PlayBook Sales Stronger Than Reported

The BlackBerry PlayBook launched on Tuesday.  Many news reports focused on the short lineups for the PlayBook (sometimes about 2 people) and compared those to the long lineups that greeted the iPad2.  Many commentators then drew the conclusion that sales were weak.  However, comparing sales of the PlayBook to the iPad2 based on lineups alone is inaccurate, based on 2 reasons.

First, the PlayBook took pre-orders online for weeks prior to April 19.  This is something that Apple did not do for the iPad2.  Customers who already pre-ordered the PlayBook online would not line up in front of stores before they open.

Second, the PlayBook is available at far more locations that the iPad2 was.  The PlayBook is sold by retailers such as Best Buy, Staples, Sears, Office Depot and Chapters/Indigo.  Thus, the lineups were shortened because customers have more locations to go to.  For the iPad2, customers had to go to a select few Apple stores, making the lineups appear longer.

Thus, first-day sales were much stronger than what many reported.  For example, Barron's Tiernan Ray reported that one of the Best Buy locations he visited in Manhattan was sold out of the PlayBook.  Meanwhile, the WSJ reported that on Broadway in NYC, a Staples store sold out of all its PlayBooks a few hours after opening.  It also reported that in Toronto, a Sears store, hardly a retailer known for creating buzz, managed to have a lineup of 5 people when the store opened at 7am.

In fact, Jefferies and Co analyst Peter Misek reported that about 45,000 PlayBooks were sold on the first day, including about 25,000 pre-orders.  Meanwhile, RBC analyst Mike Abramsky estimated first-day sales of 50,000 including pre-orders.

Conclusion

With RIMM shares closing at US$53.77 on Thursday, the shares are trading at 7.78 times forward earnings.  That is far lower than peers such as Apple, the money-losing Motorola and the struggling Nokia.  The shares are pricing in a complete failure for the PlayBook, when the device's first-day sales surpassed both the GalaxyTab and the Xoom.

As native email and calendar apps become available (Co-CEO Jim Balsille said 60 days within launch), the 3 4G versions and the Java and Android app players become available in the summer, sales of the PlayBook will increase significantly in the months ahead.  Investors should keep in mind that RIM managed to sell 50,000 PlayBooks on the 1st day, without launching an advertising campaign.  Such a campaign would increase sales further.   

I continue to expect RIM to easily get 10% of the tablet market share this year, which equates to about 5.48 million PlayBooks.  RIM has now entered into the fast-growing tablet market, which is expected to reach 100 million tablets in 2012.  I expect RIM to take about 20% of market share in 2012, which equates to about 20 million PlayBooks sold.  At an ASP (average selling price) of US$599, this would add $11.98 billion in revenue for RIM. 



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