Losing the Signal: The Spectacular Rise and Fall of BlackBerry (4 page)

Lazaridis could hardly believe what he was seeing. Standing face pressed against the glass wall of a narrow walkway, he peered down at a cavernous room that looked like a sci-fi movie set. Paneled in lurid red floor and wall tiles, the chamber was jammed with dozens of large, multicolored cabinets, flashing light consoles, and a few studious young men and women operating desktop computers. It was early 1979 and Lazaridis was feasting his eyes on the fabled Red Room at the University of Waterloo. The room housed an IBM 360 Model 75, Canada’s largest, fastest computer. The Red Room was a testament to the vision of businessmen and scholars who, in 1957, founded a university in a Mennonite farming community an hour’s drive west of Toronto. The need for engineers was so urgent in the postwar boom era that Waterloo founders set up a co-op program that dispatched students each term to semester-long jobs so they could apply their learning in a commercial environment.

The program bridged the academic and corporate divide, allowing for collaboration on such ambitious projects as the Red Room in the 1960s. IBM sold the machine to the University of Waterloo at a discount and the Ontario government subsidized the $3 million acquisition, an item so alien to purchasing categories that the computer was listed as “furnishings.” Lazaridis did not see furniture when he visited the computer science department with his parents during his final year of high school. He saw the future. “I just looked down into the room,” he recalls, “and I said ‘This is where I am going.’ ”

Wireless technology and computing were traveling toward each other at warp speed when Lazaridis enrolled in electrical engineering at Waterloo. The sprawling computer in the Red Room that so dazzled him in 1979 was unplugged in late 1980 to make way for smaller, more powerful mainframes and the arrival of early desktop computers. These systems were connected through local networks knitted together with cables. Long before e-mail, Lazaridis and classmates were using the university’s network to hand in assignments or dispatch messages over the pioneering Arpanet, the U.S. military’s Advanced Research Projects Agency Network—the Internet’s forerunner. “It was a whole new world. Everything was new,” says Lazaridis. “It was like a fantasyland.”

Just as he had divided studies at W. F. Herman, Lazaridis explored various disciplines at Waterloo. He supplemented core electrical engineering courses with computer science and physics classes. Of all his studies, it was quantum mechanics that made the greatest impact on him. Classical physics theories were being challenged in the early 1980s. Longstanding formulas that revealed how liquids were heated or why vehicles accelerated downhill had little application in the world of atoms and subatomic particles. One father of the emerging offshoot of classical physics was David Bohm, an American-born physicist whose dabbling in Marxism forced him to leave the country in the McCarthy era. The intuitive scientist continued his work abroad. Borrowing from religious, biological, psychological, and artistic influences, he theorized that atoms and particles were part of a deeper, intricate order in which they were influenced by the properties of other particles. While it would be decades before scientists would be able to apply Bohm’s theories to breakthrough experiments in quantum mechanics, the unorthodox thinking encouraged students to explore new frontiers.

“It was a new age,” Lazaridis explains. “We had this belief that all sorts of stuff was about to get transformed, from technology to the way we thought about the universe.” Bohm’s theories were so influential that when Lazaridis learned the scientist would be speaking in Ottawa in May 1983, he and a group of friends approached the pending visit like religious pilgrims. “We all wanted to go to Ottawa. We had no money. A couple of us said we can do this, it didn’t need to be impossible,” Lazaridis says.

The Waterloo students eventually made their way to Ottawa. Listening to the lecture, Lazaridis felt that he was in the presence of an “enlightened” man who “crackled” with confidence. He also remembers the small miracles that made his trip possible. A professor let the students drive a university van to the speech and friends secured rooms at an Ottawa fraternity. “The point was, we never gave up,” he now says. “We just believed we had to get there and see David Bohm.” Lazaridis would approach future challenges with the same sense of destiny.

At the University of Waterloo, Lazaridis distinguished himself as an entrepreneur. He landed a plum work placement at the Canadian branch of the Minneapolis supercomputer maker Control Data Corporation. He then earned his way out of a tedious night shift running computer diagnostics by designing a program that automated the process. Lazaridis was given a series of increasingly important assignments working with Control Data’s “big iron”
computers and was on track for a job in Minneapolis. The plans, however, were derailed by the company’s financial woes. The big computer maker responded ineptly to the arrival of microcomputers and spent most of the 1980s and 1990s shedding assets. It is now called Ceridian.

The wrenching decline of a company staffed by so many smart and devoted engineers made a big impression on Lazaridis. Innovation could not thrive without corporate support and effective commercial strategies. Discouraged with the world of big business, he decided to be his own boss by starting a consulting company that designed computer solutions for local technology companies. For one of his first clients, he built a primitive memory card with custom software that eliminated the need for cumbersome floppy disks. He became so busy with his fledgling company that the university agreed to let him work for himself for his third-year co-op job placement. The $5,000 in profits he pocketed during the term allowed him to buy a new computer and take his father, Nick, on a fishing trip.

Lazaridis loved running his own business. By the fourth year he was consumed with an innovation that he and Doug Fregin had toyed with in Micsinszki’s basement. By hooking up an early computer to a cathode-ray tube, the pair could transmit data to project information on a television screen. The device was a money saver for Micsinszki, who burned through expensive tubes broadcasting the recorded times and frequencies of his regular one-man ham radio talk show for fellow enthusiasts. At Waterloo, Lazaridis saw a grander application for the technology, and Fregin, who visited him frequently on breaks from his studies at the University of Windsor, shared his enthusiasm. During these get-togethers the old friends honed their high school innovation, creating a device with a custom-designed circuit board, computer memory, power supply, central processor, and a calculator-sized keyboard. Once wired into a cathode-ray tube, the system enabled users to type words that flashed onto television screens.

The system, Lazaridis decided, would be called Budgie, a fun, consumer-friendly name that he believed would endear people to an electronic system that was difficult to explain or understand. By spring of 1984 he was so convinced the device represented a breakthrough that he traveled home to Windsor to tell his parents and the Micsinszkis that he and Fregin would be dropping out of university weeks before graduation to launch a new business. Margaret Micsinszki said she and her husband were shocked by his decision, but they had learned to trust Lazaridis’s determination. For Lazaridis, she says,
“There were no roadblocks. He would persist until the experiment succeeded or the project worked.”

While Fregin and University of Waterloo co-op student Chris Shaw wrote software code and perfected hardware for the Budgie, Lazaridis pitched the innovation to local businesses as a kind of digital advertising banner that could effortlessly flash new messages. When a local hardware store and shopping mall agreed to test the Budgie, the trio attracted local media attention. A black-and-white photograph taken by a local newspaper of the young entrepreneurs, still very much Boy Electricians, remains a timeless portrait of innovators who misunderstood their market.

At the center of the photograph is a glass case with two televisions. One reads, “Advertise On Me - I Attract Customers,” the other, “The Budgie System.” Perched on top of the second TV set is a stuffed bird. To the left of the display, Shaw and Fregin join together, unsmiling, clad in plaid (Fregin) and a rumpled T-shirt (Shaw). To the right stands Lazaridis, at twenty-three sporting premature gray hairs, wearing an oxford shirt, V-neck sweater, and khaki plants. Clutching a vinyl briefcase and staring confidently into the camera, Lazaridis appears oblivious to a group of female shoppers gathered behind him. No one notices that the stand-in budgie is actually a toy parrot. Instead they are sifting through a large box of discounted goods placed in the hall by a nearby retailer.

In an unintended nod to the many lessons they had yet to learn about running a business, Lazaridis and Fregin formally registered their new company under the name Research In Motion Ltd. on March 7, 1984.

Mike Lazaridis strode with purposeful confidence into an office tower on Eglinton Avenue in Toronto. He and Mike Barnstijn, a new Research In Motion partner, were hopeful that a meeting with a potential client would bring some badly needed luck. It was late 1989, five years after Lazaridis and Doug Fregin founded RIM. Their inaugural Budgie communicators never took flight because businesses didn’t share the designers’ excitement about the bulky digital advertising system. At the time RIM was surviving by designing electronic components in a berth above a Waterloo bagel store. It had a run making computerized digital display boards for General Motors Corp. and circuit boards for factory equipment. It even created automated bar code readers for film-editing machines that would later earn RIM Oscar and Emmy technical awards. The innovations were promising, but buyers were scarce. Cash was so low that Barnstijn was sometimes paid in RIM stock. If the pressure was getting to Lazaridis, he never let it show. He was not one to dwell on finances or grow nervous if products fell behind schedule. The schoolboy who fixed every mess at W. F. Herman high school, no matter how difficult, approached business setbacks as temporary problems. “There is always another life raft,” was his mantra.

The raft of the day was Rogers Cantel Inc., a cellphone company controlled by Canada’s cable pioneer, Ted Rogers. Having amassed a fortune feeding cable TV to Canadian homes in the 1970s and 1980s, Rogers had a habit of recruiting big thinkers who might deliver the next lucrative electronic
breakthrough. One of Rogers’ sages, an irreverent Brit who parlayed a chemistry degree into a mobile phone career, was seated in the middle of a warren of cubicles, smoothing a plush mustache, when Lazaridis and Barnstijn strolled in the door. David Neale was technically in charge of marketing at Rogers Enhanced Radio Group. More accurately, he was the Pied Piper to a team of employees known internally as the Enchanted Radio Group. The team tinkered with radio components and antennas and dreamed of data that could be carried over radio waves to mobile products. Could computers be refitted to fire messages and documents on radio signals to mobile couriers, salespeople, and other footloose professionals? Engineers and ham radio innovators experimented for years with text messages on radio waves. No one, however, had translated the breakthroughs into a viable business.

“No one believed we would amount to anything,” says Neale. “Can you imagine a group of people who had been drawn together for the purpose of creating something, but weren’t sure what it was? I was supposed to think up what that was.”

Rogers enlisted RIM to assess recently purchased technology from Sweden’s telecommunications giant Ericsson. When Neale and his team first opened the boxes of components, they were puzzled. Nobody could figure out what it was. And the big fat manual, more than a thousand pages, was in Swedish. What Rogers had purchased was a collection of wires and parts for a wireless data network called Mobitex. It was acquired to fix a persistent service issue: in an era before cellphones were ubiquitous, Rogers couldn’t communicate with its service trucks. Customers wasted whole days waiting for servicemen, and Rogers lost money with idled trucks. If Rogers could figure out how to make a usable network with the Swedish equipment, it could manage its service fleet more effectively, improve customer satisfaction, and cut costs. Maybe Rogers could even sell Mobitex systems to other businesses.

Barnstijn, a Dutchman, knew enough Swedish to translate some of the Mobitex manual. What Rogers had acquired, he explained, was a network designed to deploy data over radio frequencies. It was the kind of technology bridge Lazaridis’s teacher John Micsinszki had envisioned: a radio-based system that enabled communications on a network of computers and mobile devices. Lazaridis felt his pulse quicken. “I remembered what my teacher said, that the person who puts this all together is going to do something really big,” he says.

For his part, Neale didn’t have much faith that Mobitex would be commercially
viable. All he saw was an electrical mess. “If you can figure out how this works, we’ll hire you,” he told his guests.

Communication advances have marched at a sluggish pace for most of history. By the early 1800s progress was so limited that carrier pigeons and flag semaphores defined instant messaging. Things picked up speed in the mid-1800s with the advent of the telegraph. The rapid transmission of electrical messages over copper wires triggered such an explosion in communications that the breakthrough has been referred to as the Victorian Internet.
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Just as the modern Internet boom inspired legions of start-ups seeking to leapfrog dot-com innovations, the dots and dashes of Morse code telegraph messages inspired competitors to race ahead with advances.

One of the most famous early pioneers was Guglielmo Marconi, an Italian inventor who devised a system for “telegraphy without wires.” Dispensing with the wires and cables of the telegraph, Marconi devised a system that harnessed radio waves to transmit messages. Other scientists had previously experimented with transmitters to generate radio signals over short distances. But what these innovators lacked was Marconi’s imagination and showmanship. He made headlines around the world in 1901 when his towering transmitter in Cornwall, England, successfully conveyed the world’s first transatlantic radio message, three clicks, or Morse dots, for the letter S, to a receiving station Marconi was manning in Newfoundland.

Marconi’s show business savvy allowed him to raise enough money to build a profitable global business for customers with deep pockets. Sales improved when it was revealed a Marconi operator went down with the
Titanic
after successfully sending an SOS to nearby ships. Naval and commercial ships, unreachable by telegraph wires, paid handsomely for Marconi’s wireless equipment. But for the average company, his systems were too complex and expensive. Most consumers and businesses would have to wait nearly a century for more affordable wireless communication machines. In the meantime, innovation was driven by those willing to pay heavily for the convenience of portable communicators.

Ericsson designed what is believed to be the first car phone in the early 1900s for its wandering chief, Axel Boström. Boström was such a car enthusiast that his trips down Swedish country roads in rudimentary cars often
left him stranded with a broken vehicle. The company assigned engineers to design a mobile phone so he could call for help. The solution was a car phone that could tap local landlines when Boström attached a metal-tipped pole to overhead telephone wires. The only problem with the system was the car had to remain stationary during calls.
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Detroit was home to the next major advance in mobile communication when the city’s police force struggled to keep up with speeding getaway cars in the Roaring Twenties. To combat the crime wave, the police hired a local engineer to build a custom radio system that enabled dispatchers to send alerts about stolen cars or robberies from headquarters over a radio channel to receivers embedded in patrol cars. The radio messages sped up police response times, but the system had its limits. Radio messages could only travel one way from the station to cruisers, which meant police officers had to find a land phone if they needed to get more information or report back to headquarters. Despite the drawbacks, the innovation gave Detroit’s finest an edge fighting bad guys. Other cities clamored for the crime-fighting device, a lucky break for a struggling Chicago radio manufacturer called Galvin Manufacturing Corporation.

Galvin was founded in 1928 to sell parts for home radios. Stiff competition forced the company to diversify into the emerging market for car radios. Its pioneering radios, called Motorolas, were created to tap into the restless American spirit. It was the Jazz Age, and cars and roads had replaced horses and trails. What better way to see and hear the country than a car radio. Soon, company founder Paul Galvin saw potential for another market—police cruisers. “There was a need and I could see it was a market that nobody owned,” Galvin said.
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He quickly dominated the market for mobile communicators by adding transmitters to specialized police radios, allowing two-way conversations between dispatchers and police.

Car and police radios marked the beginning of a decades-long race by Galvin to perfect wireless communications. Innovations with transistors meant it no longer cost a fortune to build the giant transmission towers of the Marconi era. Devices were getting smaller, signals more powerful. Galvin’s next innovation turned the Illinois firm into a global player. More than forty thousand U.S. soldiers entered World War II with portable two-way radios that later became universally popular under the name “walkie-talkies.”

Following the war, Galvin changed its name to Motorola and expanded into the professional classes with handheld pagers. Its first big paging success
was the Pageboy, introduced in the mid-1970s. Backed by a network of powerful antennas that broadcast radio messages to pagers, Pageboys kept doctors, emergency workers, and other professionals connected when they left work. Like early Detroit police car radios, the fist-sized pagers were beeping one-way communicators, because network antennas lacked the signal power to send messages back into the system. Motorola changed the electronic conversation game again in 1983, unveiling the first commercial mobile phone, the shoe-sized DynaTAC. Nicknamed “The Brick,” the device sold for $4,000 and came with a battery that lasted about an hour and took half a day to recharge.

Cellphones were a perfect solution for mobile professionals who didn’t roam too far from headquarters, but charges rocketed if users called long distance. By the 1990s globalization was pushing so many employees to travel to distant locations that the costs and convenience of staying connected were becoming prohibitive. Wireless messages were a more affordable option, but devices and networks were primitive. Most big organizations had built custom networks and software programs to connect in-house desktop computers. But there was no standard communication language, no open, well-tended wireless roadway to shuttle mobile data to traveling employees or outside businesses, governments, and other organizations. It cost so much time and money to translate the Babel of network languages with custom software that many companies didn’t bother. Early innovations by a surfing fanatic in Hawaii would prove instrumental in bridging the wireless data gap.

Norman Abramson left his job teaching engineering and physics at Harvard University in the late 1960s to accept a job at the University of Hawaii that put him within walking distance of the ocean. Abramson loved surfing, but he made his reputation riding airwaves. As head of a campus research project, Abramson created a wireless network based on radio signals that solved a local communications problem with University of Hawaii computers scattered among its campuses on four islands. Underwater telephone cables connecting the islands were expensive and not always reliable.

Abramson’s solution was ALOHAnet, a network of software and equipment that radiated coded messages over radio signals. The advent of computers and digital communications made it possible to modulate radio waves, once shaped to convey the dashes and dots of Morse code, to relay digital bits known as 1s and 0s. This binary code was so efficiently processed that it was possible to relay data at faster speeds.

Ham radio enthusiasts had tinkered with radio-based digital data transmissions for years, but radio channels were scarce and the capacity for conveying large blocks of data over long distances was limited. The biggest problem with traditional analog radio channels was that they were so busy and noisy that data messages were at risk of being lost or so corrupted they were unreadable. ALOHAnet solved these problems by dividing data into coded packets. Each packet held a portion of the user’s message and instructions about the destination and sequence in which the packet was to be arranged with other parts of the message when they arrived. If a channel was busy, packets were programmed to wait, like cars obeying a red light. As soon as a channel opened
—green light
—some packets continued their journey, a process that was repeated until all packets arrived. In the early 1970s, long before most people had heard of the Internet, Abramson and his colleagues were sending and receiving e-mails from various university campuses on their wireless network.
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It would be years before the concept was commercialized.

Motorola and IBM joined forces in 1983 to create a two-way radio network for the computer maker’s service technicians. The first commercial data network seemed an ideal partnership. IBM could keep tabs on roaming technicians; Motorola now had a blue chip customer to vouch for its breakthrough service and transmission equipment. IBM technicians were issued portable terminals. Initially, an IBM phone operator took customer orders, then routed computer messages in short, coded messages to the nearest technician. The device sped up IBM service response, but the experiment was costly and offered limited message capacity. The terminals sold for as much as $3,700 a pop, and there were access fees and messaging costs.
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Few other businesses signed up for the service after they commercialized it in 1990. In 1994, IBM sold its 50 percent stake in the business back to Motorola.

Until the 1990s, wireless data networks were seen as a great engineering adventure that offered little commercial potential. It was an old story. Communication innovators often didn’t know what they had. Alexander Graham Bell was so convinced his pioneering telephone would be such an unwanted intrusion that he initially promoted his invention in the 1880s at expositions and fairs as an entertainment system that conveyed music and theatrical performances over headphones to those who couldn’t afford to buy tickets to the real thing.
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Similarly, it would take years and hundreds of millions of dollars of investment in wireless data research and many wrong turns to convince the market that wireless data was a worthwhile service. In the
meantime, there were enough profits to be made in the fledgling mobile phone business.