RIM slashes PlayBook price, warns of falling profits

RIM slashes PlayBook price, warns of falling profits

Summary: Canadian device maker reveals it will miss earnings target amid poor PlayBook sales and service outage customers experienced in October. Analysts think recovery for ailing company "unlikely".

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Research In Motion (RIM) has warned investors of falling earnings as it slashed prices for its poorly-received Playbook tablet. This, in turn, led to bearish forecasts from analysts doubting recovery for the troubled handset maker.

In an official statement released last Friday, RIM said it would not meet its full-year financial targets, mostly due to the service outage customers experienced in October and the decision to cut the price of its PlayBook tablet. Poor sales of the tablet has left the Canadian company sitting on a high level of inventory, resulting in a US$485 million before-tax writedown related to inventory valuation of the device. 

Excluding the US$50 million charge related to the service outage, RIM said newly-adjusted revenue for its third quarter, which is due out on Dec. 15, is expected to be slightly lower than the previous range of US$5.3 to US$5.6 billion.

"RIM expects adjusted diluted earnings per share in the third quarter to be at the low- to mid-point of the US$1.20-US$1.40 per share range it previously guided," it added.

Mixed reactions over RIM's fortunes
Despite the PlayBook's poor sales showing, the company stated that an "aggressive level of promotional activity" will help drive the tablet's adoption among consumers and enterprises.

"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," Mike Lazaridis, co-CEO at RIM, said in the statement.

"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."

Analysts, however, were unconvinced. "Nobody cares about the PlayBook since the quarter before last," Wunderlich Securities analyst Matthew Robison told online magazine Canadian Business in a report last Saturday.

"RIM's like a plane at 30,000 feet and the engines have stopped running," said the San Francisco-based analyst, adding that the e-mail service outage only brought more damage to RIM's downward spiral with enterprise IT personnel turning to rival Apple's iPads and iPhones instead.

National Bank Financial analyst Kris Thompson had an equally bearish outlook, and called RIM's recovery "unlikely" in the report.

He said: "Our thesis remains that BlackBerry channel inventory remains at risk of becoming stale next year, much like the failed PlayBook. We expect RIM's performance to deteriorate in future quarters and have little hope for a recovery from the new BBX platform."

Topics: Hardware, Mobility, Software, IT Employment

Jamie Yap

About Jamie Yap

Jamie writes about technology, business and the most obvious intersection of the two that is software. Other variegated topics include--in one form or other--cloud, Web 2.0, apps, data, analytics, mobile, services, and the three Es: enterprises, executives and entrepreneurs. In a previous life, she was a writer covering a different but equally serious business called show business.

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