Strong PlayBook Sales Threaten Tablet-Less Microsoft

Research In Motion may sell 500,000 PlayBook tablets by the end of the quarter, burrowing deeper into the enterprise -- and pushing Microsoft to make a decision on a tablet. Microsoft is focused on Windows Phone 7, and waiting for Windows 8 could put it far behind RIM's PlayBook and BlackBerrys. But others think Microsoft has plenty of time.

RBC said Wednesday that Research In Motion appears to have sold approximately 250,000 PlayBook tablets in the first month of availability, with the BlackBerry maker on track to sell 500,000 PlayBooks by the end of the current quarter. If the financial firm's estimates are accurate, it would suggest that RIM has been successful in leveraging the widespread enterprise Relevant Products/Services presence of its BlackBerry smartphones -- and to a higher degree that anyone expected.

The RBC forecast is also surprising given the mixed reviews the PlayBook received last month, in part because the Playbook is expressly designed to function in tandem with a BlackBerry handset. If RIM's dual-device Relevant Products/Services strategy is succeeding, it raises questions about the extent to which Microsoft can recover the mobile Relevant Products/Services-market share Relevant Products/Services it lost in recent years without launching its own tablet Relevant Products/Services platform.

Gartner Relevant Products/Services analysts strongly believe there is a tight link between smartphones and tablets in the minds of users. "They want a similar experience, a tight ecosystem and applications and content that run across devices," explained Gartner Research Vice President Carolina Milanesi. So Microsoft and Nokia "need a tablet strategy sooner rather than later," she said.

A Strategic Mistake

Microsoft's current focus is on bringing enterprise-class capabilities to its next-generation Windows Phone 7 mobile platform, and a tablet platform is not expected anytime soon. But Milanesi believes that waiting for Windows 8 may be a strategic mistake.

It may be too late for Microsoft "to catch up with competitors and allow Windows Phone 7 to grow -- not just in the enterprise but also in the consumer space in the high end, where users will be looking for that link," Milanesi explained. "As with any new products, I think we should wait and see what RIM does next quarter. Even Motorola sold a similar amount of Xoom [tablets] to start."

However, other wireless Relevant Products/Services analysts believe Microsoft still has time to establish a strong tablet presence.

"Right now, in terms of sheer volume, between the two device types smartphones easily have the lion's share of the installed mobile-device base," noted Lisa Pierce, an independent wireless analyst with the Strategic Networks Group. "Tablets are complementary to smartphones, not competitive," as opposed to the "growing degree of cannibalization between tablets and notebooks/laptops."

Time To Catch Up

What Microsoft needs to do is really bring the full weight of the PC Relevant Products/Services ecosystem into the tablet world, noted Al Hilwa, director of applications software Relevant Products/Services development at IDC. "That can be done with the right changes to Windows and its programming model to make sure that it accommodates touch apps Relevant Products/Services better," Hilwa said. "We are really in the early stages [and] I don't blame Microsoft for taking its time to get [its mobile-platform] formula right."

Pierce also believes Microsoft still has plenty of time to launch a worthy mobile OS rival that can compete with the tablet platforms launched by Apple and RIM. "In the future, I fully expect Microsoft will release a platform for tablets that has business Relevant Products/Services features, with a very high degree of interworking between Mango and the future tablet platform," Pierce said.

Still, Apple continues to command the lion's share of tablet sales and is expected to blow away the competition this year and beyond. Piper Jaffray, for example, is currently pegging Apple's sales "at seven million iPads in the June 2011 quarter and 31.7 million in calendar year 2011."