Just a couple of weeks ago, Mike Lazaridis, the co-CEO of Research in Motion Ltd. (NASDAQ: RIMM), was asked if the company had any plans to build a tablet device to compete with the iPad from Apple Inc. (NASDAQ: AAPL). He answered, “We went through this 20 years ago — we have to ask ourselves what is the purpose of the technology.” He noted that it was undoubtedly cool, but that it was aimed at a niche market.
But reality may have set in since then. RIMM is now said to be testing not only a touch-screen BlackBerry smartphone but is also kicking the tires on a tablet device. The company is scheduled to announce a new BlackBerry operating system and new web browser in the September quarter. As for the tablet, RIM does not even acknowledge that it is considering such a device.
RIM certainly has no choice when it comes to revamping its OS and its browser. The Android OS from Google Inc. (NASDAQ: GOOG) and Apple’s iOS are a formidable one-two punch at RIM’s dominance of the business smartphone market.
RIM’s share of the North American market for smartphones is slipping as it falls behind Apple and Google in software upgrades. In the March quarter, RIM’s market share in North America fell to 38% from 54% in the same period a year ago. Apple’s share rose from 18% to 23% at the same time. And some observers believe that annualized Android shipments will top iOS shipments by the end of the current quarter.
RIM’s Lazaridis may well have all the technical points on his side when he asks what purpose a tablet serves. But that could be a huge marketing mistake. iPad buyers love the thing and Apple is having a hard time meeting demand.
Hewlett-Packard Co. (NYSE: HPQ) with its acquisition of Palm Inc. (NASDAQ: PALM), is perhaps an even bigger threat to RIM’s longstanding grip on the business market. If HP can successfully integrate Palm’s webOS smartphones and a forthcoming tablet with the rest of HP’s business hardware and software, RIM could see its sales plummet even faster.
As much as Lazaridis can’t see the point, RIM is just going to have to bite the bullet and develop a tablet device. The company doesn’t really have a choice.
