Research In Motion Tablet in 1Q 11 - Analyst Blog

BlackBerry smartphone manufacturer Research In Motion Ltd. (RIMM) will launch its much hyped PlayBook tablet in the first quarter of 2011. However, this will be WiFi only version. The 4G wireless network compatible PlayBook will be introduced in mid-2011 for the 4G networks of Sprint Nextel Corp. (S).

The tablet computer is being built by Quanta Computer Inc of Taiwan and will run on chips from Marvell Technology Group Inc. (MRVL). The tablet will be based on a new operating system developed by QNX Software Systems. Research In Motion acquired QNX from Harman International in April 2010.

The company is using the operating system from ONX instead of its traditional BlackBerry's operating system, which is slow, time consuming and outdated. Eventually, Research In Motion intends to transform its BlackBerry smartphones to this improved operating system.

The tablet will include a video camera and Adobe System Inc's (ADBE) Flash software. It will support Bluetooth and broadband connections that will allow connectivity to cellular networks through a Blackberry smartphone. PlayBook is mainly designed for enterprises, which use special servers to control and monitor employees' BlackBerry phones.

We believe diversification in the tablet market is necessary for Research In Motion. The company is still reeling under an extremely challenging environment, reflected in its soft net BlackBerry subscriber growth. During the third quarter of fiscal 2011, the company added 5.1 million net new subscribers, which is at the low-end of its guidance.

Furthermore, management has decided not to disclose this figure and ASP (average selling price). We remain highly skeptical about this announcement. Unlike other mobile phone manufacturers, net subscriber addition is directly linked to the company's Service revenue, which accounts for nearly 17% of its total revenue.

We suspect the company may fumble in North America due to increasing pressure from iPhone and several Android-based smartphones. We maintain our long-term Neutral recommendation on Research In Motion and currently a short-term Zacks #3 Rank (Hold) on the stock.

 
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