'BlackBerry is not in a trough' - RIM CEO Thorsten Heins interview

Research in Motion Chief Executive Thorsten Heins talks to Matt Warman about why BlackBerry will survive and how other manufacturers could use its new operating system

RIM shares fall as Blackberry shake-up unsettles investors
Research in Motion Chief Executive Thorsten Heins

The man in charge of BlackBerry is in London at the invitation of David Cameron, and he likes what he’s seeing. So far, in the company of the Prime Minister, Thorsten Heins has watched the Olympics opening ceremony and visited the British Business Embassy Summits that the Government hopes will encourage the world to start companies in London. There, he claims, “Guess what – most of the guys were on a BlackBerry, typing. Working.” Surely that’s not bad for a company that one analyst recently suggested was “in a death spiral”?

German-born Heins joined BlackBerry in 2007, and took over from co-founder Mike Lazaridis and Jim Balsillie in January. In doing so, he accepted the chalice that many in the mobile industry believe to be the most poisoned available – while Nokia has at least made a decision to get in to bed with Microsoft and produced a well-reviewed range of phones, BlackBerry is mired in its own transition from one generation of its own operating system to another.

Heins, as all BlackBerry executives continue to be in public, is bullish and keen to back up his argument with statistics. “If you look at the platform it’s still growing, if you look at the devices we’ve got a single phone that’s sold 45million units.”

There are, however, other less attractive numbers he doesn’t bring up: Research in Motion, BlackBerry’s parent company, sells less than one eighth of the number of phones that run Google's operating system, Android. It’s slimming its workforce to just 11,000, compared to nearly 20,000 a few years ago. Shares once traded at over $140; now they are at $7.25. On the firm’s Wikipedia page, there’s an entire section called “Decline” that ends as though the author has paused rather than finished.

Given that the company still has more than 80million subscribers, that seems harsh. And the flagship service, BlackBerry Messenger (BBM) can’t be both the tool of choice for London’s 2011 rioters – as many claim – and also an ancient irrelevance. Referring to a memo new chief executive Stephen Elop wrote to staff at Nokia, Heins claims simply, “our platform isn’t burning”. He adds, “I’ve been kind of surprised by the credit that Windows Phone already gets.” He points at meagre sales and ask “What are the proof points for its ‘success’?”

Either way, if RIM’s platform isn’t burning, then there’s certainly the whiff of smoke at BlackBerry. Its new phones will be out in January, Heins promises. Recently pushed back from the end of this year, which in itself was a delay, the BB10 phones mean RIM has older devices to launch and sell in the meantime, when every enthusiast knows that newer ones are imminent. One commentator said it will be “like launching fireworks underwater”.

“We know that BlackBerry OS7 was a great platform – but it would not carry us to where we wanted to be tomorrow, with the full mobile computing experience,” says Heins. “We don’t have the resources like a Microsoft; we have to place one bet and make it right; we don’t want to go for an intermediate step. It comes out in the first quarter and I think a lot of people are going to be surprised.” BB10, for instance, will allow what Heins calls “true multitasking”, potentially running a car’s navigation, entertainment and gaming systems for the whole family. “It’s working and it’s running right now,” says Heins as he points to his own phone. “It has never reset on me. The teams are working relentlessly day and night, at the weekends – it’s a once in a decade change that will see us through the next ten years.”

Meanwhile, however, Heins emphasises that BlackBerry is “a very secure, entrenched stable business”. He disputes that businesses are leaving, and says that even when major companies such as the New York Times stop supporting their BlackBerry apps, RIM is working closely with companies for apps on the forthcoming OS. “Most of the media is very black and white – they look at every little thing that could be bad and put it on to RIM’s shoulders,” says Heins. “And let’s be honest we don’t like it. This is something we have to get through and convince the critics and the market that BB10 is going to cut it. And BB7 is still a competitive product; we are not in a trough.”

He says the bulk of the work going on for the new software is not building an operating system, it’s building the “platform around it”.

Announcing the latest delay, however, Heins was even accused of misleading the stockmarkets with his earlier optimism. He claims that the last major release, the sixth of eight milestones on the way to the final version, was the biggest and the most disruptive. “We were not happy that this had happened. But we were satisfied with the software being built. Am I disappointed? Sure I am but if you build a whole new platform it’s a different size of a task.”

Wouldn’t it have been easier to simply adopt Android or Windows Phone, and already have a product on the shelves? “We took the conscious decision not to go Android. If you look at other suppliers’ ability to differentiate, there’s very little wiggle room. We looked at it seriously – but if you understand what the promise of BlackBerry is to its user base it’s all about getting stuff done. Games, media, we have to be good at it but we have to support those guys who are ahead of the game. Very little time to consume and enjoy content – if you stay true to that purpose you have to build on that basis. And if we want to serve that segment we can’t do it on a me-too approach.”

He points to the developing world – “every cab in Jakarta has a BBM pin on the door” – and concedes RIM lost market share in more developed markets because it missed superfast 4G connections and the “Bring your own device” trend where users want the same phone for work and pleasure.

Still, it’s BBM that Heins sees as RIM’s great remaining strength: “That’s what attracts people to BlackBerry. This is our BlackBerry experience we can deliver – there’s no other system out there where you can read, write, check if you’ve read my message. We want to make it as differentiated as possible. Going cross platform and opening up would be losing that advantage. I think there’s a huge difference between somebody who just provides the phone and the hardware and someone who provides services.”

Wouldn’t it be useful, even so, to open that community up to other platforms and build on its success with a wider audience? “We’re still looking for partnerships and new business partners. We’re running certain assessments around it but right now the focus has to be focus on BB10 and getting it out there. But look at the subscriber base. Don’t abandon them. We will be one of the future mobile ecosystems.”

If that is to be the case, then BlackBerry needs, simply, more phones in more people’s pockets. For years the keyboard was the device’s unique selling point, but now it doesn’t have its appeal in the face of the iPhone and Samsung’s popular touchscreen rivals. “There’s never an eternal proposition – there’s a very stable, slowly growing base of physical keyboard users and most of them are really highly ranked officers. At the moment it’s prudent to offer both keyboard and touchscreen. If people love a physical keypad I will not talk them out of it but it’s one element of the larger experience.”

Indeed, RIM will launch BB10 with two devices that are crucial to its survival and only one will have a keyboard. The more expensive device will be a touchscreen. Heins is keenly aware that he must get cheaper devices into the mainstream. “We don’t have the economy of scale to compete against the guys who crank out 60 handsets a year. We have to differentiate and have a focused platform. To deliver BB10 we may need to look at licensing it to someone who can do this at a way better cost proposition than I can do it. There’s different options we could do that we’re currently investigating.”

That raises the prospect of a BlackBerry phone that is made by, say, Samsung or Sony. “You could think about us building a reference system, and then basically licensing that reference design, have others build the hardware around it – either it’s a BlackBerry or it’s something else being built on the BlackBerry platform. We’re investigating this and it’s way too early to get into any details. We have to also model this from a finance perspective – that’s why we’re working with the financial advisers to see if we do this where would it take the company. Either we do it ourselves or we do it with a partner. But we will not abandon the subscriber base.”

And perhaps that is RIM’s paradox – 80million subscribers, many of them coming from relatively low-budget new users, and a need to make a premium flagship product that lives up to its past glories in order to drive future sales. Heins says as new users in the developing world buy BlackBerries, they will grow into profitable, loyal customers. It’s a bet born of necessity as fewer buy expensive BlackBerry handsets in the West. Either way, BB10 is make or break for RIM: “We’ve just got to get it out there”, says Heins.