At the Cosmopolitan hotel last night, RIM executives showed off devices with the new PlayBook OS 2.0 software, which includes built-in e-mail and calendar programs missing from the original version of the device. A nine-month delay in getting e- mail onto the PlayBook hurt the tablet’s chances of mainstream success, said Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago.
“It’s too little, too late,” said Fritzsche. “I would call this a working version of what should’ve come last year -- things that should’ve been there out of the box.”
The fate of the PlayBook, RIM’s initial foray beyond smartphones, is critical because it’s the first device to be built using new software on which the company is betting its future. After postponing the introduction of PlayBook OS 2.0 to February, RIM said in December that the first BlackBerrys based on the new operating system, called BB10, won’t be available until the “latter part” of this year.
Fritzsche says the PlayBook’s appeal is now largely limited to corporate BlackBerry customers who were willing to wait for the software upgrade. She rates RIM “market perform” and expects the company to ship 100,000 PlayBook devices this fiscal quarter. RIM shipped 150,000 last quarter, while Apple sold 11.1 million iPads in its most recently reported period, outpacing the PlayBook 74 to 1.
Fritzsche is less optimistic than some other analysts, who on average project RIM will ship 177,000 PlayBooks this quarter and 186,000 in the three months ending in May, according to a survey compiled by Bloomberg. The company shipped 200,000 in the period that ended in August.
BB10 is based on QNX, sophisticated software also used to run nuclear power plants and unmanned aerial drones. RIM acquired the software when it bought Ottawa-based QNX Software Systems in 2010. Difficulties in melding QNX to the PlayBook and marketing missteps have left PlayBook shipments at a little more than 1 percent of those for the market-leading iPad.
“The most frustrating thing about the last 12 months is that PlayBook itself has had so much potential,” RIM Vice President Alec Saunders said in an interview at the event. “We’re finally starting to see that potential in the PlayBook 2.”
Amazon Swoops In
By not getting e-mail into the PlayBook from the outset, RIM lost an opportunity to gain market share in a period when some other tablets based on Google Inc. (GOOG)’s Android software failed to catch on, said Fritzsche and Tavis McCourt, an analyst at Morgan Keegan & Co. That prospect is now largely gone -- nabbed instead by Amazon.com Inc.’s two-month-old Kindle Fire tablet, which is smaller than the iPad and similar in size to the PlayBook, McCourt said.
“It’s an iPad market,” said McCourt, who is based in Nashville, Tennessee, and rates RIM “market perform.” He expects RIM to ship 300,000 PlayBooks this quarter, with a drop to 150,000 next quarter. “Every vendor has failed, with the exception of Amazon.”
Amazon said in December that the Kindle Fire tablet had been the top-selling product on Amazon.com since its September unveiling and that the company was selling more than 1 million of the tablets and Kindle e-readers a week.
Amazon (AMZN)’s newest device hit store shelves on Nov. 14 and quickly surpassed more-established tablets from Samsung Electronics Co. and Barnes & Noble Inc. Last month, research firm IHS Inc. estimated Amazon would ship 3.9 million Kindle Fires in the last three months of 2011, making it the No. 2 tablet. Apple was projected to ship 18.6 million iPads.
One bit of good news for RIM is that after repeatedly missing sales and profit targets and deadlines for new software, PlayBook OS 2.0 is still scheduled for February, McCourt said. RIM said on Jan. 9 that the free software upgrade “is expected to be available” in February, without giving a more specific time frame.
“That’s a positive,” McCourt said.
And RIM has added other tools to PlayBook OS 2.0 to entice consumers attracted to the iPad. One new feature turns a BlackBerry smartphone into a remote control for PlayBook users to play movies on a connected big-screen TV. RIM says the upgrade also includes BlackBerry Video Storefront, which will offer “thousands of movies and TV shows” for rent the day they appear on DVD.
To appeal to corporate customers, RIM said it has improved the PlayBook’s ability to create and edit presentations and transfer files from a laptop or desktop computer. Those improvements may provide some additional incentive to enterprise buyers that have held out for the e-mail upgrade, but guessing the size of that potential market “is very hard to gauge” as RIM’s grip on the corporate computing world loosens, said Alkesh Shah, an analyst at Evercore Partners Inc. in New York. He rates RIM “equalweight.”
“We should have done it earlier. But we’re doing it now,” Saunders said last night. “It’s a great product. There are going to be a lot of very happy people in February.”
RIM has had a better start to 2012 in the stock market as well. After falling 75 percent last year to below its book value, or the value of the company’s assets minus its liabilities, the stock has climbed 7.7 percent this year, compared with a 4.1 percent gain for the Nasdaq Composite Index. RIM rose 0.6 percent today to $15.61 at the close in New York.
Still, making any money from the PlayBook will be tough, said Matt Thornton, an analyst at Avian Securities LLC in Boston. RIM has cut the price of the PlayBook by as much as $400 to spur sales, wiping out any profit margin, he said.
The PlayBook with 64 gigabytes of memory now costs $300, down from $700, on Best Buy’s website. The basic 16-gigabyte version is $300, down from $500.
“You can continue to bring out buyers with fire sales, but RIM can’t make money at those prices,” said Thornton, who rates RIM “neutral.”
“Volumes are going to be hard to come by, and margins are less than smartphones,” he said. “When you roll that up, it doesn’t amount to much.”
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