RIM bets the house on QNX

Mon Dec 5, 2011 4:48pm EST
 
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By Alastair Sharp

TORONTO (Reuters) - Research In Motion, facing analyst stock price target downgrades after its steep profit warning on Friday, is willing to absorb huge losses on its unloved PlayBook because the success or failure of the tablet are key to RIM's hopes of revitalizing its BlackBerry.

PlayBook is RIM's poor-selling entry into the tablet market created by Apple's iPad, and is crucial to RIM's efforts to move to a new operating system that will power BlackBerry smartphones from early next year.

Since PlayBook is the first device to feature the QNX system - soon to be renamed BBX - the company can't abandon the tablet, analysts say.

"QNX is important not because the tablet itself is important but because they have to attract developers to this platform because it's the pathway to BBX and obviously BBX is crucially important to the company's future," Morgan Keegan analyst Tavis McCourt said in a telephone interview.

"This is their last shot, their only real shot to revive the business."

The need to stick with the PlayBook while it makes QNX/BBX work has forced RIM to offer heavy discounts on unsold PlayBooks. On Friday it announced a $485 million pre-tax writedown on the inventory and said full-year profit would not meet earlier forecasts.

Getting QNX right has been no simple task, and analysts worry RIM's evident struggle to make the software work with legacy systems to handle email or run Android apps bodes ill for the next round of BlackBerries.

"Investors may be underestimating what it will take to transition to BBX - that's still a big unknown," Sterne Agee analyst Shaw Wu said in a phone interview.   Continued...