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RIM, Samsung should avoid head-on Apple clash

As the biggest names in technology prepare to fight Apple's iPad, their best hope may be to avoid a head-on confrontation and focus on niche and low-priced products instead.
/ Source: Reuters

As the biggest names in technology prepare to fight Apple's iPad, their best hope may be to avoid a head-on confrontation and focus on niche and low-priced products instead.

A year ago, industry insiders debated whether a market existed for a device to bridge laptops and smart phones. Now, Samsung and Research In Motion will be the latest to respond to Apple's gadget.

The iPad attracts many buyers with its sleek interface and iTunes music, video and software applications. Business people also use it as a portable display for presentations.

Ahead of BlackBerry maker RIM's expected unveiling of a tablet computer next week, analysts say RIM and its rivals will not succeed unless they offer lower prices or address a segment Apple has overlooked.

"We've yet to hear a convincing story about what the potential is beyond Apple," said CCS Insight analyst John Jackson. "The next successful tablet story will be one that doesn't try to take on Apple directly."

RIM plans to debut the BlackPad at a developers' conference starting Monday, according to a Wall Street Journal report. The device is expected to have a 7-inch touchscreen, which would be smaller than the iPad, and at least one camera.

It is expected to connect to the Internet via short-range Wi-Fi networks found in homes, offices and cafes. Outside Wi-Fi, the only way to connect BlackPad will be to tether it to a BlackBerry phone, according to the report.

It could appeal to cost-conscious customers reluctant to pay additional cellular service fees on top of their phone's data service charge. IPad users pay separate cellular service fees from $15 a month upward.

Several analysts said the lack of a direct cellular link would limit sales for RIM, which had 50 million BlackBerry users by the end of August.

The lack of a cellular service fee may also leave mobile network operators, RIM's main distributors today, without much incentive to promote the device.

"I have my doubts as to whether their tablet will succeed," said Morgan Stanley analyst Ehud Gelblum.

Courting consumers
RIM has been successfully courting consumers with new BlackBerrys in recent years. But since businesses are key customers, RIM's best chance may be a tablet specifically for them, said Carmi Levy, an independent technology analyst.

"What I believe RIM is trying to achieve with the BlackPad is not to release a be-all end-all consumer product, but to release a very compelling enterprise product that also has crossover appeal to consumers," said Levy.

Aside from Apple and Samsung, RIM will also compete with rivals such as Dell, which has developed at least two tablets, and Hewlett-Packard and Motorola, which plan tablets for 2011.

Some analysts say Samsung's Galaxy Tab is the most credible iPad rival, given it is not only smaller but — perhaps more importantly — the Korean conglomerate has forged partnerships with the top four U.S. mobile carriers and with media companies which are providing programing for its Media Hub service.

Nick DiCarlo, Samsung's U.S. director of product planning, listed three features that trump iPad: cameras for two-way video chat, support for Adobe Systems' Flash software and a compact size that fits in a suit pocket.

"No one of them by themselves would be enough, but all together, they're special," DiCarlo said in an interview.

DiCarlo also pointed to Samsung's media partners: NBC Universal (Msnbc.com is an NBC Universal-Microsoft joint venture) and Viacom's Paramount and MTV, which brings hit shows like "Jersey Shore." Time Warner and CBS are also in talks with Samsung to provide video for Galaxy Tab, according to two sources familiar with the matter.

However, the iPad is backed by Apple's long-established iTunes digital media store — which has the industry's largest library of 250,000 mobile applications. Samsung is depending on Google Inc's far smaller Android software store.

Thus, pricing of the Galaxy Tab and its connection services will be crucial, according to analysts who say any iPad rivals need to sharply undercut Apple to entice consumers.

Samsung has not released U.S. pricing for the device as carriers will set the price. But if its suggested price in other markets is any guide, it looks like the device will be more expensive than iPad unless carriers subsidize it.

The company had said the suggested retail price in Finland will be 949 euros ($1,278), well above the iPad's $629 tag.

U.S. operators typically subsidize phones for customers who commit to long-term contracts. When carriers get exclusive rights to sell a device, they promote it more heavily.

But since the Tab will not be exclusive, Current Analysis analyst Avi Greengart said no carrier will "spend outsized marketing budgets promoting Galaxy Tab because they're not likely to get outsized benefits."

DiCarlo said marketing will be a collaborative effort with carriers. And Dan Hesse, head of Sprint Nextel, indicated that Tab would be important to Sprint.

Hesse said it would be "very affordable," as he pulled out the gadget at an investor conference this week to show off how he easily he could fit it in his suit pocket.

Some say the real battle begins next year when Apple rivals have more time to respond to iPad, which went on sale in April. But Morgan Stanley's Gelblum said the consumer electronics market may not give somebody like RIM a second chance.

"They have to hit it in the beginning. They don't have enough goodwill out there to come out with half a product and then improve it over time. The market is moving too fast."