Fumbled response to iPhone sealed BlackBerry’s fate: book authors

The decline of BlackBerry Ltd. as a dominant player in the global smartphone market can be traced largely to its inadequate response to Apple Inc.'s iPhone, say authors of a new book on the subject. Losing the Signal: The Spectacular Rise and Fall of BlackBerry was written by Globe and Mail journalists Jacquie McNish and Sean Silcoff. It was published by HarperCollins Publishers Ltd. and released Tuesday. It tells the story of how Research In Motion Ltd. (RIM), later renamed to BlackBerry, was founded in the 1980s, struggled to survive for more than a decade and then released a product called the BlackBerry in 1999 that went on to change the way people worked and lived. Things then took a turn for the worse after Apple founder Steve Jobs, in January 2007, unveiled plans for the iPhone. The book says that Mike Lazaridis and Jim Balsillie, co-CEOs of the company at the time, "had more urgent concerns than Apple's new phone. They were scrambling to feed a world hungry for BlackBerrys." Back then, more than a million BlackBerry subscribers were being added every three months and business was expanding by about 25 per cent each sequential quarter, the book outlines. However, it also describes how later in 2007, Lazaridis, "ever the boy electrician," cracked open an iPhone and was impressed with what he saw. "They've put a Mac in this thing," he's quoted as saying. Succumbing to pressure from major international carriers for a device that could compete with the iPhone, RIM came up with a touchscreen phone called the Storm. It went on sale in time for the 2008 Christmas shopping season. While initial demand was strong, the quality of the Storm proved to be disappointing to consumers and critics alike. The following spring, RIM's biggest customer, Verizon Communications Inc., told RIM that most of the first million Storm smartphones they sold had been returned. Verizon was seeking almost $500 million US in compensation from RIM, the book explains, a demand RIM balked at, setting the stage for soured relations between the two companies going forward. "The core reason did so badly was because of its poor response to the introduction of the iPhone in 2007," McNish said in a phone interview with The Wire Report. "And they introduced a touchscreen phone that really was a disaster because they produced it too quickly. And then a company that was a great innovator became a follower." In a separate phone interview, McNish's co-author Silcoff said RIM's response to the iPhone, along with the controversy involving the backdating of stock options that was breaking around the same time, was ultimately responsible for turning the positive momentum of the company in the opposite direction. For almost a decade up until 2006, more than 60 managers and executives of the company, including Balsillie and Lazaridis, benefitted from backdating of stock options to periods when the stock was less valuable, a practice market watchdogs in both Canada and the United States found improper. Losing the Signal details how RIM announced in May 2007 that it would take a $250-million US charge for the years 1999 through 2006 to reflect costs related to these options. Two years later, the two CEOs paid millions of dollars out of their own pockets to market regulators to settle the matter. Beyond the monetary costs, the book tells how this episode drove a wedge between the company's two leaders and how their relationship never fully recovered. Balsillie was hurt because Lazaridis went behind his back to ask for leniency from the Ontario Securities Commission, while Lazaridis "felt betrayed by Balsillie's failure to prevent a decade of reckless backdating," the book says. "I think it's the combination of Apple's arrival and response to it happening simultaneous to the options scandal that really left that company reeling," Silcoff said. "They really misunderstood the iPhone threat. Mike saw a phone and he thought, 'Well, it hogs bandwidth, it hogs battery power, it's not secure and you can't type on it,' and he was right about all those things. … But those things didn't really matter, and he missed that." McNish noted how U.S. giant AT&T committed to improving its network capacity to properly accommodate the iPhone and its capabilities, which was a change from what carriers were generally willing to do up until then. “For to get contracts to sell their phones through the carriers, they had to minimize bandwidth usage because the networks were very limited and primitive at the time,” she said. “BlackBerry was always fighting to add on things, and the carriers were saying no.” Balsillie’s characterization of AT&T's treatment of Apple, as outlined in the book, was: “Apple’s got a better deal. We were never allowed that.” Among the highlights of Losing the Signal are candid interviews done with Balsillie and Lazaridis. McNish said she was surprised how co-operative the two men were, but added that they “believe that there is a good future to be had for technology companies in Canada, and they really want people to learn from their experience.” Silcoff said that both Balsillie and Lazaridis, along with many others interviewed for the book, “realized how incredible a story this was and how important a story this was, not just for Canada, but for the world and for this business.” Both authors said they are unsure what the future holds for BlackBerry but added that some kind of partnership or acquisition by another company is likely. Silcoff said no matter what happens to BlackBerry, it must be given credit for being the first company to successfully introduce a smartphone to the market. “The term was coined beforehand, and people had tried to do this,” he said. “Nobody had successfully commercialized the smartphone , and part of the problem was that nobody could figure out how to do this in a way that was cost-effective, that didn’t hog up network space, that wasn’t expensive, and was fun and pleasant to use,” he said. “Rather that trying to overburden it with tasks and effects and applications and so on, they picked the one piece of the Internet that people were really using a lot, needed to use and made it fun and easy and efficient, and most importantly, productive to use. … And you have remember, there was nothing like that at the time.” — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Fumbled response to iPhone sealed BlackBerry’s fate: book authors

News | May 25, 2015

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