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The race to establish a strong third player in the mobile platform world kicked off in earnest this week with the launch of Research in Motion’s Playbook, and the early returns suggest that RIM (NSDQ: RIMM) has an awful lot of work to do should it wish to be considered among the companies driving mobile computing forward.
Even with the disappointing performance of Android challengers to Apple’s iPad in the early days of this market, there isn’t much doubt among software developers, carriers, and the public that Google (NSDQ: GOOG) and its partners are in this for the long haul, and that at some point they’ll probably come up with something that is at least competitive with the iPad, similar to the way it took that group a few years to really start challenging the iPhone with Android smartphones. For everybody else scrambling to avoid being left behind, the future is much less than certain, even for a company as deep-pocketed and familiar as RIM.
In the first day the Playbook was on the market, RIM was estimated to have sold around 50,000 units. That isn’t an awful lot considering that Apple (NSDQ: AAPL), with sales of 4.96 million iPads in the first quarter, sold 55,000 iPads a day assuming a 90-day quarter: and sales were lighter than expected due to supply constraints and slowdown ahead of the debut of the iPad 2. Reviews of the Playbook ranged from savage to lukewarm, with a consensus that while the hardware wasn’t bad the software was a rush job further handicapped by reliance on the BlackBerry for basic tasks and the decision of AT&T (NYSE: T) to block a key application from Playbook customers on its network.
There are two major factors that mobile companies need to nail should they want to be a player in this new era of computing. The first one is the software: the bar for ease-of-use and intuitive design was set long ago by Apple’s iOS and anything that’s less than 90 percent there simply won’t be tolerated. The second is volume: as mobile computers turn into devices as worthy of software developers’ time as PCs, at some point they will decide that they can no longer support eight different versions of their applications. Someone might approach iOS and Android in terms of volume to be relevant these days, but they’ll need to have a special hook to stand out.
It’s hard to see what the catalyst is for RIM in either case. Sure, software can improve over time, but this was the release that was supposed to vault RIM from the dowdy days of the BlackBerry into the new world, and it was really hard to find anyone except the person selectively pulling quotes for RIM’s Twitter feed this week who felt that even without the myriad bugs discovered, RIM had really nailed something with the QNX software that is the heart of RIM’s future mobile computing strategy.
And when it comes to volume, RIM has a serious problem if it can’t prevail on Verizon Wireless (NYSE: VZ) to carry the Playbook, like both companies said it would when RIM announced its retail partners back in March. As the largest carrier in the U.S., Verizon has a significant amount of retail traffic and enterprise accounts that RIM just has to have in order to ship the Playbook in sufficient volumes, and Verizon’s wavering this week on whether or not it would support the tablet at all had to be heartbreaking for RIM executives. While Wi-Fi-only tablets have been overwhelmingly popular among consumers so far in the early days of the market, the enterprise mobile users who are supposedly the heart of RIM’s customer base are going to need dependable always-on wireless: you can’t always stop to find a Wi-Fi access point when trying to close a sale or edit a crucial document.
Perhaps the most perplexing thing about RIM’s attempt to reinvent itself is that co-CEO Mike Lazaridis seems to truly not understand why mobile industry observers are skeptical about the company’s long term strategy. “Maybe we’re just not good at promoting ourselves. Maybe that’s the Canadian way,” he told the hometown Globe and Mail prior to the Playbook launch. To the New York Times (NYSE: NYT), he complained “Why is it that people don’t appreciate our profits? Why is it that people don’t appreciate our growth? Why is it that people don’t appreciate the fact that we spent the last four years going global? Why is it that people don’t appreciate that we have 500 carriers in 170 countries with products in almost 30 languages?”
Here’s a hint: people are skeptical about RIM because for all its strengths it has never created a piece of software that warmed the heart of anyone who wasn’t an IT manager or CFO. And although the Playbook is its best effort to date, it still hasn’t done so on the level that RIM needs. It’s not because it’s a Canadian company. It’s not because it hasn’t shown an ability to make money or expand beyond North America.
While the ability to generate profits is indeed important in business, it’s not particularly meaningful when assessing whether or not you’re on the right track. Consider the financial numbers of this household-name tech company during its last fiscal year: $61 billion in revenue, up 16 percent, and profit of $3 billion for the year, up 51 percent.
Now consider RIM’s performance during its last fiscal year: $19.9 billion in revenue, up 33 percent, and profits of $3.4 billion, up 47 percent from the prior year. Not bad, right?
The first company was Dell. And no one is confusing Dell with a company driving the future of mobile computing.
The good news for RIM is that there is still time: if tablets and mobile devices in general really are a segment with a bright future, as an awful lot of people believe, there will be room for someone to provide an alternative to Apple and Google at some point. WIth HP’s WebOS tablet still vaporware, and Microsoft (NSDQ: MSFT) having yet to even articulate a tablet strategy, RIM will learn valuable lessons from the first few months the Playbook and its software is in the market that could help inform its future smartphone strategy–a category in which it is much more prominent.
But the Playbook is not off to the start that RIM needs. Jim Balsillie, RIM’s other co-CEO and a rabid hockey fan, surely appreciates the famous Wayne Gretsky quote that Apple CEO Steve Jobs likes to often cite: “I skate to where the puck is going to be, not where it has been.”
The debut of the Playbook shows that RIM isn’t even sure where the puck is at the moment, let alone where it is going.