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RIM Chiefs Defend PlayBook Against Critics as Debut Nears

Research In Motion Ltd. (RIMM) co-Chief Executive Officer Jim Balsillie said criticism of the company’s PlayBook tablet computer, which goes on sale next week, are misguided because they ignore RIM’s base of BlackBerry faithful.

Technology columnists criticized the 7-inch tablet for its limited number of applications, lack of built-in e-mail and inability to connect to mobile-phone networks -- issues that won’t be remedied until new software and further editions of the device are introduced later this year. Some critics suggested RIM rushed an unfinished device to market, a charge Balsillie refutes.

“I don’t think that’s fair,” Balsillie, 50, said in a television interview yesterday on "Bloomberg West" with Emily Chang. He pointed out that more than 60 million BlackBerry smartphone users can pair their phones and PlayBooks to read e-mail and connect to the Internet. “A lot of the people that want this want a secure and free extension of their BlackBerry.”

RIM will need those loyal customers to help it come from behind in the tablet market. Apple Inc. (AAPL), which put its first iPad on the market last April, has sold more than 15 million units and Samsung Electronics Co., Motorola Mobility Holdings Inc. and Dell Inc. have all introduced tablets already.

While RIM hasn’t forecast how many of the devices it will sell, Balsillie said the opportunity is significant.

“I like our chances for a lot of share,” he said. “We’re very excited about where we are.”

Business Market

RIM rose 75 cents to $54.67 at 9:51 a.m. New York time in Nasdaq Stock Market trading after dropping 1.7 percent yesterday following the negative reviews. Before today, the shares had lost 7.2 percent this year.

The iPad accounted for 75 percent of tablets shipped in the fourth quarter, according to researcher Strategy Analytics. Tablets that use Google Inc. (GOOG)’s Android software, including Samsung’s Galaxy Tab and Dell’s Streak, had a 22 percent share.

RIM’s best chance to win customers is with business users, say investors such as David Eiswert of the T. Rowe Price Global Technology Fund.

“RIM’s got this really good tablet but would a consumer buy anything other than an iPad, given the time it’s been out on the market and all the applications that come with it?” said Eiswert, manager of the Baltimore-based fund, which includes Apple shares and a “small” amount of RIM. “They need to take the PlayBook, install it among their diehard installed base and then push back out to consumers.”

‘Ultraportable’

Co-Chief Executive Officer Mike Lazaridis said RIM expects to distinguish itself in the tablet market the same way it did in mobile phones -- through better technology. The PlayBook has security features that appeal to corporate customers and unique extras, such as the ability to let consumers browse the Web and run videos simultaneously, he said in an interview last week.

The device, which is smaller than the 9.7-inch iPad, is also designed to be “ultraportable” so it can be more frequently used during the day, he said.

“This is superior,” he said. “It’s far more portable, it’s lighter in your hands, you can hold it for longer.”

RIM didn’t make the decision on size lightly. Todd Wood, vice president of industrial design, and his team studied the optimal proportions for a tablet while Lazaridis weighed what format would offer a screen big enough for watching video and could pack a powerful processor, and remain portable. The inspiration for the final size was decidedly low-tech: the Moleskine leather notebooks used by Pablo Picasso and Ernest Hemingway.

“It’s an iconic form factor,” Wood said in an interview. “There’s the science part of it that led them to 7 inches and we took the human factor side and in the end agreed very quickly.”

Smaller Tablets

Consumers have had the chance to buy smaller tablets for months, though sales haven’t threatened the iPad’s dominance. Samsung’s Galaxy Tab, the size of the PlayBook, went on sale in October and had shipped 2 million units by the end of 2010. Verizon Wireless and Sprint Nextel Corp. last week cut the price of the device for a second time this year to spur sales.

“There’s no doubt the PlayBook has a lot of power,” said Michael Gartenberg, an analyst with Gartner Inc. in San Jose, California. “The question is whether those things will matter to consumers more than the things that the iPad can do, namely with its breadth and depth of applications.”

Pricing Parity

The PlayBook starts at $499, the same as the least expensive iPad 2. The priciest PlayBook is $699, while the top- end iPad, which comes with a 3G connection, is $829.

A large installed base of business customers should help RIM sell about 250,000 PlayBooks in its current fiscal quarter which ends in May, and 5.4 million over the fiscal year, predicts Alkesh Shah, an analyst with Evercore Partners Inc.

The device will probably capture 10 percent of the tablet market by 2015, compared with 47 percent for the iPad, research firm Gartner Inc. predicts. PlayBook sales will be about 29 million devices in 2015, eclipsed by a forecast of about 138 million iPad sales, according to Gartner.

ManuLife Financial, Canada’s largest insurer with about 24,000 employees worldwide, plans to deploy the device across its businesses in North America and Asia. Toronto-based insurer Sun Life Financial Inc. is ordering as many as 1,000 of the devices to make signing up new policyholders easier. ING Direct, a Canadian unit of ING Groep NV, plans to pilot the PlayBook for its staff. All three companies have said the adaptability of the PlayBook to existing BlackBerry networks, and the tablet’s security features were primary reasons to stick with RIM.

“Any new tablet maker faces an uphill challenge in capturing the attention of the market, but PlayBook has the potential to be meaningfully different,” said Paul Taylor, chief investment officer of BMO Harris Private Banking in Toronto, which holds both RIM and Apple shares.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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