Ever since Research in Motion (NASDAQ:RIMM) launched the PlayBook last year, the criticism hasn’t stopped from users. The company experienced poor tablet sales and tried all possible strategies of pricing cuts to move inventory, but the efforts fell short as Apple’s (NASDAQ:AAPL) iPad and Amazon’s (NASDAQ:AMZN) Kindle Fire gained tablet market share while the PlayBook sales suffered. RIM even took a $485 million charge in the third fiscal quarter due to unsold PlayBook inventory.
RIM announced Tuesday that the PlayBook tablet can now handle e-mail as easily as the BlackBerry. [1] It announced the introduction of PlayBook OS 2.0 update which has some tightly integrated features related to the calendar, e-mail, and contacts functions.
The PlayBook tablet accounts for less than 1% of our $16.50 price estimate for RIM’s stock. Our price estimate for RIM’s stock is about 10% above the current market price.
See our complete analysis of RIM here
RIM Making Concerted Efforts for PlayBook’s Success
The e-mail integration with PlayBook is a basic feature which should have been there when the tablet was first introduced. The company is trying other promotional efforts to bump up PlayBook sales. RIM recently announced that it is extending a promotion that awards a free 16 GB BlackBerry PlayBook tablet to developers who port their existing mobile applications to the new BlackBerry PlayBook OS 2.0. [2]
The heavy discounts offered on PlayBook have started to show results for the company. According to one research report, the PlayBook’s tablet share in the Canadian market increased from 5% to 15% on substantial discounts, and played a role in bringing down Apple’s iPad share to 68% from about 86%. [3] This does not however mean that RIM’s PlayBook tablet woes are solved.
In our earlier article titled RIM Extends PlayBook Promotion to Attract Developers, we discussed that although offering free PlayBook is driving great interest among developers, this strategy will hurt the company’s profit margins. We think in order to compete, RIM will need to devise more ways to improve PlayBook sales as well as protect margins to justify remaining in the tablet market.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- BlackBerry PlayBook OS 2.0 Available Today, Press Release, February 21st, 2012 [↩]
- RIM: BlackBerry apps are more profitable than Android apps, BGR, February 7th, 2012 [↩]
- PlayBook price cut results in increased market share, The Globe and Mail quoting SRG Research as the source, February 15th, 2012 [↩]
