RIM Unlikely to Surprise on PlayBook Sales

RIMM: Research In Motion logo
Research In Motion

Source: RIM SEC filings, Trefis Estimates

Research in Motion (NASDAQ:RIMM) is expected to announce its fiscal year Q2 2012 earnings on September 15th as its fiscal year ends on February 28th. In our earlier note titled RIM Earnings Preview: All About BlackBerry Shipments, we discussed our estimates of BlackBerry smartphones shipments for the last quarter. Here we will talk about our estimates of PlayBook shipments for the last quarter and why we believe PlayBook shipments will remain subdued for the upcoming quarters. RIM faces tough competition in the tablet market with Apple (NASDAQ:AAPL) and Samsung dominating the market and Amazon (NASDAQ:AMZN) the potential threat for future (see Amazon Take Note of HP’s Tablet Lesson: Aggressive Pricing Works).

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The PlayBook tablets accounts for only 6% of our $43 price estimate for RIM stock, which reflects our pessimism about PlayBook’s fortunes. Our price estimate is about 40% above market price.

PlayBook shipments unlikely to surprise

As shown in the above chart, RIM could only ship 500,000 PlayBooks in the first quarter of its release through April 19th this year. We expect RIM to ship about 1.5 million PlayBooks in the next two quarters giving it a cumulative 2 million PlayBook sales for the complete calendar year 2011. During the last quarter, the indications have not been positive which could suggest that RIM will bring about a surprise with regards to PlayBook.

The company has made some strategic mistakes

Strategically, RIM doesn’t seemed to have taken the right steps in promoting PlayBook. Without first sorting out the issues with its wi-fi version of the PlayBook, it planned to launch 4G WiMax and LTE (Long Term Evolution) versions of PlayBook. It received a setback in the last quarter when Sprint (NYSE:S) announced that it is scrapping plans to sell PlayBook’s 4G WiMax version due to a lack of demand for the wi-fi version (see RIM Appears Confused with its PlayBook Strategy).

RIM also possibly stopped production of its 10-inch PlayBook 2 tablet to avoid direct competition with Apple. These decisions shows that RIM is confused with its PlayBook strategy. Although recently Best Buy (NYSE:BBY) cut PlayBook price by $150 in order to spur up PlayBook sales, we believe this move was more of a desperation for RIM to stay afloat in the tablet market (see Best Buy Cuts Playbook Prices to Compete Among the Non-iPads).

See our complete analysis for RIM stock here