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RIM's PlayBook may undercut Apple iPad at $399 - report

Research in Motion's initial entrance into the tablet market may prove aggressive with a rumored $399 starting price point for a contract-free PlayBook.

Mobility Insider, which was first to get a hands-on with the PlayBook, claims that the PlayBook will have an entry price of $399 for the 8GB model. If true, that would be $100 cheaper than the entry-level 16GB iPad, which starts at $499.

For the same capacity, RIM and Apple would have identical pricing, as the 16GB PlayBook is rumored to cost $499. And the high-end model, with 32GB of storage, is said to cost $599.

"Besides the difference of internal memory, all models will be identical in features and functionality," the report said. "There will be no models with built-in WWAN connectivity, so if you don’t have a BlackBerry to tether your data connection for free, you will have to rely on WiFi or a Mobile Hotspot."

Earlier this month, RIM revealed that its multi-touch tablet would have a starting price under $500 when it goes on sale in North America in the first quarter of 2011. Many assumed that would turn out to be a $499 starting price, equal to the iPad.

But the PlayBook has a 7-inch display, which is smaller than the 9.7-inch screen found on the iPad. Apple Chief Executive Steve Jobs even called out devices like the PlayBook with smaller screens, saying that they were too small to be functional for most users.

Analyst Mike Abramsky said if the rumor of a $399 starting price is true, he expects the gross margin of the PlayBook to be between 25 percent and 30 percent. He also anticipates that the forthcoming PlayBook with integrated 3G or 4G wireless connectivity would be priced at between $299 and $499 with a two-year contract.

"PlayBook pricing (unverified) is aggressive, which shows RIM is serious about gaining share," Abramsky wrote. "Investors are intrigued by the PlayBook, but in their minds questions remain: how will it stand up against iPad? What about distribution? What about Cisco's pending offering for business? And what might be RIM's market share vs. many tablet competitors?"

RIM has already been aggressive in comparing the PlayBook to the iPad. Last week, the company released a video in which it compared the Web browsing performance of the two devices. The PlayBook was shown to load websites faster than the iPad, and RIM's tablet also plays Adobe Flash content.

Of course, speed and price of the iPad could be different come next year, when Apple is expected to introduce its second-generation device. The PlayBook is expected to go on sale around the same time in early 2011.