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Research In Motion Ltd’s., failure to integrate its BlackBerry Messenger service on PlayBook tablets will continue to cost the company. RIMM is also looking to cease production of its low-end 16GB PlayBook tablets, which we view negatively given the fact that the main thing going for its tablets at this point is the price.

In 2011, Research In Motion launched its much hyped PlayBook tablets based on BlackBerry OS 1.0 applications. However, PlayBook sales deteriorated over the year, mainly due to the limited number of applications as compared to Apple Inc.’s (AAPL - Analyst Report) iPad and Google Inc.’s Android-based tablets.

Since software development around a hardware platform is instrumental to its broad adoption, Research In Motion increased the number of applications from 2,000 to 15,000. However, this is still a far cry from the development activity surrounding the iPad or Android.

The new PlayBook tablet was expected to integrate the e-mail feature, the security and speed of which had drawn users to its phones. However, technical enhancements were minimal and calls for the use of an application called BlackBerryBridgeto access mails and contacts on PlayBook tablets.

In the beginning of fiscal 2012, Research In Motion launched the BlackBerry PlayBook OS 2.0 application for its tablets to improve email functioning. However, the problem still persists as the company was unable to integrate its popular BlackBerry Messenger service (BMM)on its PlayBook device. Moreover, the e-mail service looks a bit complicated.

The tablet market continues to be dominated by Apple’s iPad. In the last quarter, Apple sold 11.8 million tablets compared to 500,000 BlackBerry Playbook tablets sold by Research In Motion.  

Research firm Gartner expects the tablet market to grow by 98% in 2012 from the 60 million units sold last year, with Apple accounting for 61.4% of the total sales and Research In Motion contributing a mere 2.2%.Therefore, the dropping of $199 tablets from its portfolio, which helped drive a 78% increase in Playbook sales in the last quarter looks like a very bad idea.  Particularly so, since the QNX-based PlayBook tablets are still way behind Apple’s iOS and Google’s user-friendly Android operating system.

Currently, Research In Motion has a short-term Zacks #4 Rank (Sell) on the stock.

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