At the end of trading this past Tuesday, Research in Motion (NASDAQ: RIMM) was doing okay, but not great by any means. Shares were trading at just about $54 per share, up +21% from their 52 week lows from back in September following reports of the mobile technology manufacturer’s second quarter earnings. Up, but not as far as up as investors would like; the proud parents of the BlackBerry line were still down -30% from the high of $76.95 they hit just after the beginning of the fiscal year last March. Today, though, Research in Motion is trading just below $59 per share. Where did the +8% growth come from in the last 36 hours?
Research in Motion announced that their new tablet computer will retail for below $500 when it releases during the first quarter of 2011. Good news for consumers put off by the high price point of Apple Inc.‘s (NASDAQ: AAPL) iPad and Samsung’s Galaxy Tab, but even better news for investors hurt by RIM’s waning power in the smartphone market. The BlackBerry PlayBook may just be the device that changes the current tablet PC game.
Research in Motion CEO Jim Balsille announced the ballpark price point during an interview in Seoul yesterday according to Bloomberg. “The product will be very competitively priced,” said Balsille, emphasizing that the PlayBook would retail for less than $500 but he declined to specify pricing beyond that. The iPad’s cheapest model retails at $499, and that model includes WiFi communication capabilities and 16GB of storage memory. When RIM officially unveiled the PlayBook during the BlackBerry Developer Conference last September, only two models of Playbook were shown, a 16GB and a 32GB model, both of which were said to include WiFi 802.11a/b/g protocols. It was not, however, confirmed whether the devices would support 3G wireless communication of any kind, whether HSPA+ or otherwise. Given Balsille’s indication that Research in Motion will look to undercut Apple’s pricing of the iPad, it is possible that the PlayBook’s 32GB model may retail below the $500 price point.
Even if the 16GB PlayBook retails for $499, it will be competitive in the still developing tablet market. The 3G iPad models begin at $629 and go up to $829. The 3G Samsung Galaxy Tab supported by Sprint Nextel (NYSE: S) and Verizon (NYSE: VZ) sells at $599 and comes with 16GB of memory. Other competitors in the market like Hewlett-Packard (NYSE: HPQ) are also pricing their tablets prohibitively high—the recently announced, WiFi-only Slate 500 will start at $799. If Research in Motion offered multiple SKUs of the PlayBook with both WiFi-only and 3G models following Apple’s iPad structure while still keeping the high end PlayBook priced below $500, they could easily dominate a market that is still open.
Apple CEO Steve Jobs put down Research in Motion’s tablet during his company’s third quarter earnings conference call, albeit indirectly. Jobs said that tablets with 7-inch screens, like RIM’s PlayBook, will be “dead on arrival” because screen sizes smaller than the iPad’s 9.7-inches aren’t suited to tablet app development. RIM has more directly lashed back at Apple by touting the PlayBook’s support for Adobe‘s (NASDAQ: ADBE) Flash media format. Balsille also stated during the interview that consumers are “tired” of Apple’s overbearing business strategy and that they want more choice in what software their handheld devices can run.
While new specifications for the tablet were scarce, Balsille did hint at potential retailers for the PlayBook, naming both Target (NYSE: TGT) and Best Buy (NYSE: BBY) as likely carriers of the device. More details on the final retail versions of the PlayBook should come out as the tablet nears its spring 2011 release window. Investors whose interest has been piqued by RIM’s newfound vigor may want to buy now before share price spikes back above $60. Avian Securities LLC analyst Matt Thorton has a “neutral” rating on RIM now, but this might be a good chance to get a deal before the PlayBook debuts next year.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
