Losing the Signal: The Spectacular Rise and Fall of BlackBerry (7 page)

“Everyone wanted to do a Microsoft, get a product like DOS, then wedge
the business open, dominate the economics, and kill anyone trying to make a product,” Balsillie says. To chase this dream, RIM would develop a signature wireless product. That product, Lazaridis was convinced, was a mobile message device. Not the expensive and awkward Newtons and Simons that belly-flopped, but a small, simple, inexpensive device that did one thing well: send and receive digital messages instantly.

In 1996 three major companies were leading the quest for the perfect palm-sized communicator. Referring to a scene in one of his favorite films, the 1981 blockbuster
Raiders of the Lost Ark,
Lazaridis was convinced his competitors, like German soldiers searching in the desert for the Ark of the Covenant, “were digging in the wrong place.”

The competitor digging with the largest shovel was Motorola, then the dominant global maker of cellphones and pagers. The Chicago firm opened a new market with Tango, a pager that not only received messages but enabled responses. Unlike the elegant dance that inspired its name, the device was clumsy. Tango expertly received short text messages over Motorola’s ReFLEX paging network, but it stumbled with replies because it didn’t have sufficient transmission power. Message replies were limited to a series of canned responses, such as “running late” or “will call later.”

Another contender was Nokia’s 9000 Communicator, a book-sized tool that looked like a cellphone strapped onto a mini keyboard. A precursor to the smartphone, the 9000 combined computing, cellular, and Internet applications such as browsing and e-mail. The Finnish phone was so glamorous it was used by Val Kilmer’s Simon Templar character in the 1997 remake of
The Saint.
Few consumers, however, could afford the $800 price tag, and wireless cellular network carriers more accustomed to handling voice traffic charged a fortune to relay such data-heavy communications.

One company had more success creating a portable office aide: RIM nemesis U.S. Robotics. Its Palm Pilot 1000, launched in 1996, the year after U.S. Robotics bought California startup Palm computing, was a sleek device storing calendar, contact, and other information that could be synchronized with users’ computers. Promoted as a personal digital assistant, the Palm was an instant hit with professionals. You didn’t need an engineering degree to operate the machine. And unlike Newton’s faulty handwriting, the Palm came with a digital keyboard that was easily operated with a stylus. No more “egg freckles.” Missing from the Palm Pilot, however, was a wireless connection. Fans would have to wait until 1999 for a new Palm Pilot to be linked wirelessly to the Internet and e-mail.

RIM was quietly putting the finishing touches on its own handheld communicator in the spring of 1996. Its conquer-the-world strategy was audacious for a company with fewer than one hundred employees, but RIM’s low profile had its advantages: bigger global companies didn’t take the small Waterloo company seriously. “We seem to be doing quite well without anyone knowing,” Lazaridis told the
Globe and Mail
in one of his first mainstream media interviews. Working in the shadows, Lazaridis’s team had accumulated eight years of experience helping Sweden’s Ericsson, Toronto’s Rogers, and New Jersey’s RAM Mobile Data, the small wireless data arm of BellSouth, transform Mobitex into a working radio network with better coverage across the continent than its main rival, ARDIS, the data network that was created by Motorola for IBM and sold to American Mobile Satellite in early 1998.

By the mid-1990s, Rogers and RAM Mobile had little to show for hundreds of millions of dollars spent expanding the networks. Radio-transmitted data was an expensive and nonessential service. Mobitex and ARDIS had fewer than fifty thousand customers.
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Media and industry players questioned the future of radio networks. AT&T was developing a faster network technology that was due to be launched imminently. If Mobitex didn’t attract more traffic, Rogers and RAM Mobile would surely abandon the costly wireless exchange. Such a move would be fatal for RIM. Lazaridis had devoted years to Mobitex by designing many of the on-ramps to the rickety information highway. It was RIM that created a software-based system of universal digital rules that allowed different types of computers to exchange data. And it was RIM’s portable radio modems that drew laptop and mobile device users to the Mobitex roadways.

When RIM’s radio modem went into production in 1995, Lazaridis believed it was a watershed moment. RIM had hired a team of radio engineers from McMaster University in nearby Hamilton who designed a portable radio card that was small and powerful enough to be housed in a handheld device. The radios worked better than those made by Ericsson, costing less and draining less battery power than the competition. For Lazaridis, who had been sending electronic mail since university, the most logical device would be one that sent and received e-mail. His counterparts at RAM Mobile Data disagreed. Motorola was generating a lot of attention with its two-way Tango pager, which sent short paging messages, not lengthy e-mails. The media was heaping praise on the gadget. Paging was a booming market with nearly 40 million subscribers. Some experts believed the two-way paging market could attract nearly 80 million subscribers by 2005.
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If RAM Mobile and RIM wanted in, they’d
have to move fast. In the summer of 1995, Lazaridis set a deadline for his engineers. RIM would have a working prototype by Christmas for a two-way pager that would be called [email protected] 900. Production would begin in 1996.

To the engineers, the decree was yet another impossible demand. RIM employees respected Lazaridis for his drive and design ideas, but when it came to deadlines, he was starry-eyed. Did he really think they were going to beat Motorola and its sprawling army of engineers with a new two-way pager in a yearlong sprint?

“Mike would make these bold calls and I thought he was nuts,” says RIM’s radio software prodigy Matthias Wandel. To Lazaridis, the tight deadlines were a matter of survival. Without a new product, the company would not last.

RIM was months behind its promised December delivery of a pager prototype to RAM Mobile Data, the New Jersey–based wireless data carrier that was desperate for wireless messaging devices it could sell to customers to boost data traffic on Mobitex’s empty roadways. The [email protected] 900 project had suffered so many setbacks that by early 1996 RIM engineers were questioning Lazaridis’s unwavering optimism about the handheld device, a thick, fist-sized machine with a keyboard and a screen on a pop-up clamshell cover that Lazaridis’s wife Ophelia nicknamed “Barbie PC.” Lazaridis drew some of his confidence from an unlikely alliance with one of the United States’ most powerful technology companies: the semiconductor maker, Intel Corp. Graham Tubbs, an Intel business development executive, visited Lazaridis in early 1995 as part of a search for new Canadian customers. Tubbs was initially doubtful that wireless devices or pagers would be a big enough market for Intel chips, but he changed his mind upon hearing Lazaridis’s description of the [email protected] 900. If RIM got it right, the potential for a two-way messaging device was enormous. The problem with such a small unit, Lazaridis explained to his American guest, was that conventional chips drew so much power that the [email protected]’s battery drained too quickly. No one wanted a portable communicator that worked only for a few hours. Tubbs saw RIM’s problem as Intel’s opportunity. By making a bet on RIM, Intel could help Lazaridis solve his problem and open a new market in mobile communicators for Intel.

Tubbs and Terry Gillett, Intel’s division manager for microcontrollers,
drew up a proposal to redesign an existing Intel microprocessor—a silicon chip housing the central processing unit—for a two-way pager. Development costs would run to $2.5 million, they advised Intel. Sorry, you’re only getting $100,000, they were told. The minuscule budget should have killed the microprocessor project. But Tubbs and Gillett realized that by reconfiguring another existing chip they could fashion a power-efficient microprocessor for RIM for less than $100,000.
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By the time the Intel microprocessor arrived in the spring of 1996, RIM had missed the December 1995 deadline to deliver a pager prototype to RAM Mobile Data. The chip was one of many components RIM’s engineers struggled to integrate into the [email protected] 900. The pager’s internal antenna interfered with the radio signal. The transmitter conked out. RIM had outsourced design and manufacturing to Canadian firms that did such a bad job the device’s plastic case parts had to be glued together, while the hinge that attached the screen lid to the body of the device easily wore out. RAM Mobile, growing impatient for a competing pager to Motorola’s Tango, requested a demonstration at its head office in Woodbridge, New Jersey, on April 19, 1996.

That morning, RIM’s office was a high-tech war zone. Parts and wires were scattered everywhere, engineers were slumped asleep in chairs. Lazaridis and a few RIM soldiers stood over a gray plastic object shaped like a hamburger. The device consisted of two puck-shaped plastic components connected by a hinge. The top held a small screen displaying four lines of text; the bottom, a tiny keyboard. It was a fully interactive two-way device. Unlike pagers, which operate with radio receivers capable of capturing messages, RIM’s device came with a transceiver that could receive and reply to electronic notes. When it worked, that is.

Cupped in Lazaridis’s hand was the only working prototype of the [email protected] 900, a device that would become known internally as “the Bullfrog.” Most of the bugs had been eliminated, but the transmitter was so finicky it wasn’t sending messages. Wandel was pulled out of bed at dawn to change the configuration. “If we don’t get this done,” Lazaridis warned, “we might as well shut down the company.”

Wandel was able to tweak the transmitter, but it was only capable of sending radio signals short distances. That would have to do. Lazaridis slapped the clamshell shut, grabbed his briefcase, and headed out the door for the airport. In Woodbridge, Lazaridis took the stage at a presentation center in front of dozens of RAM Mobile engineers and managers so his demo could
be broadcast on a large screen. Holding the Bullfrog aloft, he tapped out a short message that was relayed to a nearby computer.

“It worked. We got through it. Everyone clapped and cheered,” Lazaridis recalls. After that day, the prototype never worked again.

Jim Hobbs, vice president of BellSouth’s mobile data group, knew he had to call Lazaridis. Hobbs had lots of time for RIM’s innovator and loved being astonished by the gadgets Lazaridis pulled from his pockets. Lazaridis always seemed to know what was around the corner. On this day in May 1997, however, it was Hobbs’ duty to surprise Lazaridis. And it wasn’t with good news. BellSouth was running out of patience with RAM Mobile’s expensive Mobitex network. The Bullfrog hadn’t made much of a splash. Customers loved the immediacy of its two-way paging, but the device was clumsy to hold and jutted out of users’ hip holsters. Bump into a doorframe and it sheared off the belt, damaging the device. RAM Mobile’s sales staff nicknamed the ungainly pager “Fat Boy.”

When he reached Lazaridis on the phone, Hobbs was uncharacteristically terse: “If things don’t pick up, something bad is going to happen.” BellSouth hadn’t set a date, but budget season was coming, and it looked like the carrier might mothball its mobile data experiment unless RAM Mobile could find some new devices to generate traffic.

“Mike, I’m telling you this for your own good. We’ve got to make something here and we’ve got to do it quick,” Hobbs warned.

Lazaridis gently put the phone back in the cradle and walked out of his office to Balsillie’s corner room across the hall. “I think we’re dead,” he said. “They’re going to pull the plug on Mobitex. We have two weeks.”

Balsillie got the “dead” part. Products designed for Mobitex generated the bulk of RIM’s sales: software, modems, and the Bullfrog. RIM was so committed to the network that a new project was underway to make a more sophisticated two-way pager. Balsillie was cautious about developing another device after Bullfrog’s poor debut. Costs were rising faster than sales; it would be reckless to make another big bet. Hobbs’ call changed the stakes. This was no time for caution. RIM had to convince BellSouth that RIM had a game-changing product.

The call from Hobbs was more than a tip from a buyer to its small supplier. The BellSouth executive understood that its wireless data venture in
New Jersey needed RIM’s wireless devices as much as the Waterloo business needed the carrier. Their marriage of convenience was often rocky; Hobbs and Lazaridis engaged in back-room diplomacy to keep the union alive. A major difficulty was the relationship between RAM Mobile’s CEO, Bill Lenahan, and Balsillie. Since joining the New Jersey carrier in 1995, Lenahan had been put off by Balsillie’s abrasiveness toward BellSouth. Lenahan pressed for low prices on RIM’s modem cards and Bullfrogs to attract customers and keep BellSouth off his back. Balsillie pushed back like a tier-one manufacturer. Lenahan wasn’t used to such behavior from small suppliers.

“Jim is not an easy guy to work with on this stuff. He wants to be the smartest one in the room all the time…. I think he has a certain amount of arrogance about him,” Lenahan explains today.

Balsillie saw RAM Mobile and BellSouth as two more in a series of outsized customers who were out to squeeze the little guy. If he didn’t play “hyperaggressive,” Balsillie says, RIM was roadkill. Lenahan concedes he was preoccupied with managing his demanding parent, BellSouth, “the big guy in the room.” The Atlanta carrier wanted to see sales gains from RAM Mobile every quarter. The more pressure he got, the more he muscled RIM and other suppliers for lower prices and new products. “RIM had to keep showing us what they could do for us to keep moving forward,” Lenahan says.

A long-term player, Lazaridis saw no point in playing tough after the call from Hobbs. The burden was on him to convince the Atlanta carrier’s senior executives of the vibrant future for wireless messaging. The solution was a new two-way pager that RIM had under development. Showing them a prototype wasn’t enough; he had to convince buttoned-down BellSouth executives that innovations in wireless devices were on the verge of changing how the world communicated.