Best Buy Cuts Playbook Prices to Compete Among the Non-iPads

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RIMM: Research In Motion logo
RIMM
Research In Motion
RIM PlayBook

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Best Buy (NYSE:BBY) has cut Research in Motion’s (NASDAQ:RIMM) PlayBook price by $150 according to an AppleInsider report to join the list of tablet makers that have cut their prices in an effort to compete with Apple (NASDAQ:AAPL) iPad. [1] A few days back, HP (NYSE:HPQ) cleared out the TouchPad tablet inventory through a $99 fire sale. Yesterday, TechCrunch mentioned that Amazon (NASDAQ:AMZN) could come up with a $250 tablet, half of the lowest version of iPad that sells at $499. [2]

We discussed this trend of rivals undercutting iPad’s pricing in our previous note titled Amazon Take Note of HP’s Tablet Lesson: Aggressive Pricing Works.

RIM’s Struggle with PlayBook Continues

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The PlayBook accounts for only about 6% of our $43 price estimate for RIM stock, which is about 40% above market price. PlayBook has received a tepid response ever since its launch in April this year and could only ship 500,000 PlayBooks in the last quarter compared to 9.3 million iPads that Apple shipped.

Sprint (NYSE:S) later announced that it was scrapping plans to sell PlayBook’s 4G WiMax version, [3] an item we discussed in our earlier note titled RIM Appears Confused with its PlayBook Strategy. The only hope for RIM now is that a cheaper PlayBook becomes an attractive device for consumers, thereby helping the company through rapid sales.

iPad Sales Undeterred by Competitors’ Pricing Strategy

iPad sales are expected to continue to grow despite competitors’ strategy of undercutting iPad’s pricing to a large extent. According to a DigiTimes report, Apple’s overseas manufacturing partner Foxconn could be shipping 20 million iPad 2 units to Apple this quarter — which represents 60% sequential growth. [4] In an earlier note titled iPad Shipments Spike in Current Quarter, Likely to Beat Forecasts, we discussed that if this were to occur, the iPad would continue to dominate the tablet market despite aggressive pricing tactics employed by rivals.

See our complete analysis for RIM stock here

Notes:
  1. Best Buy slashes RIM PlayBook tablet price by $150, AppleInsider, September 1st, 2011 []
  2. Amazon Is Only Launching A 7 inch Tablet?, TechCrunch, September 2nd, 2011 []
  3. Sprint ditches 4G model of RIM PlayBook, Reuters, August 12th, 2011 []
  4. DigiTimes report on Foxconn’s expected iPad 2 shipments this quarter, September 1st, 2011 []