terms of its consumer offerings. “Last year, we realized that the arms race had taken off to such an extent in the U.S that we really needed to up the platform of our high-end product,” he said. “We made the decision to really jump ahead…literally jumping over a generation, and that delayed our profits.”

Lazaridis is referring to the fact that RIM is developing a new generation of devices based on the QNX operating system, which the company calls “super phones.” They won’t be released until early next year, however, leaving a drought of new BlackBerry products in the market.

Balsillie, too, sounded more apologetic than usual in between moments of bombast. One shareholder criticized the poor placement of RIM’s PlayBook tablet in Best Buy outlets compared to its competitors. “It’s not uniform across stores, but we will get better,” he promised. “This was our first retail product.”

Overall, however, the executives stuck to the same talking points they’ve been using for months, while failing to adequately respond to legitimate concerns. Take marketing, an area that many argue is an area of weakness for RIM. One shareholder took to the microphone to criticize the company’s approach, saying, “You’re letting Apple and Android eat your lunch.” 

RIM’s chief marketing officer resigned in March, and its top digital marketer left for Samsung last month. The CMO role is currently filled by Balsillie, an occasionally tone-deaf communicator. Up on stage, Lazaridis is clearly passionate about RIM’s products, but cannot generate the same level of excitement as, say, Steve Jobs. As he talked about the next generation of BlackBerry Bold on Tuesday, he repeatedly highlighted its “liquid graphics” capabilities, a selling point he’s emphasized in the past. But how many smartphone users actually know what that is or why they should care? Lazaridis hasn’t explained, beyond saying, “You’ll understand why [the wait] was worth it.”

Another shareholder asked the execs to respond to an anonymous letter supposedly written by a RIM executive that tore into the company’s strategy. (RIM issued a response, but did not confirm or deny the veracity of the letter.) At the meeting, Balsillie chose to focus on the actions of the letter-writer as opposed to the content. “Do you think it’s fair to work for the company and issue something like that, rather than come and talk about these things?” he asked. The shareholder pushed Balsillie to address the substance of the letter, which—real or not—is a cogent assessment of RIM’s weaknesses. Balsillie didn’t go down that road. 

“You don’t get the letters saying thanks for the first 20 billion in sales,” he said at one point. The problem is if RIM doesn’t fix its problems and win over customers with its next round of products, there might not be another $20 billion in sales.