RIM's Management Shuffle: The Street Remains Skeptical

Expect to see a bounce in Research In Motion shares Monday morning on the news that co-CEO's Jim Balsillie and Mike Lazaridis are stepping down, while handing over the top job to co-COO Thorsten Heins.

But the announcement is not being greeted by Street analysts with unbridled enthusiasm. The Street seems lukewarm about Heins, an insider who is promising to carry out the same strategy that the previous CEOs had been pursuing. And that particular approach has not been working, as the company continues to lose market share rapidly in the smartphone market.

Here are some excerpts from some of the Sunday night research notes from the sell side:

• Ehud Gelblum, Morgan Stanley: "We view this as a good first step in the right direction, as the board of directors finally appears to be doing what a board should always do, which is to make sure the CEO is effectively doing his or her job leading the strategic direction of the company. However, we do not believe this move is enough, especially as Heins is an internal hire and not an independent fresh voice," he writes. "We also worry that Heins has had little experience setting a vision or strategic direction for the company, and has instead been more involved implementing the products and strategy devised by Mike and Jim."
• T. Michael Walkley, Canaccord Genuity: "While this change in management might positively impact RIM’s execution, we maintain our Hold rating," he writes. "With competing OEMs introducing high-end smartphone products on more established software ecosystems and low-cost Android products pressuring RIM’s international sales, we believe sales and earnings will decline....While the change in management might reinvigorate the employee base, improve execution, or even increase interest from potential acquirers, we maintain our belief the new BB 10 OS will not stem ongoing market share losses to Android and iOS."
• Rod Hall, J.P. Morgan: "We believe it is positive that RIM has resolved its governance issues but continue to see the road ahead for a stand-alone RIM as tough. As the founders step aside for new management we believe a wider set of strategic options becomes available for the company."
• Amitabh Passi, UBS: "While we think this is a small step in the right direction, we are surprised RIM has decided to go with an operations minded insider, especially since we consider the challenges tied more to strategy," he writes. "We don’t believe these announcements (likely propelled by shareholder and, quite possibly, some Board pressure) will produce much change in the short-medium term, and much will depend on the success of BB10."
• Stuart Jeffrey, Nomura: "We remain of the view that an acquisition of RIM by a strategic buyer is unlikely," he writes. "Not only is it unclear if RIM’s new OS will work, we don’t know when it might be ready, when it might prove competitive, or if indeed it can support all of the current BlackBerry enterprise applications. In addition, given that RIM appears to be experiencing difficulties with porting its enterprise applications to the new OS (BB10), it is far from clear whether these applications could ever be ported to a third-party OS such as Android or Windows Phone. If the applications cannot be ported, then an acquiring company would likely only bid for RIM on the premise that it can develop RIM’s software better than RIM can. At present, we see no software companies that have sufficient cash or expertise to attempt such a take-over. For private equity investors, we retain our view that fair value for RIM in a cash optimization mode is likely around $15 per share and that a private equity buyer is thus unlikely to bid much above $10 per share."
• Edward Snyder, Charter Equity: "At first blush this seems more like window-dressing than a real reorganization," he writes. " COO Thorsten Heins took direction from Balsillie and Lazaridis when they were Co-CEOs, and as the newly appointed CEO he’ll still be under their review as Board members.  And with Lazaridis already talking up his intent to play an active role in innovation by committee, today’s announcement seems more like window-dressing than real reform. Normally handset OEMs that run into trouble of the type RIM is experiencing start their turn-around by severing ties with the old CEO to make a fresh start with the new one. No company gives board seats to the management team that got it into the mess to begin with. Indeed there has never been a successful turn-around of a handset OEM without a wholesale change in management."