Sprint Sprints Away: A Tough Run for RIM

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Sprint Nextel Corp has cancelled its plans to sell the Blackberry PlayBook on its network.

Yeah. You should have waited. The Blackberry PlayBook ad, beams, although, subtly, on billboards. Well now it seems like its them that have been left out, waiting.

The Story:

Eight months ago, Sprint had announced itself as the first operator that would partner with Research in Motion (RIM) on tablets. But last Friday, it had a change of mind and it cancelled a version of the device for its fourth generation (4G) WiMax service.

After being announced as the first operator to partner with Sprint, the No. 3 U.S. mobile service,

Blackberry, despite its popularity, it faces major competition with several Apple Inc. products. RIM reported that it shipped 500,000 WiFi-only PlayBooks in its first quarter in North America, while Apple said it sold 9.3 million iPads in the June-end quarter.

And you do not even need the statistics to tell you about which is more popular than the other. Almost every tech-freak out there owns an iPhone, and every other person who is into higher-end gadgets owns a Blackberry. And then with the release of the iPad, in a bid to catch up with its competitors RIMs Blackberry released the PlayBook.

The mutual decision

Sprint is the No. 3 mobile service in the U.S.A. that the cancellation was based on low demand. Paget Alves, Sprint’s head of business services, said tablets with short-range Wi-Fi Internet connections are far more popular today than tablets for wide range networks such as WiMax. The decision was said to be mutual, and Alves, continued to say that, People use tablets in fixed locations,” and Wi-Fi, is sufficient for them.

This was a mutual decision between Sprint and RIM, said a Sprint spokeswoman named Michelle Leff Mermelstein. I would discourage you from speculating that it has to do with interest or sales.

RIM

The Going gets Tough

RIM has been having a tough year. Its stock price plummeted as a result of product delays and profit warnings.

Sprint was RIMs hallmark partner for the upcoming 4G PlayBook. It had announced that Sprint would be the carrier for the cellular-equipped version as early as January, at the Consumer Electronics Show in Las Vegas. To also, fend of criticism the 4G model would include many of the features that were considered to be lacking in the Wi-Fi-only model, such as built-in e-mail and calendar functions.

It was also supposed to solve one of RIMs biggest issues with the tablet prior to the introduction of the cellular model, there was less incentive for carriers to stock and sell the PlayBook, because they couldnt make recurring revenue from the tablets in the form of data plans.

Long Term Evolution

RIM also had its own ideas and plans. The company said that it would now prioritize product development around devices running Long Term Evolution (LTE), a rival to WiMax. LTE PlayBook models are already being tested and by this fall, the United States and international markets would be welcoming a new product in their test labs.

Joining the bandwagon, are the top 2 U.S. wireless providers, Verizon Wireless and AT&T Inc. by building networks based on LTE.

On the Wait

When the Playbook was launched in April, the news spread that Verizon would be selling the device. But soon after, Verizon stated that it was reconsidering. Some analysts frowned at Canada-based RIM’s choice of WiMax as its initial technology as news had already been spread in January that the top two operators were embracing a rival technology.

Even Sprint, which currently depends on the WiMax network of Clearwire Corp for its high-speed offerings, is expected to upgrade to LTE in October. Sprint still sells a Wi-Fi version of Playbook.

WiMax over WiFi

A cellular network such as Sprint’s WiMax service allows for greater mobility than Wi-Fi but operators have been criticized for charging too much for tablet data downloads.

Charter Equity Research analyst Ed Snyder said RIM’s problem is not related to wireless technology but PlayBooks inability to stand out beside iPad. “There’s two groups with tablets: Apple and everybody else. RIM’s in the second group, definitely.”

RIM’s U.S. shares closed up 38 cents, or 1.6 percent, at $24.56 on Nasdaq.

IDC, a research firm said in July, that it has to increase its shipment for tablet computers world-wide that was forecast at 53.5 million this year, from the previous estimate of 50.4 million. In general the demand for tablets it rising and as a results the market will only get more competitive.

Sources: Reuters, Wall Street Journal, The Globe and Mail

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