RIM to Miss Financial Targets Again, Weak PlayBook Sales to Blame
December 2, 2011 8:58 AM
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Much of RIM's future success hinges on its success (or failure) in the tablet market. The company's first foray into the burgeoning market, the PlayBook, has struggled to gain traction among consumers. In an attempt to increase sales, RIM has slashed the retail cost of the PlayBook by $300, at a total cost of $485 million (pre-tax) in Q3.
Discounting to drive tablet sales costs Canadian company $485 million
BlackBerry manufacturer Research In Motion (RIM) today announced that it would not hit its projected third-quarter revenue estimate of $5.3-$5.6 billion that the Canadian company forecasted at the end of Q2.
The company, headquartered in Waterloo, Ont., pointed to discounting of its already weak PlayBook tablet sales as one reason the company will miss its financial goals. RIM said it was also expecting to miss its projected full-year earnings per share (EPS) of $5.25-$6.
Still, the company says it will stand behind the PlayBook tablet, and that 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," RIM co-CEO Mike Lazaridis said in a press release.
Recently, RIM slashed the price of its PlayBook tablet by $300, bringing the total cost down to $200 (from $500) for the base 16GB model. In an attempt to drive sales, the intense tablet discounting cost the manufacturer a reported $485 million — $360 million after tax. "Early results from recent PlayBook promotions indicate a significant increase in demand across most channels," Lazaridis said.
The company says it will record a pre-tax provision of $485 million in Q3 to write down the value of unsold Playbook tablets, 150,000 units of which RIM says it sold to retail channels in the same time period.
RIM's troubles adjusting to a post-iPhone/Android mobile market are well documented. The company hasn't been helped any by the widespread,
media attention-grabbing outages
or weak sales of the
initially overpriced and not-quite-ready-for-its-closeup PlayBook tablet
reports of unmet quarterly financial goals
are becoming a bit of a theme — or recurring nightmare — for RIM. The company is forecasting an even weaker Q4 compared to Q3, "due to several factors including lower than expected sell-through in the third quarter and RIM’s current view of fourth quarter demand."
The Globe and Mail
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RE: Too little, too late
12/5/2011 6:44:30 AM
I agree with you for once. RIM's presence in the tablet market is unlikely to be successful. I would never be surprised if they pulled an HP and EOL'd the product, it is surely what their shareholders are screaming for if they get many more quarters like this one. Without the Apps (especially some crucial core apps like an integrated mail client) it's not going to be a success. Period. This was true even before the Kindle Fire came on the market, but even more so now.
Apple are shooting for a different market as a laptop replacement, pointing out the fact that there are many desktop apps like Numbers, Pages etc. specifically made to make the iPad as a standalone device a decent option for users and enterprise which is working (my company rolled out iPads to staff who want them) whereas it's a stretch to see them doing that with Kindle Fires at present. LImiting the Fire as a media device might well work quite well for Amazon though and put them on a level footing with iTunes+iPhone/Pod/Pad. I also think that consumers will be quite wary though of new entrants to the marketplace since the HP fiasco, and the fact that nobody apart from Apple has been succesful thus far, even at this impulse-buy pricepoint, it could still crash and burn. It's also the very first revision and yearly updates are likely, but then that's no different to the iPad at this stage.
"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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