WATERLOO, Ontario—As the BlackBerry smartphone fell steadily further behind app-loaded rivals like the iPhone in recent years, it was time for an unambiguous response from the chief executive's office. 
 
 RIM is expected to report an operating loss following a decline caused partly by overconfidence in its keyboard devices amid the rise of touch-screen smartphones. Will Connors reports on digits. Photo: AP. 
 
 At Research In Motion Ltd., however, that was complicated. The BlackBerry maker had two chief executives. Moreover, their offices were about a 10-minute drive apart. Meetings with both of them present were rare, say former RIM executives and people who dealt with the company. 
 
 Many forces have combined to bring RIM to the point of reporting a quarterly operating loss, as is expected on Thursday, but one of them was a split personality in the executive suite, former executives say. As investor pressure mounted at the company recently, one CEO, company founder Mike Lazaridis, was focused on a make-or-break push to launch a next-generation BlackBerry with a new operating system. His co-CEO, Jim Balsillie, started pursuing a separate strategy that envisioned licensing out some of the company's proprietary technologies. 
 
 Both men are gone from the CEO suite now, replaced in January by former Lazaridis lieutenant Thorsten Heins. He is slashing costs. RIM says it is committed to seeing through the rollout later this year of its next BlackBerry. But Mr. Heins has hired investment bankers to explore options and hasn't ruled out a sale of a company, whose stock has tanked nearly 70% in 12 months and pushed its market value, at under $5 billion, to less than one-fifteenth of its peak. 
 
 RIM still has a comfortable cash cushion of more than $2 billion, which it said last month is likely to have grown in its fiscal first quarter ended June 2. It also is debt-free, giving it more breathing room to get out its new phone, with an operating system called BlackBerry 10 that RIM says "sets the standard for reliable, secure mobile computing." RIM has told its bankers it is focused on that rollout, said a person familiar with the matter. If the phone is a hit, the company will recover some of its lost value, and the new technology will be a boon to any possible sale or partnership in the future, this person said. 
 
 According to interviews with more than a dozen former RIM executives and industry executives who worked closely with the company, it was a blinding confidence in the basic BlackBerry product that was at the root of RIM's current troubles. Compounding that, as they describe the events, were a drawn-out internal debate over who their core customer was; a series of catch-up products that didn't really catch the company up; and tensions within parts of the company. 
 
 The bet long made by RIM was that both corporate and individual customers would continue to favor the BlackBerry's easy-to-use mobile email over the multiplying features and apps on Apple Inc.'s iPhone and devices running on Google Inc.'s Android operating system. When it saw consumers starting to gravitate away from BlackBerrys, RIM moved tentatively. 
 
 At one point, RIM worked to challenge the iPhone with telecom carriers that were fearful of Apple's dominance. The new models that came out of these collaborations, however, failed to generate iPhone-like buzz. 
 
 RIM isn't alone in failing to adapt quickly to the transformation of smartphones from devices to talk and email into pocket-size computers. Once-dominant Nokia Corp. has been forced into a partnership with Microsoft Corp. to equip its phones to compete, and is slashing thousands of jobs as its share of the global smartphone market erodes. 
 
 At RIM, executives eventually brought in outside talent, but that raised tensions inside the ranks of a company that already harbored separate Lazaridis and Balsillie fiefs, some former RIM executives and executives who have worked with RIM say. According to them, the separate teams sometimes clashed, especially as the onetime smartphone leader slipped further behind. 
 
 RIM, in a statement, said the split-personality characterization wasn't accurate. "As with any innovative company there were times when various people within the organization disagreed, but this was not the norm," it said. 
 
 "The CEO structure worked well for many years and allowed each of the co-CEOs to focus on their areas of strength," RIM added. It said the co-CEOs started out sharing an office, had offices next to each other, and then, "as RIM grew, they each took offices closest to those areas each supervised in order to stay close to their teams. At all times, they had an efficient, professional working relationship and were in close communication." 
 
 Read More Investors Brace for RIM's Results 
 
 Mr. Heins, soon after taking over as CEO early this year, put an end to the strategy pursued by one CEO: Mr. Balsillie's licensing initiative. RIM said it doesn't discuss nonpublic internal deliberations. 
 
 Mr. Balsillie has given up his board seat. Mr. Lazaridis remains nonexecutive vice chairman. 
 
 "Successful companies take what they can learn from every situation and use that to push forward," Mr. Lazaridis said, noting that he and Mr. Balsillie "felt it was the right time in RIM's life cycle to turn the leadership of the company over to someone else." Mr. Balsillie didn't respond to requests for comment. 
 
 RIM didn't make Mr. Heins available, citing a quiet period before the earnings release. 
 
 RIM essentially invented email on the go. Founded by Mr. Lazaridis in 1984 with a $15,000 loan from his parents, the company grew to a stock-market value of more than $80 billion at its zenith in 2008, controlling about half the U.S. smartphone market. 
 
 Enlarge Image Close David Manning/Reuters RRIM CEO Thorsten Heins 
 
 RIM hosted lavish banquets for its inventors. To mark milestones, it treated employees to concerts by bands such as U2 and Van Halen. At the company's campus of low-slung gray buildings 70 miles from Toronto, employees got free ice cream on "Frosty Fridays." 
 
 Amid its cost-cutting, RIM isn't giving up entirely on ice cream days. "Ice cream is a relatively low-cost way to build stronger bonds within our team," RIM said. 
 
 Mr. Balsillie, who came aboard in 1992 after having explored a takeover bid for the company, and Mr. Lazaridis became Canada's best-known billionaires, each funneling chunks of wealth to pet projects. Mr. Lazaridis built a theoretical-physics institute. Mr. Balsillie started a school for global governance and tried unsuccessfully to buy three professional hockey teams. 
 
 Behind the success was Mr. Lazaridis's unrelenting vision for robust engineering and innovation and Mr. Balsillie's push for market expansion. But former executives say there was also an aversion at the company to innovations that didn't buttress its core strengths: its proprietary network and reputation for security. 
 
 At an investor meeting about a decade ago, analysts asked Mr. Lazaridis whether RIM was moving to a color screen, a feature popping up on devices in Asia. "Do I need to read my email in color?" he replied, according to Brian Blair, then an analyst with Banc of America Securities. 
 
 Enlarge Image Close Mike Cassese/Reuters Former co-CEOs Mike Lazaridis and Jim Balsillie in January 
 
 RIM says that at the time, color screens were impractical, with high costs and high battery drain. It says it was among the first to adopt color displays just a few years later. 
 
 RIM's customers then were overwhelmingly companies, which gave their employees BlackBerrys for email. But a growing number were individuals, often eager for features such as cameras, games and Internet browsing. RIM brought out devices with cameras and MP3 players including the Pearl in 2006 and the Curve in 2007—the year the iPhone came out. 
 
 Still, RIM's carrier partners worried that the wild popularity of the iPhone could give Apple outsize influence in the market. Executives at Verizon Communications Inc. and Vodafone Group PLC approached RIM to work together on a phone that could compete with the iPhone, say people familiar with the matter. The collaboration resulted in RIM's first touch-screen device, the Storm. 
 
 "Vodafone started really rushing around saying, 'Helps us build an innovative competitor to the iPhone,' " said Pieter Knook, a Vodafone executive at the time. He said Mr. Lazaridis came up with the Storm's marquee innovation, a touch screen that physically clicked. 
 
 The Storm "sold very well," but wasn't a strong competitor to the iPhone, said Denny Strigl, at the time president of Verizon. 
 
 In 2010, AT&T Inc., then Apple's exclusive carrier partner, approached RIM about a plan to develop a touch-screen rival to the iPhone, said two former RIM executives. The chief of AT&T's mobile division visited RIM's research and development team in Waterloo to stress how important it was for AT&T to have a successful BlackBerry product to sell, according to people familiar with the visit. RIM said the objective of the visit was to develop "a differentiated, unique BlackBerry experience for AT&T customers." 
 
 "We work with all device makers to bring the best products to market for our customers," AT&T said. 
 
 A RIM-AT&T collaboration resulted in the BlackBerry Torch, say people familiar with the effort, but it was hobbled by hardware and software shortcomings. 
 
 RIM executives also missed some internal warnings. The sales division produced a research report in 2010 on the future of tactile keyboards, the thumb-friendly feature that was a favorite in the early days of the BlackBerry. The report warned that in the era of Apple's touch-only devices, keyboards would make up a diminishing share of the market, according to a person familiar with it, who said the warning was ignored. 
 
 During a meeting the same year, Mr. Balsillie asked if RIM should be worried about a new trend: consumers bringing their own smartphones to work and asking their employer to let them work on the devices. Some executives said the trend was a threat; a few said they weren't worried. Mr. Balsillie went with the latter view, said a person close to the company. RIM said it doesn't discuss nonpublic "internal company deliberations." 
 
 As Apple and Android devices ate into BlackBerry's market share, Mr. Lazaridis started looking outside for innovation, bringing in a new marketing team and other top executives. In April 2010 RIM bought QNX Software Systems, a maker of operating systems for cars and medical devices. RIM was readying a tablet to compete with the iPad, and executives decided that they would use QNX to power the device, called the PlayBook. 
 
 According to people close to the company, the acquisition stoked tensions between the teams led by Mr. Lazaridis, who was in charge of product development, manufacturing and R&D, and Mr. Balsillie, who ran carrier partnerships, sales and marketing. 
 
 The two CEOs met in person fairly regularly, and would send instant messages or call each other to bounce ideas around or get progress reports when they weren't in the same room. But as RIM hit trouble, they were more often than not toiling in very different worlds, according to these people, who say the teams reporting up to the two didn't communicate effectively if at all. Some projects would go astray before either co-CEO noticed, these people say, and disagreements between the two sides sometimes devolved into shouting matches. 
 
 The QNX leadership team reported directly to Mr. Lazaridis, bypassing Mr. Balsillie and other top RIM officers, rankling them, according to people familiar with the situation. 
 
 Meanwhile, by late 2011, Mr. Balsillie was deep into his own project, an effort aimed at licensing some of RIM's proprietary technology, such as its security network and its popular BBM messaging tool, to outside companies. Some analysts had long suggested such a move to boost revenue and buy the company more time as it readied its new phone. 
 
 Mr. Balsillie and a team under him struck licensing agreements with several partners, including carriers, according to people familiar with the effort. The deals would have allowed other smartphone makers and the carriers to use RIM's network for a fee. 
 
 But by the end of last year, RIM shares were hitting eight-year lows. On Jan. 22, the board, led by Messrs. Lazaridis and Balsillie as co-chairmen, said the two would step aside. They remained big shareholders and each kept a board seat. 
 
 Within a week of becoming CEO, Mr. Heins, a Lazaridis lieutenant, scuttled the licensing plan, people familiar with it said. He said he would focus a slimmed-down RIM on rolling out its new BlackBerry phones. 
 
 —Anton Troianovski, Jessica E. Vascellaro and Anupreeta Das contributed to this article. 
 
 Write to Will Connors at william.connors@wsj.com ||||| After a year in which almost everything went wrong for BlackBerry Ltd., the smartphone maker emerged Monday from a failed auction with a new CEO, new cash and, perhaps, a new lease on life. 
 
 Investors punished the company after its largest shareholder, Fairfax Financial Holdings Ltd., abandoned its attempt to take over the business for $9 (U.S.) a share. The stock fell 16.4 per cent to $6.50 in trading on the Nasdaq market in the United States.. 
 
 Instead of proceeding with a buyout deal, Fairfax and a group of unnamed investors – which sources say includes a Middle Eastern sovereign wealth fund – agreed to pump $1-billion into the smartphone maker, giving it more money to work with as it tries to arrest a downward spiral in sales and market share. 
 
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 That move ended weeks of speculation that the conditional Fairfax takeover, announced Sept. 23, was falling apart. 
 
 A second group, led by BlackBerry co-founder Mike Lazaridis and private equity firm Cerberus Capital Management, came forward with a highly conditional takeover offer during a dramatic weekend of negotiations that also resulted in the departure of Thorsten Heins, who has been BlackBerry's chief executive officer since early 2012. 
 
 BlackBerry's board appointed technology executive John Chen as interim CEO and executive chairman while it looks for a new leader. 
 
 Mr. Chen rose from modest beginnings as a poor immigrant from China to become one of the most accomplished Chinese-American executives, executing a successful turnaround of Silicon Valley database software firm Sybase Inc. 
 
 Sources familiar with the negotiations say Fairfax chairman and CEO Prem Watsa insisted on Mr. Chen's appointment as a condition of the $1-billion financing. Fairfax is putting in $250-million. 
 
 Mr. Chen will continue to live in California and BlackBerry has agreed to let him use a company jet to commute to and from BlackBerry's home city of Waterloo, Ont. 
 
 Mr. Chen's accomplishments, Silicon Valley connections and familiarity with the corridors of Washington arguably give BlackBerry the leader the company could have used instead of Mr. Heins, who had been the hand-picked favourite of Mr. Lazaridis after leading the company's hardware division. 
 
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 "He's got an outstanding track record ... and that's what you needed at this point in time," Mr. Watsa said in an interview. 
 
 Mr. Chen said: "I appreciate that these are challenging times and I'm no stranger to uncertainty around the future of a company. It's natural for businesses to go through ups and downs, but with the right financing, management and strategy in place, it's amazing what you can achieve." 
 
 With the financing deal, BlackBerry took itself off the market, stranding a rival consortium that included Mr. Lazaridis, Cerberus and chip maker Qualcomm Inc.The group put forward a bid on the weekend, but it was conditional on more due diligence. A third bidder, Chinese computer maker Lenovo Group Ltd., was also interested. But sources familiar with the process say that Lenovo knew that any bid would run into stiff opposition in Ottawa, where the federal government has made it clear an offer by Chinese interests would not be welcome. 
 
 Mr. Watsa hadn't intended to lead a BlackBerry takeover when he doubled down on his company's investment in early 2012 and joined the board. At the time, he believed the company could engineer a successful turnaround after steadily losing share in the global smartphone business to Apple Inc. and phones powered by Google Inc.'s Android operating system. 
 
 But Mr. Watsa and Mr. Lazaridis found themselves at odds with Mr. Heins on several occasions. A source close to the board said the two were against the company's decision to publicly disclose it had hired JPMorgan and RBC in spring 2012 to lead a strategic review, believing that it sent the wrong message and would hurt sales. Later that year, Mr. Lazaridis opposed a decision by Mr. Heins and two of his senior executives to launch an all-touchscreen version of the company's BlackBerry 10 smartphones first, instead of a version that includes its signature keyboard. 
 
 Mr. Lazaridis left the board this past spring but Mr. Watsa stayed on – until the board decided to again explore strategic alternatives in August. He left to launch a bid of his own. 
 
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 Talks heated up in mid-September after BlackBerry disclosed poorer-than-expected second-quarter results. With the stock in freefall, the company hastily announced a conditional deal with Fairfax. 
 
 But the due diligence process was revealing for Mr. Watsa. He was "a little more optimistic than he should have been about investment support" for his planned buyout, said one person familiar with the discussions. He had not realized just how dire BlackBerry's results were until his advisers took a closer look at the company's books. 
 
 They told Mr. Watsa it would be a mistake to saddle BlackBerry with billions in high-priced debt as it headed into a stretch of several difficult quarters where it would bleed cash and undergo a challenging business transformation . That would make it difficult to meet its obligations to lenders, they felt. "People started to realize it was going to be very complicated to fix BlackBerry," said one person familiar with the negotiations. "There was too much business risk." 
 
 As Fairfax gained more information about BlackBerry's financial condition, the discussion shifted from a buyout to a new capital investment that would give the company time to stop the rapid erosion of its business, while allowing investors to protect their investment. 
 
 "They said there was a lot of assets, but a leveraged buyout with ... high-yield debt was not appropriate, and we agreed with it," Mr. Watsa said, adding that it was important to end the auction because it was hurting the company's business. He denied reports that he had difficulty finding financial backers, and dismissed the negative investor reaction Monday. 
 
 "I've been in the market for 40 years," he said. "If you decide to make a judgment on what the market thinks every half-hour, that would be very inappropriate."
– Research in Motion is announcing its earnings today, and they're "going to be terrible with a scoop of worse for August," an analyst tells CNET. How did things get so bad for the BlackBerry maker? It started at the top, the Wall Street Journal says in a lengthy piece detailing RIM's woes: For years, the company had two CEOs, each pulling the company in different directions. Their offices were a 10 minute drive apart, and they rarely attended the same meetings. RIM insists the two-CEO structure worked fine, though both have since been replaced. But that wasn't the company's only woe: Analysts and ex-executives alike say the company put too much faith in its core BlackBerry product, and resisted innovations that didn't fit its paradigm. At an investor meeting 10 years ago, for instance, an investor asked founder and then-co-CEO Mike Lazaridis if the BlackBerry would get a color screen, then just emerging on phones. Lazaridis replied, "Do I need to read my email in color?'