Image by Getty Images North America via @daylife
Research In Motion’s PlayBook tablet apparently is not generating the kind of demand from buyers that the BlackBerry maker hoped.
In a holiday shopping season where much is being made of the appetite for tablets like Apple’s iPad, Amazon’s Kindle Fire and Barnes & Noble’s updated Nook e-reader, RIM said Friday that it will take a $485 million hit to its pre-tax earnings for the third quarter of fiscal 2012 as it revalues its PlayBook inventory.
The predominantly non-cash charge, which amounts to $360 million after tax, comes as the company “now believes that an increase in promotional activity is required to drive sell-through to end customers.” In other words, RIM needs to offer prospective tablet buyers a deal in order to get them to choose the PlayBook.
“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 at Research In Motion, who also touted strong early results from recent promotions aimed at increasing demand for the tablet.
With the PlayBook-related charge, RIM expects to report third-quarter earnings per share at the low to mid point of the $1.20-$1.40 per share range it previously guided. The company, which issues results Dec. 15, said it shipped about 14.1 million BlackBerry smartphones during the quarter, and booked revenue slightly lower than its forecast of $5.3-$5.6 billion. RIM also warned that it expects to ship fewer smartphones in its Q4, and that no longer expects to meet its full-year earnings target of $5.25-$6.00 per share.
Research In Motion dove 7.2% in pre-market trading. Shares are down more than 68% year-to-date.
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