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PlayBook offers insight into RIM's woes, future plans

When it was launched this April, the PlayBook tablet computer was supposed to mark a preview of the next stage in Research In Motion Ltd.'s evolution.

Today, the company can only hope that isn't the case.

As RIM executives disclosed another quarter of weaker-than-expected earnings this week, one of the most striking revelations was this: so far, the PlayBook is simply not catching on. During the three months ended August 27, the company shipped just 200,000 of the tablets – about 60 per cent below the roughly 500,000 that had been expected by analysts on Bay and Wall streets. Those numbers indicate that many PlayBooks are still gathering dust on store shelves, and that the device that RIM once hyped as the first "professional-grade" tablet has failed to put a dent in Apple Inc.'s dominance.

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"They might as well pull the plug on it," said Queen's University computer science professor Roel Vertegaal. "They made every mistake in the book."

It is probably too early to call it a failed experiment, or to kill the project. And in the end, the PlayBook's failure to catch on is not fatal to RIM, which still earns all of its profit – $329-million in the second quarter – from BlackBerry smart phones and services.

Yet the PlayBook is still important as a yardstick – of RIM's ability to innovate, to expand into new product lines, to market itself to a broad range of consumers and to compete with Apple, the tech giant from Cupertino, Calif. It's also a test of new technology that is supposed to help RIM turn around sales of the BlackBerry phone, which have declined the past two quarters.

The PlayBook is certainly not the only tablet to fall flat in the face of Apple's iPad line. Dell and Hewlett-Packard both killed off some or all of their tablets this year. The Samsung Galaxy, considered by many to be the best non-iPad tablet currently on the market, has run into numerous patent litigation issues in Germany and other countries. And even as the overall market grows, the anticipated dilution of Apple's market share has yet to take place.

Worldwide tablet sales jumped more than 300 per cent during the second quarter of 2011, compared to the same period last year, according to a research report released this week by the International Data Corp. In all, IDC expects 62.5 million tablets to be shipped in 2011 – by some estimates, that's equivalent to almost 15 per cent of global PC shipments this year.

But the vast majority of profits from the rapidly expanding tablet market are going straight to Apple. According to the IDC report, almost seven out of every 10 tablets sold around the globe are iPads. The combined market share of all tablets powered by Google's Android operating system – including Samsung's popular Galaxy tablet – make up less than 27 per cent of the market.

The PlayBook commands less than 5 per cent. And part of the reason for that is that RIM has had difficulty defining who, exactly, it's trying to appeal to.

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Much of the work on building the tablet came after Apple unveiled the iPad in 2010. The PlayBook was clearly designed to compete with, and offer many of the same features as, Apple's tablet. But unlike Apple, RIM could not afford to build a purely consumer-focused device. It has always been a company more comfortable dealing with corporate and government customers, who comprise a sizable percentage of the world's 70 million BlackBerry users.

The trouble is, there is no proven business market – yet – for tablets. So RIM tried to position the PlayBook as the best of both worlds – an entertainment and productivity device, a piece of hardware that was highly secure and could also play Flash videos, which the iPad can't.

On paper, it was a smart strategy. But in the real world, there appear to be relatively few users who care equally about entertainment, productivity and security to opt for the PlayBook over the iPad. There simply are not enough compelling reasons for people to prefer RIM's device over Apple's.

"Every single vendor in the tablet space made the same mistake," said Maribel Lopez, principal analyst at Lopez Research. "Not a single one of them did anything different than the iPad."

In late October, RIM will try once more to revive interest in its tablet, by issuing a software update that lets PlayBook users run applications such as e-mail and calendar on the device – something that can't currently be done without tethering the device to a BlackBerry. RIM also plans to introduce a program that will run apps originally designed for the Android operating system, instantly expanding the PlayBook's app selection from a few hundred or thousand into tens or hundreds of thousands.

But it is still unclear whether those changes will be enough to convince consumers, especially since Apple may well unveil a new version of the iPad in early 2012.

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RIM may well try to heavily subsidize the PlayBook in the coming weeks and months, taking a short-term hit in the hopes of building a critical mass of users – which in turn would make it more appealing for developers to build PlayBook apps.

"The jury's still out on whether RIM can stimulate excitement over the PlayBook," Ms. Lopez said. "There's still time to pull it around."

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