That's $200 Million Badly Spent, RIM

Research In Motion (Nasdaq: RIMM  ) appears to have painted itself into a tough corner.

As the current generation of BlackBerry devices isn't impressing anyone, the Canadian handset designer is pinning its hopes on the QNX operating system, which it acquired from Harman International Industries (NYSE: HAR  ) this year.

It's a great software platform with a long and solid history, and it already powers everything from network switches to car engine controllers. Surely, the PlayBook tablet will show QNX off and instantly introduce a worthy rival to Apple's (Nasdaq: AAPL  ) iPad hegemony. Then, the same strengths that make QNX a fine tablet platform -- security, reliability, performance, and compliance with POSIX standards -- should transfer with swift authority to smartphones and become the next-generation BlackBerry foundation.

Or at least, that was the plan.

Kaufman Bros. analyst Shawn Wu reports that it's not exactly working out that way. His sources say that the Playbook's battery life falls far short of what the iPad or various Android tablets can muster. The tablet may be delayed as a result and may be redesigned to fit a heftier, bulkier battery.

QNX was never meant to run off a portable battery, as most of its traditional strongholds are connected to power mains or at least a nice, big car battery. All that power and reliability apparently comes at a cost: bad battery drain. What's good for the embedded goose may not work for the mobile gander.

So what can RIM do about its technical direction now? Maybe QNX can be adjusted to fit better in a mobile world, but that would take a lot of time and elbow grease and might mean trade-offs versus its existing strengths.

A more gutsy move would be to dump the QNX idea and sell that asset to the highest bidder to recoup some of the $200 million outlay. Then RIM would either pour some sugar on its BlackBerry development efforts or adopt another proven technology -- the MeeGo Linux platform that's backed by Nokia (NYSE: NOK  ) and Intel (Nasdaq: INTC  ) springs to mind, as does Android.

But that would require a lot of pride-swallowing in Toronto. The first option sounds more likely, no matter how difficult or costly it may be. Like I said, RIM finds itself in a tough spot these days, brought on by the company's own errors of judgment.

Can RIM find a way out of this market trap -- and is it too late to make the PlayBook a respectable and timely competitor? Discuss in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Intel is a Motley Fool Inside Value choice. Apple is a Motley Fool Stock Advisor selection. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (10) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 30, 2010, at 2:33 PM, JJBull1 wrote:

    RIMM has made alot of bad decisions lately and I think this will hurt the stock price in the short term and long run. If you are not on top of your game in a very competitive industry, you will definitely fall behind quickly. The black berry tablet is already too far behind to catch up and it would need to be an advanced high tech tablet for people to even consider it. When your are this far behind in the game, good luck catching up. RIMM is dead money. I wouldn't be suprised if the stock price is in the $30's by next quarter.

  • Report this Comment On December 30, 2010, at 2:40 PM, grreyes24 wrote:

    What a terrible article… Why do people write articles when the biased Wu comes out with another bogus claim with no sources. Plus your article is late; this was yesterday’s news. RIM has already replied with a statement of it own, saying that the battery life of the PlayBook will be comparable to the competitions even though it has far more power and that the statements made by Wu are a lie. QNX will be great for RIM and the mobile world.

  • Report this Comment On December 30, 2010, at 2:58 PM, powerphrase wrote:

    It is actually a 2 days old story plus it is a lie. Every Quarter I see so called analysts are saying next quarter would be the last after that Dooms day is coming, but RIMM is selling more phones than ever also making more money. Thanks grreyes24 for pointing out the facts. All I want say so called analysts was wrong before and wrong now. If any prudent Investor used to listen what they say stop it or you will be ruined.

  • Report this Comment On December 30, 2010, at 3:57 PM, Henry3Dogg wrote:

    @grreyes24

    That's not quite true.

    Wu has raised this issue and RIM have replied saying that they are working on the issue is going to schedule.

    So Wu gets points for raising a real issue that RIM have been forced to acknowledge.

    If RIM is working on an issue of this magnitude, now, then we are unlikely to see the RIM device in volume Q1 11.

    In which case the RIM device will probably now launch, even in the US, after the launch of the iPad2.

    In which case RIM are likely to have no window in which they can claim any edge over the then current iPad.

    In which case RIM will probably delay further to up the spec so as to stand some chance.

    Which makes the article look pretty accurate!

  • Report this Comment On December 30, 2010, at 4:09 PM, barilro wrote:

    Mr Byland, please find yourself a new career. Maybe a truck driver would suit you fine.

  • Report this Comment On December 30, 2010, at 4:12 PM, FutureMonkey wrote:

    There are many loyal Blackberry users out there in this world, with lots of interest in maintaining their loyalty. data security, keeping up a "business" vs "toy" appearance, etc.

    The battery issue is a delay problem not a product killer (well not if it is corrected). If the utility of the interface is as good as reported I believe that there will be a market for the Playbook, but I hardly expect it to be an iPad killer anymore than the Blackberry touchscreen phones have been iPhone killers. Playbook will never have the universal appeal of the iPad and cannot match Apple's distribution channels to the mass market.

    I really don't see this as a RIM vs AAPL issue. Both tablets can be accepted by the market, one does not preclude the existance of the other. Just like both company's successfully sell smartphones to a different consumer base.

    FM (incidentally no position in RIMM, long AAPL)

  • Report this Comment On December 30, 2010, at 6:14 PM, powerphrase wrote:

    @InfoThatHelp and @Henry3Dogg both of you are so stupid, complete Brian dead Like IToys and IFUN Looks nice but No Brain, same as Beautiful Blonde with no Brain. By the way do guys get paid under the Table? same as James, AKa James Apple Charles Nguyn and many more AKA

  • Report this Comment On December 31, 2010, at 1:20 PM, MrZ2357 wrote:

    "As the current generation of BlackBerry devices isn't impressing anyone,..."

    Care to take a look at some figures?

    Top 10 AT&T Phones 2010-2011

    http://top-10-store.com/top-10-att-phones/

  • Report this Comment On December 31, 2010, at 2:26 PM, 4TRec wrote:

    Anders' assertment that QNX was never meant to run off a portable battery is a lie and I wonder what his motive for misleading the readers was. In fact, QNX is currently used in portable medical devices and portable GPS navigation systems, to name a couple of examples. To quote an article from intoMobile.com back in 2007, QNX "was made for low power, ultra responsive, never ever (hopefully) going to crash devices. In essence this operating system is an ideal candidate to lay the foundation for a new mobile operating system" (http://www.intomobile.com/2007/09/12/qnx-just-went-open-sour....

  • Report this Comment On January 03, 2011, at 4:55 PM, melegross wrote:

    I just love the crazy RIM fanboy posters. Who says Apple has the worst fanboys? We need look no further than RIM.

    Powerphrase, you make my day!

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