If you're looking for more evidence Research in Motion Ltd. is a changed company in the post-Jim Balsillie era, read a copy of the company's annual information form, filed this week.
The AIF is one of those mandatory regulatory filings that most investors overlook. It's a typically dry overview of the company's business. But sometimes, it can provide insight into management's view of the business – particularly the "risk factors" section. It can also be good reality check on how honest management is being with itself about the hazards that lay ahead.
In RIM's case, what's striking is how the risk factors and tone have changed from last year's AIF to this version. The document gives a solid indication that the people running RIM are much less sure of themselves than in the past. Rather than reading like a dismissive boilerplate, the latest set of risk factors reads more like a confessional by a fallen giant.
For starters, the 36 pages of risk factors are 10 more than last year's version, with fresh new warnings that weren't there in 2011. This year, for example, RIM warns its "ability to maintain or increase its cash balance" – which stood at $2.1-billion on March 3, down $600-million from a year earlier – "could be adversely affected by its ability to offer competitive products and services in a timely manner at competitive prices." Also new this year are warnings of potential further writedowns, litigation claims and the spectre of activist investors taking a run at the company.
Last year, the number one risk identified by RIM was that it "may infringe on the intellectual property rights of others." This year that concern has dropped to 34th. In its place is a warning that RIM "may not be able to enhance its current products and services, or develop new products and services, in a timely manner or at competitive prices."
Embedded throughout are specific references to the company's failings of the past year – product delays, the October, 2011, service outage, loss of market share to competitors and the failure of its PlayBook tablet to make an impact.
Over all, the tone is more worried, even scared. This year, RIM warns that it might have to cut prices further or lose sales altogether if its competitors' offerings "are or are perceived to be, in higher demand by end users, or are more lucrative" for network carriers and distributors. Even concerns about RIM's "ability to compete or remain viable" could scare customers away, the company says. That kind of talk was all but considered heresy in Waterloo until recently.
The filing finds RIM more concerned about its ability to attract and retain talent, and of its ability to access scarce components and favourable pricing from suppliers compared to its rivals.
The biggest risk of all is the Blackberry 10 smartphone. It's clear that the company's future depends on the success of the delayed next-generation product, which in turn depends on expanding the catalogue of applications available for it – a weak spot for RIM. "If the company is unable to successfully expand and manage the BlackBerry App World applications catalogue, the success of the company's Blackberry 10 smartphones and future projects and services may be materially and adversely affected," it says.
Investors, customers and Canadians in general have grown increasingly worried about the future of Canada's last great high-tech company. In black and white, it's clear the company's leadership shares their concerns.