BlackBerry - Rod McQueen

Even after spending a quarter of a century building Research In Motion, Mike Lazaridis remains deeply passionate about what he’s doing. “Mike is still a little-boy gadget freak. Whenever I see him at a trade show, he takes me aside, pulls out the latest toy, and he oohs and he aahs all over it,” says California-based wireless consultant Andy Seybold. “Mike is not driven by money. He is driven by ‘What can I do next to take this platform and turn it into something super cool yet again?’ And he keeps doing it.”

Co-CEO Jim Balsillie equates their roles at RIM in a roiling, competitive world with the wild ride of surfers. “It’s like a beach which has got three or four series of waves. You have the rolling waves here, but then you sort of have a semi, loosely coupled set of rolling waves over here, and you have a set here, and they’re all one body of interrelationships, and wave by wave by wave, you have to understand that they’re separate but not. Between Mike and I they’re highly, highly interrelated. You’re surfing these waves but you are not in control, you are definitely not in control. You just aim and hold on and tweak where you can.”

Of all the erroneous allegations made about Research In Motion over the years, the most persistent has been that some competitor is developing a killer device that will either end RIM’s growing dominance or dispatch the company into oblivion. Analyst Mike Urlocker once drew up a list of all the products that had been billed by somebody as “BlackBerry killers.” They included Palm 7, Qualcomm PDQ, Motorola PageWriter, Motorola T900, 3G, MSFT Exchange Server 2003, Compaq Ipaq, Ogo, Sidekick, Nokia E62, Sendo, Microsoft Stinger, and Pocket PC. To that list could be added other, more recent, mainstream candidates such as Palm Pre and Apple’s iPhone.

“I couldn’t name another company that has been so consistently underestimated, even to this day,” Urlocker, a technology analyst with GMP Securities told me during the research for my book. “They don’t follow a trend, they create trends. How could some company in Waterloo get that right? The reason is that Mike Lazaridis stuck to fundamental principles of physics and engineering. He understood the limitations that a network, or a battery, or a colour screen imposed on devices.”

BlackBerry ranks #1 in North America and market share numbers on global smartphone sales released today by Strategy Analytics show that RIM is on a roll globally. According to the figures, there were 53 million smartphones sold in the fourth quarter of 2009. RIM, Apple and Nokia are all gaining market share with Nokia in the lead at 39 per cent, BlackBerry next at 20 per cent and the iPhone at 16 per cent. “RIM continues to expand its international footprint beyond the core territory of North America deeper into Western Europe and parts of Asia,” said the report from the Boston-based research firm.

Look at those two men, Jim Balsillie and Mike Lazaridis, co-CEOs of Research In Motion, on the back cover of my new book. Don’t they look ready for takeoff? Well, so’s BlackBerry: The Inside Story of Research In Motion.

Regular readers of this blog will see a visual change. With BlackBerry due to be published on March 2, it was time to move on from Manulife, which was published last May. In the days ahead, I’ll be talking more about BlackBerry and RIM. Meanwhile, I can tell you I’ve enjoyed working on this book during the last three years. Much of what I’ve written has never before been told at all, let alone in such compelling detail. I had excellent access to the co-CEOs as well as other members of the executive team and RIM employees.

RIM is an innovative company that has grown from 100 employees in 1997 to more than 12,000 today. If only Canada had more such entrepreneurial global players.

I love a conspiracy theory as much as the next guy, but the one propounded over the weekend by the Canadian Association of Income Trust Investors (CAITI) is a bridge too far. I look at the group’s website from time to time and am amazed how long they’ve managed to maintain their fervor against the federal government for ending income trusts in 2006.
Among the group’s dark contentions is that Ottawa killed income trusts so that the life insurance industry, including Manulife, would have a clear field to sell retirement plans.
That’s quite stretch but nothing like CAITI’s recent claim that NDP finance critic Thomas Mulcair “is completely unaware of that event that almost saw Manulife go ‘too big to fail’ on Canadian taxpayers.”
That statement is a bit awkwardly put, but I assume CAITI means that Manulife almost neeed a bailout by Ottawa. As someone who closely studied Manulife during the period in question, let me say that nothing could be further from the truth.
When the stock market crashed in 2008, Manulife lobbied for help from the regulators and the minister of finance. If Ottawa had been favoring the firm as CAITI claims, you’d think the powers-that-be might have acquiesced. Instead, Ottawa made matters worse for Manulife by demanding that the firm add $11 billion to capital when others in similarly besieged circumstances needed to find only $600 million.
That’s why Manulife took out a bank loan, issued equity, cut the dividend and saw the share price collapse from $39 to $9.
Other than that, it’s a heck of a theory.

Standard & Poor’s yesterday dropped its credit rating on Manulife Financial to A+ from AA-. Normally, a one notch fall like that wouldn’t matter much, but in this case, the agency had warned management in advance. S&P didn’t like a plan by Manulife CEO Donald Guloien to reorganize U.S. operations claiming that what he had in mind would reduce the company’s cash flow.

Guloien went ahead anyway, thereby proving that as a leader, he’d rather be a loner than someone who just plays along. You can see that personality trait in his music. Guloien’s father and his many aunts and uncles are all musical. A cousin, who took the stage name P.J. Perry, plays bebop saxophone and has won two Juno awards. Guloien also plays the sax, but admits he has no sense of rhythm or timing, so he can’t perform in a band. Twenty years ago, when he was taking lessons, his teacher told him to leave his sax at home. In an attempt to improve his errant timing, Guloien spent the next few lessons clapping his hands to a machine with flashing strobe lights. “You’re hopeless. I’ve got a three-year-old who could do better,” said the instructor. “Are you really trying?”

Guloien told me that his self-confidence was eroded and he stopped playing the sax for a while. “Then I thought, ‘I never intended to play in a band anyway. I don’t have the time. The hell with him.’” Guloien bought a sopranino, a small sax with a high, shrill sound that doesn’t carry very far. In those days, he’d take the instrument when he traveled on business. In the evening, he’d relax by playing in his hotel room, all by himself, confident that he was not disturbing the other guests.

The man has not changed in the years since. No ratings agency is going to call the tune for him.

The Supreme Court ruling yesterday about new defences on libel claims has many in the media cheering. Journalists now have new latitude when it comes to chasing stories and defending their work against those who feel wronged and sue for libel. As a long-time journalist and author, I think what the courts have done is a grievous error and sets up a series of new ways of measuring the sting of libel that will be difficult to define.

The fact that we are now in sync with the United Kingdom, Australia and New Zealand gives me no ease. As someone who has been involved with libel as a writer and editor, I have always felt it was right and appropriate that what the writer or broadcaster produced be accurate and factual. Any straying from truth and a writer should suffer consequences at trial. Now a writer can get it wrong as long as he or she tried hard to get it right. What effort is required? A phone call or an email to a party from which there is no response over a few hours now seems to be sufficient.

And what precise meaning will the courts ascribe to “public interest” a phrase the Supreme Court used all too loosely for my way of thinking. A journalist can now publish allegations with impunity, with no need to prove them, if it’s in the public interest. Can such decisions really be made on a fair and even-handed basis in scores of newsrooms and by countless bloggers, not all of whom are good at much other than rushing something (anything) into public view.

Citizens, said Chief Justice Beverley McLaughlin, are not entitled “to demand perfection.” The new watchword is “responsible journalism.” I have seen up close how journalists act and I can tell you that too many of them are not responsible. Accuracy and getting the facts right, with a second or third confirming source, used to be a helpful weeding-out process. That fail-safe hurdle has rudely been cast aside.

Oh, but standards will evolve, said the court. I can tell you those standards will take years longer than anyone would like, will be much lower than aggrieved subjects of stories deserve and cause hurt to a lot of innocent people along the way.

The two most recent appointments to the Manulife board of directors show interesting new directions for corporate governance. In the past, most directors were picked almost solely for their management experience. Current and former CEOs, for example, were always favored for boards because they knew how to run organizations.

Under Gail Cook-Bennett as chair, the Manulife board wants new members to have similar experience but to bring some other helpful knowledge as well.

Not only is new board member Linda Bammann a woman, bringing the number of females on the board to three of seventeen, she has U.S. experience where Manulife has 60 per cent of its business. More importantly, she has held risk management roles at two banks, JPMorgan Chase and Bank One. The unstated hope: no more faux pas such as those nasty unhedged variable annuities.

The other appointee, John Palmer, has an equally targeted resume. His most recent jobs have been in Singapore, so his Asian knowledge is useful. But he was also Canada’s Superintendent of Financial Institutions from 1994-2001, so can offer advice and counsel on what plans the regulator might have in mind for capital requirements, among other issues.

I have my own history with Palmer. When I was researching my book “Who Killed Confederation Life?” that was published in 1996, I applied under the Freedom of Information legislation for documents that might explain the thinking of the government and the regulator in seizing Confed. When the thick pile of documents eventually arrived, I eagerly leafed through looking for insights. Line upon line, page after page was blacked out. The amount of useful information could have fit in a thimble.

I raised this lacuna during an interview with Palmer. “I can’t tell you how many hours I spent going through that material,” he said. He didn’t need to tell me, I already knew.

Let’s get this straight. Donald Guloien didn’t want to raise equity at $19.60, but $19 is OK. He didn’t want to do it in August, but November is fine even though the stock market is about the same level it was last summer. Shareholders who already took a hit when he cut dividends in half are being asked to suffer another wallop as he dilutes their holdings.

Guloien explains his activities by saying he is building fortress capital. If Donald Guloien were King Arthur, he would never have had time to meet with the Knights of the Round Table, he’d be too busy supervising more battlements.

Let’s face it. The foe he’s fighting, variable annuities, is minuscule. Of Manulife’s 22 million global clients, only 250,000 bought variable annuities, the cause of all this fuss. Why is everyone else paying so dearly for the difficulties involving 1 per cent of the customer base?

When I asked former CEO Dominic D’Alessandro what advice he had for his successor before Guloien took over in May, D’Alessandro said: “I’ve worked with Don for a long time. I think he’s got to become a little tougher. When you’re in these jobs, you can’t please everybody all the time.”

Well, Brave Sir Donald has certainly taken that advice to heart.

Suncor Energy Inc. has announced that Dominic D’Alessandro will be joining its board. Suncor will pay the ex-CEO of Manulife a $140,000 annual retainer, but half of that goes to buying Suncor shares until he owns $420,000 worth. Fees for attending the full board and committee meetings might add another $20,000 in income.

Rumor has it that D’Alessandro will also be joining the CIBC board where his annual retainer will be $100,000. Again, a portion (in this case $60,000) goes to buying shares. Meeting fees are higher at the bank than at Suncor so he might earn $40,000 for showing up, more if he’s named chair of a committee.

D’Alessandro has said he’ll be joining three boards. So, assuming a similar emolument, he’ll earn a total of $300,000 a year (plus the payment in shares) from the three. Not bad, but nothing like being CEO of Manulife where he earned $300,000 a week. (Company rules did not permit him to remain on the Manulife board.)

When all is said and done, compensation from board appointments doesn’t really matter. It’s all about staying connected and keeping the gray matter functioning. Or so say many appointees.

Of course, D’Alessandro receives a handsome pension from Manulife of $3 million a year, more than most individuals earn in a lifetime. In such a world, board fees are just pocket change.

The notice in the newspaper legal section was easy to miss, just one column wide by 10 cm. high. In the ad, Manulife Bank announced an application to the Minister of Finance for a licence to open a trust company, Manulife Trust.

Manulife has owned trust companies before. When Tom Di Giacomo was CEO, Manulife bought a handful of small trust companies and then gathered them all together to create Manulife Bank in 1992, the first insurance company to do so after the rules changed granting such entry into banking.

Why are you applying for a trust company licence, I asked? To offer retail savings products and mortgages, replied a Manulife spokesman.

But, I said, you can provide those through the bank. Is there something about a trust company charter I’m missing?

With that, Manulife clammed up, saying for the near future they would be concentrating on getting the licence. News about products and services would follow later.

To me, it all seemed a bit weird. After all, the things that a trust company can do that a bank cannot do are minor and inconsequential.

Then it stuck me. Manulife wants two institutions falling under the Canada Deposit Insurance Corporation’s provisions that insure $100,000 in eligible investments. High net worth individuals who have more than $100,000 invested with Manulife now have to shift any additional money to another financial institution for CDIC protection. That must have galled Manulife, to see money going to a competitor’s Guaranteed Investment Certificate, money that could have stayed in house and been put to work being loaned out on a profitable five-year mortgage.

With both a bank and a trust company, Manulife clients will have twice as much by way of CDIC backups. Call it doubling up at someone else’s expense.

If anyone has a better explanation, I’d be happy to hear it.