PlayBook ready to contest crowded tablet market

TORONTO Tue Mar 22, 2011 6:26pm EDT

A prototype Blackberry PlayBook, a seven-inch tablet, displayed at the 2011 International Consumer Electronics Show in Las Vegas, January 5, 2011. REUTERS/Steve Marcus

A prototype Blackberry PlayBook, a seven-inch tablet, displayed at the 2011 International Consumer Electronics Show in Las Vegas, January 5, 2011.

Credit: Reuters/Steve Marcus

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TORONTO (Reuters) - It's official: with the launch of Research In Motion's PlayBook tablet now just a month away, the BlackBerry maker's battle against Apple and Google is at the cusp of a fierce new phase.

RIM said on Tuesday its tablet will finally hit store shelves April 19, seven months after the device was announced.

The North American rollout will come almost a month after Apple's iPad 2 goes on sale outside of the United States, where it sold up to 1 million units in its first weekend alone.

On Tuesday, Apple confirmed it would start selling the iPad 2 in more 25 countries from Friday. [ID:nN22147683] That eased concerns that the crisis in Japan might curtail the supply of crucial components for electronic devices. Shares in both Apple and RIM closed higher.

As it enters the tablet market, RIM has little room for error and a small window to impress. It was once undisputed king of mobile communications, but slicker Google Android and Apple products have become must-haves for young consumers while also threatening RIM's corporate bastion.

"The big question is the Playbook's appeal to those not already part of the BlackBerry world," said CCS Insight's Geoff Blaber.

While investors await the consumer's verdict, the Canadian company has one more set of quarterly results to unveil without the PlayBook.

The report, due Thursday, is likely to show RIM's global growth story on track. As with recent quarters, the catalysts are sure to be higher overseas sales of cheaper handsets and U.S. discounts. Turmoil at Nokia, the leader in the low-end of the market, probably didn't hurt matters either.

The PlayBook will likely contribute only marginally to sales and earnings this year. Even so, it represents a nascent opportunity for RIM in a booming tablet marketplace.

RIM is hoping the PlayBook's natural affinity with its corporate-friendly smartphones gives sales an early boost and offsets a move by more companies to allow workers to use their own non-BlackBerry smartphones to access work-related email and data.

Unlike the almost 10-inch iPad, the 7-inch PlayBook boasts support for Flash, but the RIM tablet will not ship with its own cellular connection until mid-year.

The first version of the PlayBook pairs with a BlackBerry smartphone for features such as corporate email and to any smartphone for connectivity when not near a WiFi connection.

WHAT NEXT?

RIM's tablet will sell in 20,000 retail and wireless carrier outlets including Best Buy for as little as $499, matching the pricing for the iPad.

Apple sold nearly 15 million iPads in nine months of 2010, two or three times as many as analysts had forecast. It is expected to sell 30 million or more this year.

Still, worries remain about the supply of key components. Several key components in the new version of the tablet come from Japan, including the battery and the flash memory used to store music and video on the device, according to research firm IHS iSuppli.

Expectations for the PlayBook are lower, with between 1 million and 4 million sales seen this year.

Scotia Capital analyst Gus Papageorgiou, who expects sales at the high end of that range, said the expansive distribution network could boost PlayBook 2011 sales to more than 7.3 million in North America alone.

While RIM is seen as less exposed to Japanese supplies, its conference call following the numbers could also provide further insight from mobile industry executives on supply chain disruptions due to the earthquake.

RIM likely shipped almost 14.9 million devices in the quarter, which included Christmas and Valentine's Day, according to 12 analysts surveyed by Reuters. They shipped 14.2 million in the previous quarter.

Analysts on average expect RIM to earn $1.76 a share on revenue of $5.64 billion, both some 38 percent higher than a year earlier, according to Thomson Reuters I/B/E/S. RIM's own forecast is for sales of between $5.5 billion and $5.7 billion and earnings of between $1.74 and $1.80 a share.

In its last reported quarter RIM got 44 percent of its revenue from outside North America and Britain. That portion is expected to grow as RIM extends deeper into emerging markets.

AVERAGE SELLING PRICES

A shift in mix toward cheaper phones will hit average selling prices and mean RIM must ship even more phones to boost revenue, but will likely not hit gross margins, which at 43 percent are among the highest in the mobile industry.

Meanwhile, a November discount on its Torch model, launched in August with an improved browser, may have offset RIM's U.S. market share losses since Verizon started selling the iPhone.

Turmoil at global rival Nokia, which has sidelined its own software platforms to ink a deal with Microsoft, could bolster RIM in big growth markets as it sells increasing numbers of its lower-end smartphones, such as the Curve 8520, in Latin America, South East Asia and elsewhere.

Analysts expect RIM's earnings to drop to $1.65 a share in the current quarter on revenue of $5.65 billion.

(Additional reporting by Euan Rocha in Toronto and Arup Roychoudhury in Bangalore; editing by Frank McGurty)

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Comments (2)
Ananke wrote:
The appeal to non Blackberry customers is zero. Actually, every company that I know in the Silicon Valley is moving to iPhone, and eventually iPad. The iPad itself has enough appeal to force the IT departements using Apple ecosystem. it is not because any fictios superiority, just the management uses Apple products personally, and wants to use Apple products when at job too – IT staff has no choice but to find a way to implement that.

Me as a consumer – waiting for cheaper Android tablets, because of their espected lower upfront price and open ecosystem. I don’t like been jailed to iTunes synchronization – forced sync is an inconvenient and slow method of using any device, not just Apple’s. iTunes is the only and major cons stopping me from buying Apple’s tablet. iOS is weak, but usable. Same applies to RIM’s pad – a close ecosystem bound to fail on the vast market. It may be OK for corporat eniche, but the competition is there too. Android, regardless any shortcomings or pros, will dominate the consumer market. Software developers in the Silicon Valley are switching like crazy to Android applications now.

Mar 22, 2011 12:37pm EDT  --  Report as abuse
ccchia wrote:
I agree that eventually Android tablets will prevail. Also, (Android)tablets that have flash video capability and memory card slots and/or USB connection.

Linking Playbook to Blackberry and iPad to iTunes is slow and cumbersome. That linkage is fine for iPod and iPhone, but perhaps iPad should eventually have the option to operate unlinked from iTunes.

Mar 22, 2011 6:49pm EDT  --  Report as abuse
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