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TheStreet Open House

The 5 Dumbest Things on Wall Street: May 20

4. Research in Motion Recalls Tablet, Stumbles Toward Oblivion

When Research In Motion's (RIMM) PlayBook recall was announced on Tuesday, it drew the very name of the company into doubt.

The Research? Maybe it could stand to be better. The Motion? Does backward count as motion? Or how about falling down? That's motion!

Indeed, for a company that has yet to find an answer to Apple's (AAPL) iPad, having to recall about 1,000 of its new PlayBook tablets (less then two months after it launched) due to problems with the operating system startup probably wasn't the best marketing strategy. And while the recall doesn't cover all PlayBooks, it is a particularly bad start for RIM's new QNX software, the foundation of all new BlackBerry devices.

The news sent RIM shares down to an almost two-year low as investors started to lose hope in the BlackBerry maker's turnaround prospects.

The weakness comes at a time when Apple's iPad 2 is enjoying breakneck sales in the U.S. and scattered sellouts overseas. Apple has dominated the segment it largely created last year when it introduced the iPad. And with prices for the iPad ranging from $500 to $840, competitors have had a difficult time beating Apple on price and features.

Even worse for RIM, the competition heated up this week as HTC launched pre-sales of its seven-inch Flyer at Best Buy (BBY) for $500 and as LG started taking pre-orders for its Optimus Tab, a 9-inch, 3D-ready tablet that sells for as much as $1,200 in the U.K.

And on the other end of the price spectrum, Amazon (AMZN) is expected to introduce its own tablet (or tablets) in time for the holidays. "Stay tuned," Amazon chief Jeff Bezos said recently when asked about Amazon's tablet plans.

For RIM, a flub of its PlayBook effort could be damaging. The tech shop has had a critical lack of compelling new BlackBerries to attract smartphone buyers leaning toward Apple iPhones or Google (GOOG) Android devices. The PlayBook, with its Android compatibility and the BlackBerry business-user pedigree, was considered one of the few viable rivals to Apple's iPad.

TheStreet Says: RIM has stumbled in tablets before. Last year it pulled the introduction of its hotly-anticipated BlackPad when it could not successfully debug the device, eventually switching to Texas Instruments (TXN) as a chip supplier. So at least we can give RIM points for consistency.

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