RIM bets big bucks on Playbook success: Five key questions

RIM bets big bucks on Playbook success: Five key questions

Summary: Research in Motion will show off its PlayBook to select media types in New York and the divergence in expectations is notable. RIM is betting its dollars on a big PlayBook sales.

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Research in Motion on Thursday night will show off its PlayBook to select media types in New York and the divergence in expectations is notable.

Most folks I've talked to---including TechRepublic's Jason Hiner, Jason Perlow and Rachel King---have relatively subdued expectations. There are more than a few wild cards with the PlayBook. On the other hand, RIM has a real opportunity because Android tablets have underwhelmed so far. With the right product, RIM could be No. 2 to Apple's iPad in the consumer market and defend its enterprise positioning.

The other wrinkle key divergence here is the potential difference between RIM co-CEO Jim Balsillie's take and what consumers will actually do.

In any case, RIM is betting big on the PlayBook's success and putting money on it. In RIM's annual report, purchase commitments for materials and contract equipment manufacturers surged at the end of the fourth quarter. These purchase commitments surged to $10.8 billion, up from $6 billion in the third quarter.

So what? RIM is clearly building up for a big PlayBook launch. Morgan Stanley analyst Ehud Gelblum said in a research note:

Purchase commitments at the end of FQ4 expanded to an all-time high of $10.8B, up from $6.0B in FQ3. Out of the $10.8B, $8.5B represents purchase orders placed with contract manufacturers, up from $5.8B in FQ3 and represented the largest chunk of the increase. So-called “other commitments” (which consist of purchase orders or contracts with suppliers of raw materials) also increased noticeably growing from ~$0 in FQ3 to $2.2B in FQ4. Considering that RIM is guiding to shipments being down in FQ112 (13.5-14.5M vs. 14.9M in FQ411), we believe most if not all of the $2.7B increase in purchase orders placed with contract manufacturers is related to its new Playbook tablet launching on April 19th. Assuming a $500 ASP and 20% gross margins – i.e. that 80% of that $500 ASP represents COGS paid to contract manufacturers – implies that RIM has reserved capacity for nearly 7M Playbooks from its contract manufacturers (the $2.7B increase divided by ~$400 of cost of goods sold per Playbook).

Here's where things get interesting. Gelblum is projecting 3.5 million PlayBooks to be sold in the next fiscal year. Other analysts come well under that mark.

That gives us a few scenarios:

  • The PlayBook is going to sell really well and few see it yet.
  • RIM had to pay up with longer commitments to secure capacity and components for the PlayBook.
  • Balsillie will be vindicated with a dash of low expectations combined with strong sales.

In any case, RIM's big bet leads us to our top five questions revolving around the PlayBook launch.

Will the PlayBook sell? As noted before, Balsillie dumped the underpromise, overdeliver CEO playbook. RIM will either be vindicated or be faced with an embarrassing glut of tablets.

Does the lack of native email matter? RIM has been dinged because you need a BlackBerry to access corporate email with the PlayBook. However, it's unclear whether consumers will really care. You can get Web mail as many already do. Corporations may already have BlackBerries ready to tether.

Can the PlayBook perfect Frankenstein? RIM is launching a QNX powered device that can run Android apps as well as BlackBerry software. It's a virtualization dream. Unless these various app players in the PlayBook can't keep up. If the PlayBook---a Frankentablet---can't be seamless look out below.

Will enterprises go with the PlayBook? Balsillie boasted that CIOs were holding up pilots and deployments for the PlayBook. The problem is that RIM still doesn't have much room for error. Sure RIM is playing a home game in business technology, but the employees are bringing their iPads to work.

Are developers going to be completely confused? In the long run, RIM is going to have to get developers onto its QNX platform. However, RIM is supporting Android apps. Why would a developer run to the PlayBook for a native QNX app?

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Topics: Hardware, Collaboration, Laptops, Mobile OS, Mobility, BlackBerry, Tablets

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37 comments
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  • RE: RIM bets big bucks on Playbook success: Five key questions

    I think you've nailed the problems. But the VM running the old Phone-version of Android is going to be a major Achilles' Heal. I can't see the performance being good, running a VM in a system with limited resources (especially RAM) is always difficult. We don't know how compatible it will prove to be. Finally, this sounds like a battery killer. As you point out, will developers sit on their hands waiting to see if there is any demand for QNX apps?

    The email thing is utterly boneheaded. Palm back in the day realised this wouldn't fly (remember Folio?) Why do they think the influx of Android and iOS phones won't hurt them? Doesn't putting an Android VM in this make Android phones MORE attractive?!

    I'm sorry to say this smells of fail, epically.
    jeremychappell
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @jeremychappell I have to agree that it doesn't look good but while I can usually get a sense of how individual users will react to a device, I usually fail at predicting how enterprise customers will react. There are a lot of dim bulb CIOs out there so even if a product does not seem like a good buy to 90% of the world, CIO/CEOs may buy it (to be fair, it could also turn out to be a great product that they do not buy).

      Lack of enterprise email is the biggest surprise for me and I think it is going to be a real problem for them. The size may also be a factor. I am a fan of the 7 inch form factor for tablets but I am not sure I would be if I was using the tablet for work.

      It will be interesting to see how it plays out. My feeling is that regular consumers drive the app market for these devices and since I am not feeling they are going to sell well with anyone except enterprise users, I don't think we will see much growth in the the native blackberry app market.
      redhaven
      • May not even sell well in the enterprise.

        @redhaven

        I always felt it was a strange decision to go with a 7" screen, especially when it's being pushed as the device for the enterprise. 10" and above is ideal for work.
        dave95.
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @jeremychappell - I agree, this is a good article with good questions. As for your comment that running VM in QNX for Android Apps being less attractive than Android on native devices. What needs to be clear is that Android smartphones are actually Linux phones running an Android VM called Dalvik. (So even on Android devices, Android is running in a VM.) If RIM builds the Android VM to run atop the native QNX, then the scenario will be near-identical to an actual Android phone. The QNX Kernel is faster than the Linux kernel for running multiple-processes, so it could actually be a better experience on QNX. Of course, it all depends on what approach the developers take on this implementation.

      This is a similar issue that iOS and Android both have with Flash support. They both run Flash in a VM on top of their native operating systems. In the case of Android, Flash runs on top of Android Dalvik which runs on top of Linux. It's not a very good experience. QNX has implemented Flash and Adobe AIR code natively in a silo equivelant to the QNX OS, so in theory, performance should be half-decent. I still wouldnn't be too optimistic as Flash doing real-time vector based animation is still a processor intensive... usally not a fault of Flash, but of the person who created an overly complex vector animation to portray something simple. Flash's raster animations (i.e. streaming videos) however should still be very good.

      In the end, I'd still take flash support instead of no flash support. It's better to be able to access information I need to do my work instead of being blocked from seeing anything at all. (an issue I've had repeatedly in the past). Hopefully Apple makes mends with Adobe for the iPad3... or just make their own Flash viewer/player if they want.. Flash/Shockwave runtimes are open source anyway.
      NO_CARRIER
      • RE: RIM bets big bucks on Playbook success: Five key questions

        @NO_CARRIER I don't see Apple reversing course with Flash support. From their point of view there are too many problems with Flash (security for one, performance for another). Given how many units they are selling it's Flash that'll lose this. Content creators cannot afford to ignore iOS by not providing alternative content.

        It is that simple. You can support Flash, but you have to provide the experience another way for iOS - you simply cannot put your head in the fire bucket as if iOS didn't exist.
        jeremychappell
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @jeremychappell
      Let's see, I want a tablet really bad... pick iPad or Playbook... hmmm I think I'm going with Apple.
      Hasam1991
    • Good points

      @jeremychappell - We had a presentation by RIM last week, about the Playbook. It was clear that RIM is focusing on it's existing user base that already had Blackberry's. Those people are eager to get tablets of any kind at work to bridge the gap between the Blackberry and their laptops...a pain to lug around when in the office. When we asked about licensing for the BES, it was a little foggy. Surprisingly many of the questions were answered with "I can't imagine RIM won't add those features down the line." From the gate, the tablet seems like a complete fail. But RIM has enough of a tablet desperate user base in highly controlled IT environments that it will succeed.
      chronos27
      • Seppuku desu

        @chronos27 Maybe, but the story you're telling sounds an awful lot like the way that all the non-IBM computer companies addressed the issue of the IBM PC.

        None of them had retail distribution, none of them had ever run a television commercial, yet they were faced with this runaway success that was invading all their best accounts.

        So they conned themselves into believing that they could participate in the PC business by confining their marketing activities to their existing friends. Maybe nobody else wanted a Data General PC, but the Data General shops would buy them.

        Seen any Data General shops lately? Wang? Burroughs?

        You can't stay price competitive with a guy who's selling millions (or worse, tens of millions) by selling only to your friends. That way lies death.
        Robert Hahn
  • too small

    just too small to me. Barely bigger than my smart phone, why would i want it?
    tiderulz
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @tiderulz

      Some suggestions are that the 7" Samsung Galaxy Tab sold something like 1 million or more devices in the first two months and that it has sold in the region of 2 million to date. If that is correct, then it indicates something of a market for 7" devices.
      Wakemewhentrollsgone
    • RE: RIM bets big bucks on Playbook success: Five key questions

      Hi @tiderulz

      Douglas from RIM here. The nice thing about the PlayBook being 7-inches, 0.9 pounds and 0.4 inches thin is that it allows you to have a truly portable experience, enabling ?thumb-typing,? one-handed operation and the ability to slip it into a coat pocket or purse when you?re ready to go. And with this portability also comes a superior 1080p HD multimedia experience via PlayBook's 1,024 x 600 high resolution display and 3MP/5MP cameras (front/back), enabling HD video recording and videoconferencing.

      You can also check out this new video which shows the PlayBook in action (http://bbry.lv/ifElYd).

      Cheers,
      Douglas, RIM Social Media Team
      tr0ndizzle
  • RE: RIM bets big bucks on Playbook success: Five key questions

    Look, I'm a developer, there's 2 main OS when it comes to phones and tablets and that is IOS and Android. Now, it's great that they're releasing something of their own, but having to write mobile software and keep in mind 3-4 (counting Windows Mobile) it's just so dam time consuming that it's just not worth it. For this reason, one of the main problem they will face right of the bat, is the amount of app. in their app store.

    I wish them the best of luck, but I don't think they will get far.
    reyonlines
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @reyonlines
      iOS, Android, WP7, Bada, WebOs, MeeGo, Symbian and so forth. Far too many.
      Wakemewhentrollsgone
    • RE: RIM bets big bucks on Playbook success: Five key questions

      Hi @reyonlines,

      Douglas from RIM here. The BlackBerry Tablet OS is an open platform. That means more than 350,000 current BlackBerry developers, as well as an expanded community working in Adobe Flash/AIR, HTML5, CSS and JavaScript, are able to leverage the technologies they already know to develop for the PlayBook. In addition to the thousands of apps that will be available at launch, by the summer users will also have access to a large catalog of apps built especially for the PlayBook, plus BlackBerry JDE and Android apps via application players.

      For the latest developer updates for PlayBook, check out our Inside BlackBerry Developer?s Blog (http://bbry.lv/bsbpYQ).

      Cheers,
      Douglas, RIM Social Media Team
      tr0ndizzle
      • RE: RIM bets big bucks on Playbook success: Five key questions

        @tr0ndizzle

        Dude, can you please can it. You are just embarrassing yourself we do not need this kind of marketing on tech blogs. No one really cares about the recited marketing stuff you are parroting back at us.
        stewartngandu@...
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @reyonlines
      Does it not matter that your Android version "should" run as-is? Plus the fact that if it is enterprise-relevant, you should be looking at purchases in $1,000 multiples, not 99-cent multiples.
      aroc
  • RE: RIM bets big bucks on Playbook success: Five key questions

    While all of those are valid points, I think the other problem is price. BB has it listed for pre-order for $499 for a 16GB, WiFi only, 7" model. Somehow I doubt that will fly. We'll see.
    Badgered
  • RE: RIM bets big bucks on Playbook success: Five key questions

    Regarding question number 2, I think it is a salient question, but I think you missed one of its implications. It looks to me as though explicitly for one of its target market sectors, RIM does not want the PlayBook to cannibalize its phones. They limited their risk. Will it limit the upside in a material way?<br><br>As to developers, a minimal cost for porting Android apps will mean PlayBook buyers will have more apps to choose from and more owner-selected functionality. But, developers will for a foreseeable future target Android devices and then if the revenue, resources, and PlayBook units sold suggest it, port. Beyond popularity, there are questions of cost/benefits for selling to PlayBook buyers, as marketing and deployment channels are developed and brought to the attention of the consumer. Here, though, your question has a second part: will consumers find the user experience of the ported app equivalent to its native counterpart? Will RIM devote the resources to ensure that the Android app will look just as good, respond just as well, and not impact the PlayBook's battery life?<br><br>Will users be able to work around the corporate e-mail speed bump with an Android app?<br><br>Yet, if the Android app runs just as well with no fussing on behalf of the developer, why develop QNX-native? With an app universe that is a proper subset of Android's, where is the PlayBook differential?
    DannyO_0x98
  • RE: RIM bets big bucks on Playbook success: Five key questions

    You know, RIM is really keeping the Playbook's tech specs close to their corporate vests, so to speak. I suspect it will be a great product.
    kenosha77a
    • RE: RIM bets big bucks on Playbook success: Five key questions

      @kenosha7777
      I doubt they even have any, they announced this thing last year! 7 month later... nothing to show, all vaporware. Apple delivers...
      Hasam1991