PlayBook Compatibility with Android Apps Could Be Win-Win for RIM and Google
Research in Motion (NASDAQ:RIMM), which designs and develops the BlackBerry line of smartphones, is also expected to launch its PlayBook tablet in the first quarter of 2011. RIM, which competes with Apple (NASDAQ:AAPL), Motorola Mobility (NYSE:MMI) and Nokia (NYSE:NOK) in the mobile phone market, is expected to face stiff competition from Apple’s iPad and Google’s (NASDAQ:GOOG) Android-based tablets.
RIM lacks the apps ecosystem strength enjoyed by Apple and Google, one reason why RIM has been slowly losing its share in the smartphone market. Without a conscious effort to improve its app platform, RIM’s PlayBook may not gain much traction in the tablet market.
See our full analysis and $74.28 price estimate for RIM
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According to a recent report from Bloomberg, RIM could be working on software to allow its PlayBook tablet to run Android apps. [1] We believe that this move could benefit both RIM and Google. RIM’s app store will get the much needed strength of Android apps, which in-turn will help make the PlayBook more attractive. Concurrently, the higher Android adoption will help Google expand its search advertising business.
The PlayBook tablet constitutes around 8% of our $74.28 price estimate for Research in Motion stock, which is about 10% higher than the current market price. We also note that Google’s search advertising business accounts for roughly 70% of our $603 price estimate for Google stock, which is roughly in-line with market price.
Android Apps Could Make PlayBook More Attractive
App stores play an important role in the success of a smartphone operating system. Apple and Google app stores have around 300,000 [2] and 130,000 apps respectively, while RIM’s app store lags behind with only 20,000 apps. [1] The link between app store offerings and subscriber growth can be observed through the recent market share gains of Apple OS and Google OS, at the expense of RIM’s BlackBerry OS. [3] If RIM wants to succeed in the tablet market, it will have to make a conscious efforts to improve its app store – allowing Android apps to run on its PlayBook tablet could therefore be a step in the right direction.
Google Benefits Through Search Business Expansion
Higher Android adoption benefits Google by enabling more searches from Google’s platform, as Google search is the default search engine on Android-based phones and tablets (see our article Google Market Share in Search to Grow From Android). Google is already the leading player in the search advertising market with a share of 68%, but it could gain even more from wider adoption in the mobile search market.
The mobile search market is increasingly becoming a key component of the search business. According to Google, revenues from mobile search advertising could have been around $1 billion in 2010 for Google alone. [4]
See our full analysis and $603 price estimate for Google
Notes:- Bloomberg report: RIM Said to Plan PlayBook Software to Run Google Apps, February 2011 [↩] [↩]
- See SeekingAlpha: Apple FY Q1 2011 earnings conference call transcript, January 2011 [↩]
- TGDaily: Blackberry Market Share Plummets, Android Skyrockets, Jan 2011 [↩]
- See SeekingAplha: Q3 2010 earnings conference call transcript, October 2010 [↩]