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RIM Paid $8.3M for Dash: Proof That Hardware Is a Risky Business

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dash_express_stock1Research In Motion (s rimm) bought Dash Navigation in May for an undisclosed price, but yesterday an investment adviser did the math and stated on his blog that the BlackBerry maker paid $8.3 million for the navigation company. Davis Freeberg combed through Research In Motion’s SEC filings and its first-quarter fiscal 2010 conference call in June, and laid out his assumption that Dash was purchased for far less than the $42 71 million it raised from venture investors. Does the Dash failure mean doom for all specialty hardware companies hoping to build devices for the web? Are Slacker radios or the Kindle (s amzn) destined to flop?

Dash started out making a web-based navigation device that offered directions as well as user recommendations and real-time traffic information based on data gleaned from other Dash devices on the road. User adoption was slow, likely because the device carried a $600 price tag (later reduced to $399), but the service won praise from many reviewers, including Om. The navigation device was designed with true mobile web access and interactivity in mind, but sales were sluggish. In November, the company cut 50 jobs and said it would stop making hardware and would focus instead on licensing its software.

When it acquired Dash in May, RIM kept the details under wraps — even its 6-K filing with the SEC doesn’t mention Dash by name — but news of the deal broke on June 4. RIM did not return calls for comment on this story. However, if Dash earned its investors so little, that may indicate that connectivity is the key rather than a special-purpose device for a given task. The Kindle has an iPhone app, while Slacker, which also makes a web-connected radio, has several radio apps for a variety of mobile phones. For these companies pushing a special hardware platform, the issue becomes whether the experience on the specialized device is worth the cost of buying and then toting another hardware platform. In Dash Navigation’s case, it was not, which is why RIM got such a bargain.

23 Responses to “RIM Paid $8.3M for Dash: Proof That Hardware Is a Risky Business”

  1. Shawn

    So the VCs lost 88% on their investment. What happened to the people that ran this company? The executive team. I guess everyone else got cut in Nov, 08; a couple of months after the DOW, NASDAQ and S&P crashed.

  2. I was a beta tester for the Dash. My experience was good overall, the test units were big and bulky and the released unit wasn’t much better, but they did make many changes that the beta testers suggested. To me, the thing that killed it was the monthly fee, nobody wants to pay a monthly fee for a navigation system, no matter what it does. As reward for the beta testing, I was able to buy one at a significantly reduced price, but passed simply because of the monthly fee. I think that is why the adoption was slow, the software was great, the price was not. If RIM can integrate most of the features the Dash had in it into BlackBerry devices it will be a nice feature set for them.

  3. Yuvamani

    A startup getting into the hardware business is dumb. Sure there are a few hits like the Flip, but that is the big time exception. Dash was doomed to fail and so is slacker and vudu and the ilk. I still have a little irrational hope in roku though.

    Agree that Dash was a shrewd buy especially if the price was so low. The thing was Dash was a software company which sold hardware to make money. Making and selling hardware is not the best business for a valley startup.

    That said for the right big (non valley startup) company, the hardware or the gadget business is not bad to get into. Its a hard unforgiving business but the big hits justify the risk. The Kindle may fail, but if it is a hit then Amazon wins and wins big. But if a startup made and sold the kindle, then the kind of investments required to make it and keep it going would ensure its failure.

    Ross rubin argued in engadget that gadget sales while being affected by the recession were still strong ( . I think gadgets still rule even in the presence of the great cannibal – the smartphone… But if you are a startup which is going to make said gadget. Please move on.

  4. You know, for all of you gentiles out there, bringing consumer hardware (following mass markets) is like our Yom Kippur services, “…who will live, who will die, who will suffer loss, who will prosper?”

  5. Like no other independent channels and strategy analysts saw this coming – my first reaction to Dash, OOma, whatever is , “going head to head in a following mass hardware market? You better pull up your suspenders, because a little or a lot of value added is not going to mean shit when you will need at least one billion to go to market with a breakout device.

    My due diligence would have cost the VC’s 100K…but hey, that’s me. I could have showed them Finnegan’s Rainbow in 90 days, or less, but pulling together the portfolio of example winners and losers takes at least 30 days of that.

    The golden flush handle strikes again.

  6. I think it doesn’t matter. I think RIM doesn’t have the software DNA and they are too nerdy for their own good. It doesn’t matter if they bought Dash — they still don’t get it.

    They are an enterprise company trying to learn consumer tricks — it is years behind when it comes to mobile experience. What they have is a good solid phone/email device. I think none of us should confuse that with their ability to build a new great device.

    • Right, but Dash’s specialty was the mobile experience, not the hardware. The hardware was incidental, it was their (very expensive) way of getting to market.

      Dash had three major problems: the hardware was big and ugly, being a separate device meant that wireless data connectivity was expensive and they lacked distribution.

      If they can effectively incorporate the Dash service on Blackberry devices, it has the potential to become a really compelling offering.

      I wrote more about this:

    • I agree with that! In looking at the mobile space I see Apple and RIM as having the greatest advantages, and RIM is posed to lose that advantage to Android and devices like the Pre. With a decent Developer ecosystem, as opposed to investment in a touch device, they could remain strong in the face of Google.

      We’ll see where they head, but developing for BB is not pleasant. The App Store as you have noted, is a front to back developer experience. The only downside at the moment is the irrational approval process.