Litigation is a machine which you go into as a pig and come out as a sausage - Ambrose Bierce, allegedly
CANADIAN GADGET MAKER Research in Motion (RIM) has lost cash after selling Playbooks at a discount failed to rid it of excess inventory.
The company announced today that it will record a pre-tax provision in the third quarter of fiscal 2012 of approximately $485 million, $360 million after tax, related to its inventory valuation of Blackberry Playbook tablets.
The firm said that it has "a high level of Blackberry Playbook inventory" and "now believes that an increase in promotional activity is required to drive sell-through to end customers".
RIM said several factors, including "recent shifts in the competitive dynamics of the tablet market" and a "delay in the release of the PlayBook OS 2.0 software", caused the inventory buildup.
The company said it will "record a provision that reflects the current market environment and allows it to expand upon the aggressive level of promotional activity recently employed by the company in order to drive Playbook adoption around the world".
It added, "Based on the positive response to the promotions that are underway in select markets, RIM believes this strategy will accelerate adoption of its QNX-based platform by consumers and enterprises, as well as help to drive the development of a vibrant application ecosystem in advance of its next generation BlackBerry smartphones."
RIM only sold 150,000 Blackberry Playbook tablets in the third quarter, but said that sell-through to end customers, based on RIM's internal data, was higher than this number.
The company said that consumer and enterprise customers that buy a new Blackberry Playbook at the current promotional pricing, along with existing Playbook customers, will be able to upgrade to the enhanced Playbook OS 2.0 software at no additional charge when it becomes available in February 2012.
The company said that it will take a charge of $50m related to the service outage that occurred in the quarter, so its third quarter revenue is "expected to be slightly lower than the previously guided range of $5.3-5.6 billion".
"RIM is committed to the BlackBerry Playbook and believes the tablet market is still in its infancy. Although a number of factors have led to the need for an inventory provision in the third quarter, we believe the Playbook, which will be further enhanced with the upcoming Playbook OS 2.0 software, is a compelling tablet for consumers that also offers unique security and manageability features for the enterprise," said Mike Lazaridis, Co-CEO of Research In Motion.
"Early results from recent Playbook promotions indicate a significant increase in demand across most channels. We look forward to continuing to grow the installed base of Playbook users and to attracting more and more developers to expand the volume of applications, content and services that leverage the power of the industry leading QNX-based platform."
The company said it shipped approximately 14.1 million Blackberry smartphones in the third quarter ended November 26, 2011, which was in line with previous guidance. It's finalized third quarter results will be announced on 15 December.
Whether we'll see fire sales reminiscent of HP isn't certain, but it looks like RIM might have realised that £500 for a tablet that isn't the Ipad just isn't going to sell.
The Blackberry maker did a "buy two get one free" offer recently, and Playbooks have been available for £250 from certain channels, on and off.
One thing is for sure, selling tablets for £100 certainly gets your sales up, but it's just not so good for profits. µ
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