Is Greece Close to Leaving the Eurozone?

Posted on February 1, 2012

Amid the latest effort in Europe to ward off another systemic financial crisis, Greece looks more likely to drop out of the euro zone than ever, at least temporarily, says Franklin Allen, a Wharton finance professor.

At this week’s European summit, German Chancellor Angela Merkel said the European Union (EU) should be able take over control of Greece’s budget decisions if needed. One Greek newspaper referred to the German proposal as “the document of shame.”

“I think the Greeks are quite right to be outraged at this,” Allen says. “It underlines the real problem in the euro as currently constituted. I think Greece will leave the Euro, perhaps temporarily, and this will de facto become the discipline device.”

On the face of it, the overall risk of a financial system collapse in Europe appears to have been greatly reduced in recent weeks, thanks largely to two developments. First came the Long Term Refinancing Operation (LTRO), which makes $650 billion in new money available to euro zone banks over three years. That has significantly lowered the costs for credit insurance (credit default swaps) – and thus the overall cost of borrowing — for sovereign bond issues by Italy and Spain, at least for now.

The second development came this week with the signing of a new pact imposing stricter fiscal requirements on EU counties more generally. Of the 27 members, only the U.K. and the Czech Republic declined to sign the new treaty.

How much does this new agreement accomplish? “Obviously, Europe and the euro zone need a fiscal compact. But the problem is that it won’t be in place in just a few weeks,” notes Wharton management professor Mauro Guillen. “You need months to years to implement it. But investors and the markets want answers now, not in months or years. So I think it is the right path to eventually take, but it cannot solve the pressing problems of the day.”

Allen further points out that “it does not accomplish much in concrete terms at all. My understanding is that there will be enough ‘get outs’ that it essentially will not force countries to adjust immediately…. The Growth and Stability Pact did not work and this is more of the same.”

Regarding the new money available through the LTRO and the European Central Bank (ECB) in mid-December, Financial Times columnist Martin Wolf writes: “Does this mean the euro zone crisis is over? Absolutely not. The ECB has saved the euro zone from a heart attack. But its members face a long convalescence, made worse by the insistence that fiscal starvation is the right remedy for feeble patients.”

The bottom line, then, as Allen notes, may be Greece’s exit from the euro zone, and there have been some reports that those plans are underway.

This all comes against a challenging background. European unemployment is at its highest level since the euro was created, and the International Monetary Fund (IMF) recently lowered global economic growth estimates substantially, particularly for Europe, compared with forecasts of just three months ago. Many European countries are in recession already. The IMF forecasts a region-wide recession in 2012, with GDP falling by 0.5%, and far more sharply in Italy and Spain.

On balance, it’s a gloomy picture. But what if it’s all just part of a process of controlled chaos?

In the article “The coming resolution of the European crisis,” Fred Bergsten, director of the Peterson Institute for International Economics, and Jacob Funk, a research fellow there, disagree with the widely held view that “policy reactions to the Eurozone crisis are … short-sighted, incoherent, and driven by political expediency.” Instead, the two argue, “what we are seeing is a game of chicken among the key political and economic powers in Europe. As the crash looms ever closer, the right deals will be struck and Europe will emerge stronger and with its currency intact.”

The writers further note that the key to understanding many developments in the euro zone is to look at what “Europeans do rather than what they say. Germany and the ECB will come up with any amount of money needed to prevent a financial collapse of the region,” the article notes. “The problem for the markets is that these central players cannot say that this is what they will do.” Why? First, because committing to unlimited bailouts “would represent the ultimate in ‘political moral hazard’” and would take the pressure off debtor countries to make tough political decisions. Second, according to this view, the four key players — Germany, the ECB, the IMF and private lenders — have essentially been working individually “to impose as many of the financial losses on Greek government bonds or European banks as possible onto the other three.”

The writers further point out that none of the agreements under consideration – no matter how painful – come close to being as “costly for any of the main actors involved, inside or outside the Eurozone, as a sovereign default in Italy and/or collapse of the euro.” Therefore, the argument goes, “once the political pre-positioning is over and the alternatives are exhausted, the games of chicken will end and the political decision on how to split the bill for securing the euro’s survival will be taken.”

Still, as other analysts note, it is quite possible that markets could outrun the speed with which officials could respond to a swift-moving crisis, and the whole project could go off the rails.

Additional reading: Europe’s Money-Go-Round Saves the Day – for Now

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Starbucks Comes to India, Selling Coffee and Atmosphere

Posted on February 1, 2012

After Starbucks detailed the roadmap for its entry into the Indian market on Monday, among the first to see an impact was Tata Global Beverages. Shares of the company, which has a joint venture with the Seattle-based coffee giant, jumped more than 10% on the Bombay Stock Exchange the next day. The increase reflected investor confidence in the prospects of Tata Starbucks, the 50-50 partnership between the two firms. “We are excited about the opportunities the alliance presents,” says Tata Global vice-chairman R.K. Krishnakumar.

The first India Starbucks locations are scheduled to open in August in New Delhi and Mumbai. Company officials have hinted that the grand opening could be August 15, India’s Independence Day. With an initial investment of around $80 million, the Tata-Starbucks partnership is expected to open 50 stores in the country in 2012. The locations will be branded “Starbucks Coffee — A Tata Alliance,” an unusual move, as the Seattle firm does not typically sell its products under a hybrid brand. The stores will be offering a range of teas in an effort to cater to local tastes.

Tata observers note that the partnership is a continuation of a trend. When Pepsi came to India, it did so as part of a joint venture with Tata Group subsidiary Voltas. The product name in that case was also a hybrid — Lehar Pepsi — due to restrictions on sale of foreign brands in India. Once the laws were changed, and Coca-Cola entered the country on its own, Pepsi parted ways with Voltas.

Due to the current legal framework, Starbucks would have come to India without a partner; instead, it chose to enter into the venture with Tata. In addition, observers note, Tata had no experience in consumer products at the time of the Lehar Pepsi launch; Voltas was a marketing company that had handled successes such as dairy products brand Amul and soft drink concentrate manufacturer Pioma Industries (which sells under the popular brand name Rasna).

This time, the Tatas bring much more to the table, observers say. First, they have developed considerable retail experience, through chains such as Westside (clothing and accessories), Landmark (books), Croma (consumer electronics) and Titan (watches and jewelry). In fact, according to economic daily Business Standard, Noel Tata, who oversees many of the retail brands, is likely to be asked to oversee the Starbucks venture. (Noel Tata recently lost out to Cyrus Mistry in the race to succeed group chairman Ratan Tata.) “We are putting a high-caliber leadership team in place,” John Culver, president of Starbucks China and Asia Pacific, told the newspaper.

Secondly, the two firms are already comfortable with each other: There has been a sourcing agreement in place between Starbucks and Tata Coffee (also part of the group) for over a year. Starbucks will now be working with other group firms such as Taj Catering and the Taj hotel chain.

But the big benefit that the Tatas bring is the large number of outlets available under in different sectors and under different names, some of which could be used to accommodate Starbucks cafes. This provides a cheap entry point in a country where real estate is often one of the biggest costs for any retail venture. “We are keen to sell our products in multiple channels, such as hotels, restaurants, colleges and universities,” said Culver. “As part of this, we want to look at where we can place our stores in Tata hotel properties.”

Although coffee was practically virgin territory in India five years ago, Starbucks now faces considerable competition. Indian chain Cafe Coffee Day, for example, has more than 1,000 outlets. A dozen more chains, including Barista and Costa Coffee, have also established themselves. But competition may be helping the market grow. According to Technopak, a New Delhi-based research firm, the more than $200 million sector has been expanding at a compound annual rate of 25%. Information technology entrepreneur Subroto Bagchi gives one reason why. “CCD has raised coffee from a brew to an experience,” he told India Knowledge@Wharton. Says Culver of Starbucks: “We look forward to bringing the ‘Starbucks Experience’ to customers in India.”

See also: Logo Overhaul: Will Customers Still Answer the Siren Call of Starbucks?

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If Not a Raise, Then What?

Posted on January 31, 2012

Given the tough economic environment, it’s no surprise that many employers are making hard-nosed decisions about compensation and benefits. And while raises and promotions are becoming increasingly rare, employee workloads continue to grow. The result? Waning employee loyalty, increased turnover, and lowered productivity and morale, according to a recent Knowledge@Wharton article.

Meanwhile, managers find themselves in a bind. If the company has frozen wage increases and cut back on benefits, what tools do employers have to motivate their workers and boost morale? After all, work still needs to get done — and done well.

According to Wharton management experts, there are things that good managers can do during difficult economic times to keep their employees positively engaged in work. They cost nothing, and may help companies retain the talent they will need once the economy turns around.

1. Create ‘Intrinsic Motivators’

During a recession, when financial resources are particularly tight, “it can be quite powerful to focus greater attention on building more autonomy, mastery and purpose into employees’ jobs,” says Wharton management professor Adam Grant, who notes that author Daniel Pink summarizes these “major intrinsic motivators” in his book Drive. “Autonomy involves inviting employees to make choices about what projects to work on — or at least how, when, where and with whom to complete them. Mastery involves creating more opportunities for developing knowledge, skills and expertise. And purpose involves helping employees see how their work benefits others or contributes to a greater good.” (Grant has done extensive research on how a sense of purpose impacts employee performance. See: “Putting a Face to a Name: The Art of Motivating Employees.”)

2. Try a Tournament

According to Grant, certain practices pack a punch in terms of fostering the intrinsic motivators he cites above. One of them is holding a company-wide innovation tournament. “Recessions often elicit a threat-rigidity response, where employees focus their attention narrowly on protecting their jobs,” he notes. “Innovation tournaments can be a powerful way to break out of this threat rigidity and encourage a broader focus on creative ideas.” When innovation tournaments are well-designed, he says, they provide employees “with autonomy in selecting the ideas that they want to develop and the colleagues with whom they want to collaborate; opportunities for mastery in building and developing their knowledge; and purpose in helping the company weather a storm or designing new products and services that benefit end users.”

3. Watch for ‘Emotional Contagion’

And while employers can focus on finding functional ways to build workers’ morale, they need to remain aware of less obvious forces that can still drag them down. According to Wharton management professor Sigal Barsade, one of the most common threats during difficult times — and perhaps the most subtle — is “emotional contagion.”

Emotional contagion happens when co-workers “catch other people’s emotions through subconscious mimicry” and think that the emotions are their own, Barsade says. If one colleague becomes worried that the organization is having trouble, or if he or she expresses general fear, anger and anxiety about the economy at work, the mood can quickly spread. “Because employees’ moods can be as powerful an influence on performance as their words and deeds, the possibility for negative emotional contagion needs to be taken seriously, and managers need to be particularly vigilant in making sure this negative emotional contagion doesn’t spread.”

How? Barsade suggests that managers can start by addressing a negative person directly. “People often don’t realize how negatively they are being perceived, or how their negative emotions are influencing others in their work environment.” If an employee is intentionally negative, determining and discussing the source of the negativity can be helpful. (In some cases, Barsade notes, negativity is a legitimate reaction to circumstances.) If these steps don’t work, she says, managers need to move to “the non-verbal domain. That is, avoid sharing your gaze more than necessary in meetings with negative people.”

The best insurance against emotional contagion, Barsade adds, is to “create an environment in which positive emotions are not only allowed but encouraged. Having an emotional culture that makes it clear that destructive negative emotions will not be accepted gives employees the power to understand what the organization expects of them.”

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Seeing Red

Posted on January 30, 2012

When French shoemaker Christian Louboutin tried to trademark the color red used on the bottom of its high-fashion high-heeled women’s shoes, a court ruling shot them down, much to the relief of French fashion rival Yves Saint Laurent, which sells its own line of red shoes.

Louboutin isn’t giving up, and last week, company lawyers appealed the ruling in a Manhattan courtroom. Should a company be able to trademark a color — in this case, Louboutin’s “China red” — when color is such an integral part of the fashion’s industry’s creativity?

“My sense is that Louboutin already ‘owns’ the red bottoms on its shoes in the minds of consumers,” says Wharton marketing professor Patti Williams, who acknowledges that she is not an expert in trademark law. “It’s part and parcel of the brand experience they deliver, and [it's how] the brand allows consumers to tell others that they are wearing Louboutin shoes.”

Louboutin is “trying to prevent other brands, both high and low, from appropriating that symbol for their own benefit,” she adds. “Personally, I’m not sure I see it as that different from brown trucks for UPS. I’m sure UPS wouldn’t want another delivery company to paint its trucks the exact shade of brown, even if the other company didn’t have the UPS logo on them.” In addition, says Williams, she would expect that a ruling in Louboutin’s favor “would apply to a very specific color of red, not all colors of red.”

Wharton marketing professor Barbara Kahn, director of the Jay H. Baker Retailing Center, agrees that “the red sole on luxury shoes has clearly been identified as the brand ‘Christian Louboutin’ by many consumers … and I think this brand is the only one to date that has used that color on the bottom of the shoe.” She speculates that the earlier court ruling “would have been based on consumers’ identifying the brand by the color of the sole.”

Her take on the legal issue — as to whether a  brand can own this kind of identification — is a function of how important the “color/identification/packaging is to the product class vs. the brand itself. I believe, for example, that a pair of surgical gloves was allowed to own the color purple because that was associated with its brand, had not been used by any other brands before them and was not material to the product class per se. Similarly, it would be a legal issue as to whether pink is associated with Pepto Bismol only, or with stomach medicine in general. If that is the case, then red soles could fit that definition” because it doesn’t appear that any other shoe company has put red on the bottom of its shoes. That red sole, therefore, “has become associated with that luxury brand.”

Arguments by lawyers for both Christian Louboutin and Yves Saint Laurent revolved around a few key points, according to an article last week in The Wall Street Journal. “Christian Louboutin has created one of the more iconic trademarks of the 21st century,” stated Louboutin’s lawyer in the Journal article. “Louboutin turned a pedestrian item into a thing of beauty.”

The article also quoted a rebuttal from Yves Saint Laurent’s lawyer: “Artists … need the full palette of colors available. In order to compete and compete fairly, we need red.” The company does not want to be told that it “can make green, blue, purple shoes … but [is prevented] from making red” ones.

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India Inc. Is Subdued, But India’s Growth Story Continues to Attract Global Interest

Posted on January 30, 2012

Given the global economic scenario, a 7% GDP growth is nothing to feel dismal about. But India Inc. is not smiling. According to a recent survey by the Confederation of Indian Industry (CII), industrialists are subdued about the prospects for the country’s economy. This is reflected in the CII-Business Confidence Index (CII-BCI). For the third quarter of 2011-2012 (October-December), the CII-BCI stands at 48.6 points. In the previous quarter it was at 53.6. Since the last quarter of 2010-2011, the index has fallen by a total of 18.1 points.

According to the survey, industry leaders expect sales, output, new orders and pre-tax profits to decline. The rising costs of electricity, fuel and wages are seen as major dampeners. The majority of the companies surveyed expects exports to either decline or stagnate. Capacity expansion within India’s business community mirrors the subdued sentiments. Close to 57% respondents in the CII survey said that there was no planned expansion in the third quarter. They did not see it happening in the near future, either. Talking to Indian business daily Business Standard, Chandrajit Banerjee, director-general of the CII noted that “stagnation in investment plans has emerged as a key concern in the current macroeconomic scenario.”

Global investors view India differently, however. Studies show that India continues to be an attractive destination for foreign direct investment. The recent Ernst & Young 2012 India Attractiveness Survey ranks the country fourth below China, the U.S. and Brazil. India’s growing domestic market is fueled by a middle class that is expected to expand from 160 million in 2011 to 267 million by 2016. The country’s large and qualified workforce and its cost competitiveness are also seen as the major factors driving investor interest.

“India’s domestic demand-driven growth model is acting as a catalyst for attracting foreign investments into the country,” Rajiv Memani, country managing partner of Ernst & Young India, said in a media report. “Although the ongoing global uncertainty may have prompted global investors to become more cautious, India’s inherent advantages and proven resilience to counteract macroeconomic challenges generally outweigh these concerns.”

The E&Y survey notes that while India has been known more for services up to now, it is also emerging as a manufacturing location for many global corporations. The survey also projects an upswing for India’s private equity sector. “Despite the ups and down over the past decade, PE has emerged as a very important investor in India Inc. and with the long-term India growth story still intact, PE funds continue to look eagerly at investing in India,” according to the report.

Meanwhile, even as the World Bank predicts that for the current fiscal year, India’s economic growth will be around 6.8%, officials at the country’s finance ministry are pegging it at little higher than 7%. They also expect next year’s growth to be higher than the World Bank estimate of 6.8% and are likely to project it around 8%.

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Saving Lives through the Power of the Crowd

Posted on January 26, 2012

When someone goes into cardiac arrest, a number of different factors figure into his or her chances of staying alive. Doctors call it the chain of survival. Along with dialing 911 and administering CPR, an important link in that sequence is the use of an automated external defibrillator or AED, which restores the patient’s heart to a normal rhythm.

AEDs are easy to use — even children can be taught to operate one. But they are often hard to find. Unlike other medical devices such as pacemakers or artificial joints, there is no method for tracking where AEDs are located and when they are used. In many cases, a business may have an AED, but patrons and employees might be unaware of it, or of where it is located.

A new effort being launched by researchers from the University of Pennsylvania aims to tap into the power of crowd sourcing to create a mobile app linking the locations of all the public AEDs in Philadelphia to a person’s GPS coordinates. At the same time, they are studying the most effective ways to employ crowd sourcing as a means of furthering research.

“Our challenge as researchers is how do we improve people’s chances, or give them the opportunity to survive cardiac arrest, by improving access to these devices,” says Raina Merchant, a professor of emergency medicine at Penn’s Perelman School of Medicine. “To do that, you really have to know where they are. One approach for finding them is to hire a team of research assistants to go door to door and look and build a map. But that takes a lot of time, and the information becomes very static.”

That method can also become very expensive, notes Wharton operations and information management professor Shawndra Hill. “Basically, we’re talking about the idea of divide and conquer to the nth degree, where ‘n’ is the number of people willing to participate,” she says. “Oftentimes, people are willing to participate … at a lower cost than it would cost the researchers to participate themselves. You also get scale because so many more people are participating. And if you incentivize people correctly, you can do things faster just because there are more people.” She points to Amazon Mechanical Turk, a division of Amazon Web Services, as an example of this. The site recruits people to complete simple tasks, such as writing product descriptions or labeling documents, for relatively low fees.

Dubbed the MyHeartMap Challenge, the Penn contest is scheduled to launch January 31 and run until March 13. Contest participants will use a free app that can be installed on their mobile phones to take pictures of AED devices in public places in Philadelphia. They then send the pictures to the Penn research team through the app or via the project’s web site. Eventually, the researchers would like to expand the project to create a nationwide, crowd sourced AED registry. “In today’s networked society, it makes a lot more sense to actually use social media and social networking to collect this data, and engage the public as citizen scientists,” Merchant notes. “We thought we could probably get much better data by, for example, having people who work at a Starbucks or who are headed into the coffee shop, or the place where they work, take a picture [of the AEDs that they see]. It raises their situational awareness about their environment, and it helps us build a map so that somebody else could use that information.”

If a sufficient number of unique AEDs are identified, the person or team that finds the most devices during the MyHeartMap Challenge will be awarded $10,000. Organizers have also singled out several pre-identified “golden ticket” AEDs around the city that will net $50 for the first person to send in pictures of them. Participants are encouraged to leverage their social networks to help in the challenge, meaning the winner could turn out not to be the person who physically hits the streets to find AEDs, but the one who designs the most creative way to motivate friends and other contacts to do so. “At least one international team from outside Philadelphia is putting together a pretty sophisticated method for locating AEDs,” Merchant says. “We’re hoping a lot of different teams from across the U.S. and outside the U.S. want to [participate.]”

Structuring the contest and choosing the reward was a key part of the project: Not only do the researchers want to interest enough individuals and teams to create a comprehensive map, but they also want to find out what types of rewards incentivize crowd sourcing participants to deliver the most — and the most accurate — data. “Crowd sourcing is increasingly being used in public health, in disasters and emergency preparedness and in planning large events, with people quickly submitting information about what’s happening in those contexts,” Merchant notes. “But we need more data on how we validate the information that we get from the crowd, and how we understand what crowds are best able to answer and when that information is actually accurate.”

The Philadelphia project is meant to be a pilot that would later be expanded to other cities and other parts of the country. Organizers plan to use what they learn from the first MyHeartMap Challenge to design future contests. “We’re excited about the competition for two reasons,” Hill says. “To learn about crowd sourcing and because this particular application has the potential to provide information that could save lives.”

To learn more about the MyHeartMap Challenge, visit the project’s website: http://www.myheartmap.org.

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Japan Inc. Sees a Key Product Line – Exports — Turn Negative

Posted on January 25, 2012

The close of 2011 brought an end to an era. Japan Inc., creator and leading light of an export-led economic growth model for more than 60 years, suffered its first trade deficit since 1980. What’s more, deficits look likely to continue for the foreseeable future.

Some of the reasons for the giant shift are clear. Much of the world’s manufacturing has moved to lower-cost producers such as China, and many Japanese multinationals produce goods overseas now, which subtracts from home-country trade figures.

Nevertheless, “it is a startling thing, obviously,” says Mauro Guillen, a professor of management at Wharton and director of the Lauder Institute. “But keep in mind that two things have been going on. First, Japanese firms have shifted production offshore over the last 20 years. Second, the yen has appreciated. This means that exports have gone down and imports have gone up.”

So long as the yen and energy prices remain high, and global demand is weak, Japan will not return to surplus, says a former Bank of Japan official, Hiromichi Shirakawa, now head of economic research at Credit Suisse in Tokyo, according to a report in The Wall Street Journal. Others suggest that the yen is heading for a big fall eventually if trade deficits become a regular occurrence. While that might have the virtue of boosting competitiveness, it would also have a downside by raising import costs for manufacturing inputs.

But how likely is it that the yen will depreciate much as a result of trade deficits? Not so much, according to Guillen. That’s because the key measure regarding a currency’s value is the more comprehensive current account, which tracks not only trade, but also financial transfers, including remittances from those Japanese producers overseas. So do not expect a net outflow of cash from Japan any time soon, even in the face of ongoing trade deficits.

“What really matters is the current account,” Guillen says. That measure “includes the trade balance, income earned on capital invested abroad and net transfers.” And Japan still carries a large current account surplus “that continues to accumulate reserves in spite of the trade balance that now is becoming a small deficit.” The trade deficit is “more than compensated for by the big surplus in the other components of the current account.”

The bottom line: It is not until a country has a current account deficit that it needs overseas financing “in the form of capital transfers. That’s when your currency tends to depreciate,” Guillen adds.

Guillen also points out that Japanese firms “have become more competitive by investing abroad, not less. Still, it may not be enough to meet the challenge from the Korean and Chinese firms.”

So while one part of this story – Japan suffering a trade deficit — may not have the immediate historic impact expected on first glance, another part of the story does – the implied rise of emerging countries as manufacturing centers. “When historians examine the early years of the 21st century, they will most likely point to the rise of emerging-market multinationals as the most significant and consequential change,” Guillen recently told The Korea Times. “By comparison, the crisis of the euro or the financial implosion of 2008 will be regarded as minor events. During 2012, emerging-market multinationals will continue to rewrite the rules of global competition.”

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Can New Leadership Get RIM Back in Motion?

Posted on January 24, 2012

Two isn’t always better than one. At least that’s the line of thinking that Research in Motion (RIM) demonstrated on Sunday, when the Canadian company announced that it was replacing its co-chief executive officers — Jim Balsillie and Mike Lazaridis — with one CEO. Thorsten Heins, who has been at RIM since 2007 and was most recently a co-chief operating officer, will take on the new role.

RIM has lost significant ground in the mobile sector since the launch of Apple’s iPhone and Google’s Android-based devices. According to The Wall Street Journal, in addition to service outages and ongoing product delays, the company’s share of the smartphone market in the U.S. has fallen below 10%.

Balsillie and Lazaridis defended their joint-CEO leadership structure in the midst of the company’s well-publicized difficulties, arguing that replacing them at a critical time would only derail a turnaround. But some analysts have questioned the arrangement. In a recent Knowledge@Wharton article, Wharton management professor Lawrence Hrebiniak notes that having two CEOs could turn out to be a handicap in the long run, because it potentially muddles decision making. “When things are going well, none of this is questioned,” he adds. “When RIM was dominant, it could have had five CEOs and been fine.”

According to the Journal, Heins has a reputation for managing execution and has been training for his new role for some time. But the real issue for RIM, according to Wharton management professor Daniel A. Levinthal, is not the person — or persons — at the helm at the company, but rather where the entire ship is headed. “RIM, in my view, needs a new strategy,” he says. “The shift in leadership may help precipitate that, but a new person executing the existing strategy will continue to be disastrous.”

Heins, however, indicated during a Monday conference call with analysts that he doesn’t see the need for any “drastic” changes in strategy — instead placing an emphasis on “process discipline” and “scaling the company further.” He also said that he wouldn’t consider splitting up RIM into separate businesses. “We are strong because we have an integrated solution. We are vertical. We have our network. We have our services. We have our enterprise service out there with more than 250,000 enterprises connected to it. And we have fantastic devices and a fantastic ecosystem that we’re building. I want to build on that. ”

But if a strategy overhaul is really what’s required, what would Levinthal recommend to RIM? “My suggestion is to stop thinking of yourself as a device company — and certainly don’t bother thinking of yourself as a consumer product company.” RIM already has “a killer app,” he points out — the company’s secure email and instant messaging communication. “Let [those services] be device independent and run on Google’s Android [platform] or the iPhone. Communication would still flow through the RIM private network, and corporations will pay the ‘toll’ for that.” Doing so, he adds, would save RIM “a fortune developing and marketing devices that people increasingly don’t want to buy, and preserve [the company's] revenue flow.”

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