Shareholder wealth maximization is considered the foremost strategy for modern companies to pursue. It requires a combination of long and short term goals but above all is to link the objectives of the management team of a company to that companies objectives. This will motivate the managers to do what is best for the company in the future, while not necessarily providing the company with many short term benefits. This avoids the risk of managers acting in their own interests (agency theory) and also utilizes share options reward schemes to create incentive's for management.
Research in Motion (RIM), the company behind Blackberry, was for many years a very successful global contender with its modern devices with high functionality that proved to be very popular among business' all over the world. However, in recent years it has had a number of failures that have caused the share price to fall through the floor. While the company still sells a large amount of devices (14.1 million last year) its failures are most often contributed to the management team.
The Co-CEO's Mike Lazaridis and Jim Balsillie have delayed release dates and have faced great public ridicule regarding the failures of the many services for up to three days at a time. Their share of the smartphone market has fallen (from 19% to 12% in 2011) and there is a growing number of people who would rather use their own smartphones for work and email rather than the company issued Blackberry. The release of the Blackberry Playbook tablet was an unmitigated disaster with serious design flaws which appeared to have been rushed off the production line to compete with the top shelf products already flooding the market. 500,000 models were shipped in the first quarter after the release but only 200,000 in the following quarter.
This string of failures by management have led to many questions regarding their competency to run the company. Have they lost sight of objectives to increase shareholder wealth or were those objectives even evident in the first place? More recently the share price of RIM took a hit after the 2012 summer riots throughout the UK which it was believed were organised using the Blackberry messenger service.
On January 22nd 2012, Thorsten Heins became the new CEO of RIM. This change at the top had been a long time coming and it came at a time when things for Blackberry were looking pretty dire; in the last year the share price had fallen by 70% and RIM was being badly beaten by competition from the Apple iPhone and Google's Android smartphones.
The questions now being asked are what kind of changes are required from RIM for it to start making a recovery? Market analyst's were calling for RIM to consider selling the handset production business and concentrate on what it was originally good at: the corporate customers.
In the last few weeks, RIM has changed its name to Blackberry and has presented it's newest product, the Blackberry Z10, to the market. This product is running the new operating system, Blackberry 10, which is either going to take back part of the market for Blackberry or doom it to further failures.
Thorsten Heins has obviously decided that it was in the companies best interests to keep producing Blackberry devices but it is yet to be seen whether this move will be successful. The innovation will no doubt impress shareholders but is it enough? Can it compete at the highest levels with the iPhone and android models that have come to dominate the smartphone markets? Has he done enough to safeguard the interests of shareholders in the long term? Only time will tell....
No comments:
Post a Comment