Want CNET to notify you of price drops and the latest stories?

Executive infighting reportedly led to BlackBerry's downfall

Deep rifts in the struggling handset maker's executive ranks hobbled its ability to compete in the mobile market and led to its eventual downfall, sources tell The Globe and Mail.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
Expertise I have more than 30 years' experience in journalism in the heart of the Silicon Valley.
Steven Musil
3 min read
BlackBerry CEO Thorsten Heins.
BlackBerry CEO Thorsten Heins didn't always see eye to eye with other executives over company strategy. Sarah Tew/CNET

In the end, BlackBerry's leadership may have been its own worst enemy.

The struggling handset maker suffered from infighting at its executive level that hobbled its ability to compete in the mobile market and led to its eventual downfall, according to an investigation conducted by the The Globe and Mail newspaper.

The company, which plans to cut roughly 40 percent of its staff and sell itself to an investment group, announced Friday that it lost $965 million in its just-ended fiscal second quarter. The biggest reason for the dramatic loss was the $934 million write-down the company took on inventory of the BlackBerry Z10, which apparently did not sell well.

The Z10, a departure from the company's famous keyboard-equipped mobile phone, was BlackBerry CEO Thorsten Heins' best weapon to compete with the glass touch-screen handsets sold by Apple and Samsung. While the Z10 was designed to showcase the next-generation BlackBerry 10 operating system, it had one major detractor, according to sources interviewed by the newspaper: company co-founder Michael Lazaridis.

During a meeting last year with the company's board to review plans to launch the new device, a frustrated Lazaridis voiced concerns that the company's new direction was an abandonment of his vision that made BlackBerry handsets popular with corporate customers.

"I get this," Lazaridis said, pointing to one of the company's signature devices. "It's clearly differentiated." Then he pointed to a touch-screen phone. "I don't get this."

Once the preferred handset maker among the corporate elite, BlackBerry was hurt by its inability to move past the legacy operating system that got it into the smartphone game and quickly fell behind Apple's iPhone and Google's Android operating system. After hitting a high of nearly $145 in 2008, the company's stock lost a staggering 94 percent of its value. On Monday the company announced that it had entered into a deal to sell itself a consortium led by Fairfax Financial Holdings that valued the company at $4.7 billion.

Months before the boardroom confrontation between Heins and Lzaridis , the pair was in another showdown, this time with Jim Balsillie, who was co-CEO of BlackBerry when it was still known as Research In Motion. Balsillie championed a strategy to license the company's BlackBerry Messenger (BBM) instant messaging platform to competitors.

Getting BBM onto millions of non-BlackBerry handsets was expected to generate a handsome profit for the company, but the plan ran into stiff opposition from senior executives. Not long after being appointed chief executive of RIM last year, Heins decided to ditch plans to license BBM -- with Lazaridis' support, according to the newspaper.

As a result, Balsillie resigned from the board and severed his ties to the company, he confirmed to the newspaper.

"My reason for leaving the RIM board in March, 2012, was due to the company's decision to cancel the BBM cross-platform strategy," Balsillie said in a brief statement to The Globe and Mail.

CNET has contacted BlackBerry for comment and will update this report when we learn more.

Correction, Sept. 30 at 5:01 a.m. PT: This story originally misstated the period in which BlackBerry lost $965 million. That loss occurred in BlackBerry's fiscal second quarter, the one most recently completed.