Losing the Signal: The Spectacular Rise and Fall of BlackBerry (34 page)

He chastised Heins, whom “I have not always agreed with,” for abandoning the physical keyboard in the first phase of its planned launch of BlackBerry 10. The company’s future, he insisted, depended on BlackBerry keyboards. The most difficult subject he addressed that day was leaving RIM, “a profoundly emotional time for me,” he told the directors. “As you can imagine, for the founder of this company and CEO for twenty-eight years and for someone that ate, drank, breathed, and was on call to RIM for most of my life, it was profoundly difficult for me to let go of the day-to-day operations and leadership of the company by stepping down.”

Shortly after Lazaridis decided to cut his ties to RIM, he drove to a Waterloo electronics store. Preparing for what he regarded as an unthinkable future without keyboard BlackBerrys, Lazaridis emptied the store’s shelves of BlackBerrys, filling a large box with his purchases. “The most frightening thought,” he says, “was that I wouldn’t have a BlackBerry.”

Jim Balsillie and Mike Lazaridis have had one conversation since parting ways at RIM. The encounter took place in September 2012 at a Toronto fund-raising gala at the Fairmont Royal York Hotel for Ontario’s Stratford Shakespeare Festival. After exchanging pleasantries the two men moved on. While the twenty-year partnership is a casualty of the smartphone wars, they both in their own ways remain devoted to the kind of reinvention and gamesmanship that once made them a powerful business combo. Their shared ambition today is to boost technology research and business acumen, ensuring a productive future for Canada in the race for global innovation.

Lazaridis has invested much of his personal fortune in a venture fund and two science institutes devoted to exploring boundaries in physics. The university student inspired by the radical theories of David Bohm now backs an audacious plan to transform Waterloo into a leading center for quantum physics. Balsillie is just as ambitious, though his makeover project is more personal. Scarred and battle-weary after leaving RIM, Balsillie regenerates himself by exploring his native roots and amassing an enormous collection of native art. In quiet Ottawa back rooms, he consults regularly with federal officials about government innovation policy and intellectual property reforms to nurture Canada’s thriving technology hubs. Aspiring technology entrepreneurs from the Waterloo area call on him for guidance.

The blueprint for Lazaridis’s quantum physics quest is a November 1944 letter written by President Franklin Delano Roosevelt to the Office of Scientific
Research and Development. The agency received an unlimited budget during World War II to coordinate innovation with scientists and businesses on secret military projects—atomic weaponry, guided missiles, and radar enhancements. Roosevelt wrote to the agency’s head, Vannevar Bush, asking to continue the successful private and public sector alliance. The goal, the president wrote, was “for the improvement of the national health, the creation of new enterprises, bringing new jobs and the betterment of the national standard of living.” Roosevelt’s vision became the National Science Foundation, which, since the 1950s, has channeled billions of dollars of federal grants into scientific, medical, and computing research at U.S. universities. The funding helped give birth to computing and Internet advances commercialized by Silicon Valley, including a Web search engine project at Stanford University overseen by graduate students Larry Page and Sergey Brin, Google’s founders.

Canada has no such foundation, but Lazaridis says Roosevelt’s foresight inspired him to push his own version of a private-public partnership. Since 1999 he and his childhood friend, Doug Fregin, have donated more than C$300 million to the Perimeter Institute and the Institute for Quantum Computing at the University of Waterloo. Federal and Ontario governments have matched his philanthropy with close to C$300 million in additional funding. The quantum computing institute is a monument to Lazaridis’s conviction that his hometown and former university will be a significant force in the next wave of computing advances.

On one side of the 285,000-square-foot Mike and Ophelia Lazaridis Quantum-Nano Centre sits one of the world’s largest quantum computers. The closet-sized machine uses properties of subatomic particles to compute at speeds scientists hope will one day outpace conventional computers. On the other side is a nano-technology department where experiments with microscopic particles are influencing the creation of muscular new materials and instruments for, among other things, construction and medical applications. When Lazaridis welcomed hundreds of academics, politicians, and scientists, including theoretical physicist Stephen Hawking, to the opening of the center in September 2012 he made the same kind of bold promises that RIM’s competitors once doubted at their peril. “I believe that the work that will be done here will help transform the way we work, live, and play,” he said, “[by] decoding the rules and laws of the universe.”
¹

Away from the limelight, Lazaridis’s private interests are equally ambitious.
As of September 2014, a private fund he owns with Fregin, Quantum Valley Investments, has invested about $50 million in ventures seeking to commercialize breakthroughs in quantum physics. Since he left the RIM board in 2013, Lazaridis has operated the fund out of a bland, four-story office building near the University of Waterloo. In its first year, most rooms were empty. By the fall of 2014 the building was filled with students, academics, and entrepreneurs huddling around whiteboards or meeting in starkly furnished rooms.

Lazaridis plans to move Quantum Valley to a building he once hoped would be a retreat for RIM engineers. In 2010, after Storm failed and the company struggled with PlayBook, RIM agreed at Lazaridis’s request to build a lavish state-of-the-art research center, with an atrium, designer furniture, and high-tech labs, where he could sequester the company’s best and brightest. Two years and more than $50 million later, the company completed a contemporary three-story gray brick and glass building north of the University of Waterloo, overlooking a ravine and creek. The 90,000-square-foot building is U-shaped, with glass-covered walkways connecting each floor of two parallel brick structures. The engineering utopia has been virtually unoccupied since it was built. Lazaridis bought the center in 2014 during a massive real estate sell-off by RIM’s new management. Lazaridis got a steal, paying only $19 million for the building and more than five acres of land.

Lazaridis’s other big project is a two-story, crescent-shaped building that seems to float above a cliff overlooking Lake Huron, west of Waterloo. The 126-acre property at first housed a small cottage that Lazaridis, his wife, and two children retreated to in the summer. A busy schedule prevented RIM’s founder from joining his family most weekends. After leaving the company, Lazaridis hired Toronto architect Siamak Hariri to build a residence that could properly show off Canada to visiting academics and politicians. From inside the 26,000-square-foot building, guests can view one of the Great Lakes from a 50-foot-wide window, which Hariri says is one of the largest laminated glass window panels ever made. The inspiration for the building, which the family calls Solaris, is a marble statue of the triumphant Greek goddess Nike that stands in the Louvre. Just as the statue represents victory, Lazaridis views his country home as a symbol of the ingenuity that made BlackBerry great. When he took
Globe and Mail
reporter Renata D’Aliesio on a tour of the home in 2012 he paused to reflect on BlackBerry. Thinking big and acting bold, he said, was “something that has worked for me for decades and I can’t see it stopping. I’m not done yet. I’m not finished.”

Balsillie says he is finished with business, but like Lazaridis has not stopped thinking big. In the first two weeks after he left RIM in 2012 he slept through most days, waking only for intensive massage therapy to release muscles clenched by years of stress. Since then, he and his partner, Neve Peric have built a life he says is focused on “nourishing.” Adding to a collection he started in the early 2000s, Balsillie now owns what he says is one of the world’s biggest private portfolios of primitive masks and artifacts, most originating from the Pacific Islands, Africa, Europe, and Middle East. Many masks were made for history’s earliest warriors and young men undergoing initiation rites. The life-long Sun Tzu disciple has left the battlefield. He now appreciates war as an art form.

One mythological creature that resonates with Balsillie is the twin-headed serpent. The divided creature is a symbol of the eternal struggle between good and evil, order and chaos, or creation and destruction. Collecting artistic interpretations of the moral contest on primitive masks and sculptures is Balsillie’s “inward” and “meditative” way of dealing with his own past. “You have to make sense of these things or they bite you; they bite you bad,” he says. Balsillie’s inner voyage is not entirely private. As part of an exploration of his family’s Métis roots he has met with native Canadian groups to study their art and histories. After emotional sessions with survivors from Canada’s infamous residential schools, boarding institutions where many native children were physically and sexually abused, Balsillie has commissioned a survivor to carve a totem pole featuring a twin-headed serpent. The pole will be joined to a hand-carved longhouse to be built near the converted mill where he and Peric live. The longhouse, which will house a gallery displaying much of his mask collection, will be connected to a garden by a low stone wall that Balsillie designed to replicate the snaking form of a two-headed serpent. The wall will stop in the middle of a garden near a full-sized bronze cast Balsillie recently purchased of Rodin’s sculpture “The Thinker.”

On a brilliant fall day in 2014, Balsillie has as many thoughts as there are colors in the autumn trees surrounding his country hideaway. Like many who have exited businesses with a fortune, he talks with gratitude about the privileges of wealth. He and Peric are active philanthropists, supporting Canadian artists, writers, and musicians. He busies himself with conferences at the Waterloo governance think tank he supports and the economic institute he cofounded with George Soros. He stepped into the limelight briefly in September 2014 as one of the voyagers and sponsors of a successful quest by a
Parks Canada team in the Arctic to locate one of the sunken ships of the doomed expedition led by Sir John Franklin to travel the Northwest Passage in the 1840s. On a less public stage he meets a few times a month with Canadian technology entrepreneurs. He grants each visitor about an hour in a session that is part speed dating, part talent show. In these encounters, he plays the tough judge, brusquely challenging their technology, strategies, and financing as a way of preparing them for the kinds of predators that once threatened RIM.

As he speaks about the risky nature of technology ventures, he turns the conversation to his last, tumultuous year at RIM. For the next few hours he talks with increasing frustration about how RIM might have rewritten its future had the company followed his strategy to shift from its legacy handset business to a new future in software and services built around RIM’s BBM instant messaging service. RIM’s board and new CEO, Thorsten Heins, dismissed the strategy as risky and marginal, but today instant messaging is the talk of Silicon Valley after Facebook paid $17 billion in 2014 for the money-losing messaging application WhatsApp, with more than 600 million monthly active users. BlackBerry’s BBM service had less than a sixth of that amount as of November, 2014. Growing heated as he talks about the lost opportunity, Balsillie stops and bows his head. Rubbing a clenched fist back and forth across his forehead, as if trying to remove some hidden stain, he ends the conversation. “I must not go back to the life of commerce,” he says.

Critics called it the best BlackBerry smartphone in years. Navigating the Internet, messages, and phone calls was such a pleasure that
Fast Company
enthused “BlackBerry finally has a little of its swagger back.”
²
The phone was not the touch screen BlackBerry 10 that RIM gambled would put the company back on the smartphone map. This new phone was Passport, an oversized phone with a newly designed keyboard unveiled in September 2014 by John Chen, a turnaround expert parachuted in to save a dying company.

RIM’s promised new beginning under Thorsten Heins lasted less than two years. His strategy for reviving a failing and divided organization was to wager everything on the company’s legacy handset business instead of shifting, as Balsillie urged, to the emerging mobile software services. The BlackBerry 10, finally released in early 2013, was not the iPhone slayer Heins promised.
Not even close. It lacked many of the popular mobile apps on iPhone and Android phones and was hampered by software bugs and a complex user experience confounding to longtime BlackBerry users. BlackBerry was stuck with so many unsold phones that it was forced to put itself up for sale. Several potential suitors, including Lazaridis and his friend Doug Fregin, considered a bid. But it was the company’s largest shareholder, Prem Watsa’s Fairfax Financial, that prevailed with an offer in late 2013 to lead a sweeping refinancing deal that kept BlackBerry going as a public company and to install Chen as Heins’ replacement. In his first year, Chen dramatically shrunk the company into a smaller more unified version of the RIM that had lost its way. Where once RIM had nearly twenty thousand employees and $20 billion in annual revenues, by 2015 those numbers were 6,225 and $3.3 billion. It sold most of its Waterloo real estate and its handsets are now made by a large Taiwan manufacturer called Foxconn Technology Group that has assumed much of the associated financial risks. A company that sold more than 50 million smartphones in its 2011 fiscal year was down to less than 20 percent of that amount four years later. Its global market share was so small, less than 1 percent, that researchers seldom mentioned it in industry studies.
³

Many observers have already written BlackBerry’s obituary. That’s fine with Chen. He wants outsiders to underestimate the company as he tries to reinvent it. Chen is producing phones in limited quantities to feed a niche market of loyal customers craving BlackBerry’s reliable keyboard and business applications. Chen shares Balsillie’s once heretical view that a big part of RIM’s future lies with software and global licensing deals—including one with rival Samsung. The new CEO does not have a lot of time to complete his firm’s reinvention. The lush service access fees that once generated more than $4 billion in annual revenue have withered to less than half that amount. Innovation in handsets may not help much either. Smartphones can’t get much more intelligent, it seems. And while it’s true that rising cyber crime has burnished the appeal of BlackBerry’s encryption technology, it’s too early to say whether security fears will win back customers. Chen is seeking to stretch BlackBerry’s QNX operating system beyond phones to manage applications in medicine, automotive, home, entertainment, and other fields.