Thursday, April 14, 2011

6 Reasons Why the PlayBook Will Be A Massive Success

The BlackBerry PlayBook is launching in 5 days, and RIM's share price is not pricing in sales of many devices.  Most observers have grouped the PlayBook together with Android tablets such as GalaxyTab and Xoom, and are claiming that sales will be weak.  For example, the Xoom reportedly only sold 100,000 units since February.  However, the PlayBook has significant advantages over Android tablets and the even the iPad 2.  The following are 6 reasons why it will be a massive success.

1) Price

The PlayBook will be the first iPad/iPad2 competitor that can match the device's base price of $499.  Both the Samsung Galaxy Tab and Motorola Xoom were launched with prices higher than $499.  For example, the Xoom's 3G version costs $799, while the Wi-Fi version costs $599.  The fact that Android tablets have been priced higher than the iPad/iPad 2 is a main reason why Apple has 80% of the market share.  Thus, the PlayBook's $499 price tag will allow it to sell much better than the Android tablets. 

2) Performance

The PlayBook has been shown many times to run a video game (Quake for example), HD video and a photo application at the same time.  The demanding applications all run at the same time with no decrease in speed.  This performance and multi-tasking ability is simply superior to the iPad2 and Android Honeycomb tablets.

The PlayBook also has 5 MP and 3 MP cameras, while the iPad2 has a VGA (0.7 MP) and an undisclosed one (likely a 3MP).  The PlayBook can also record 1080p video, while the iPad 2 can only record 720p.

The PlayBook also has many other unique performance features.  For example, a user can stream a HD video to a TV using its HDMI output, while he/she does other tasks on the PlayBook, such as browse the web.  In addition, the PlayBook can connect to a blue-tooth mouse and keyboard. 

3) Installed base of 60 million BlackBerry users

RIM can sell the PlayBook to its installed base of 60 million users, which is another reason why it will sell much better than Android tablets.  In addition, the PlayBook has the security features that corporations accept.  There is significant pent-up demand from enterprise users that have been waiting to adopt the PlayBook.  Thus, initial shipments will be very strong.  As Co-CEO Jim Balsille said during the recent earnings conference call, large corporations have each ordered tens of thousands of PlayBooks.

4) Apps and developers

RIM is offering the widest options for developers compared to Apple and Android.  Developers can create an app for the PlayBook in 5 different ways: Adobe Air, Native SDK, Flash, Java and WebWorks (HTML5, CSS3 and Java).  In addition, RIM will offer 2 app players that allow traditional BlackBerry Java apps and Android 2.3 apps to run on the PlayBook.

There are currently already 3,000 PlayBook apps in App World.  In addition, the PlayBook will be able to run 25,000 BlackBerry apps in App World and over 200,000 Android apps.  The concern of some observers that the PlayBook lacks apps is clearly not true.

5) 4G

3 4G versions of the PlayBook will be launched this summer (LTE, HSPA+ and Wi-Max).  This will be a significant advantage over the iPad2 and Android tablets, since the former and latter currently are 3G. 

6) Portability

The PlayBook's 7'' screen gives it an advantage over the iPad2.  A major complaint about the iPad2 is that its 9.7'' size makes it difficult to carry outside of the house.  Thus, the PlayBook's 7'' size makes it more portable than its main competitor.  In addition, the PlayBook's size differentiates it from the iPad/iPad2, appealing to users looking for a more portable tablet.


Thus, the PlayBook will sell far more units than Android tablets.  Its powerful and multi-tasking OS gives it significant advantages over the iPad2 and Android tablets.  Analysts expect RIM to sell 1 to 8 million PlayBooks in calendar 2011.  With Gartner expecting 54.8 million tablets sold worldwide this year, RIM should be able to easily take 10% of market share, meaning  at least 5.48 million PlayBooks will be sold.

As RIM launches app players for Android and BlackBerry Java apps and 3 4G versions, sales of the device should ramp significantly in the summer.  Thus, I expect the PlayBook to take up to 20% of market share, equaling 10.96 million PlayBooks sold this year.

RIMM shares closed at US$53.92 today.  With consensus FY 2012 EPS at $6.90, the shares are priced at a forward P/E of 7.81.  This a clear bargain compared to RIM's historical valuation, and its competitors' current multiples.  Apple, for example, is currently trading at about 12 times forward P/E.

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