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Posted April 4, 2012

Economic Development

Waterloo area desribed as having a "Twilight Zone-worthy sense of cheeriness and optimism"

Bloombergs Technology reporter David Sax fails to ask "What's in the Water"

New York - The headline reads; Research in Motion - In RIM's Hometown, Optimism Trumps a Sales Implosion. The copy starts here. Research in Motion (RIMM) shareholders weren’t expecting good news Thursday, when the company released its quarterly earnings. True to form, RIM delivered. Sales dropped 25 percent, the net loss was $125 million, and RIM’s market share continued to disappear in the U.S.—and significantly, in its native Canada, once considered an impenetrable stronghold for the BlackBerry.

The news was so bad that Jim Balsillie, RIM’s former chief executive officer and co-founder, resigned from the board two months after he had stepped down from the executive suite. There’s not much of a silver lining to RIM’s cloud, but you wouldn’t know that if you were to visit Waterloo, Ontario, the small city where RIM’s operations are headquartered. In Waterloo, southwest of Toronto, the bad earnings news is brushed off as simple market hype—despite a 75 percent stock-price plunge in the past year—as the city maintains a Twilight Zone-worthy sense of cheeriness and optimism about its biggest, and most troubled, prized pig.

Picture a place where the local Starbucks (SBUX) is filled with people thumbing away on BlackBerry Curves and Bolds and Lightnings, pairing their devices with RIM’s Playbooks so they can actually send e-mails through the tablet. Mention the fortunes of RIM to many of these residents, and they’ll have nothing but effusive praise for the company and the vision of “Mike and Jim” as they’re commonly referred to, like a cheery morning-show duo.

Business leaders, local technology companies, and politicians all jump over each other to play down any worries about RIM’s future. Recently, Waterloo Mayor Brenda Halloran told a Canadian newspaper that the city had absolutely no worries about the company’s future. “Here within the community, we are very supportive, very secure in the knowledge that RIM is going to be fine,” Halloran said last month in the Globe and Mail. If people do speak with concern, it is in whispers and behind closed doors.

Aside from being the largest employer in the region, RIM is also the largest real estate tenant, as well as a symbol of global success that put this relatively small city (or large town) on the map. Even in this dismal quarter, the company brought in more than $4 billion in revenue. In contrast, Waterloo’s municipal operating budget for the next two years is C$126 million ($126.2 million). No one wants to speak ill of the golden goose. “People are still proud to be associated with RIM,” says Paul Singh, chief technology officer of the Waterloo-based company Dejero, which markets live mobile-video software. “They’ve done so much for the city, you won’t look away from it.”

RIM’s reputation in Waterloo also benefits from the tremendous generosity Balsillie and Lazaridis bestowed upon the community over the years, funding everything from small charities and soccer teams to a park partially funded by the company, with 500 acres of ice rinks, ball fields, and a golf course. The University of Waterloo and Laurier University have been the biggest recipients of RIM’s largesse and have revamped their campuses with hundreds of millions of dollars of gifts from RIM and its co-founders.

“You’re a bit of a dick if you abandon ship,” says Luis Temporao, a commercial banker who acknowledges the company’s failings but hopes RIM can pull itself together under new CEO Thorsten Heins. “This company has put so much into the community.”
Sax is a Bloomberg Businessweek contributor.

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