RIM to Take $485 Million Charge Related to Tablet
Research in Motion Ltd. said it would take a $485 million, mostly noncash charge in its fiscal third quarter, after marking down the value of its large inventory of PlayBook tablets. The company also lowered its projection for earnings and revenue for the rest of the year, and warned of falling BlackBerry shipments in the current quarter.
The large charge transforms the PlayBook launch—marred by poor reviews, a confused marketing strategy and dismal sales—into a significant financial hit for the Waterloo, Ont., company. RIM remains profitable and has been sitting on a large cash pile.
Still, some analysts have worried that the PlayBook's large stock of unsold inventory could sap earnings and cash for several quarters to come. Friday's announcement suggests that RIM aims to put the PlayBook behind it, by taking a large charge now. The company said it remains committed to the tablet.
Investors sold down shares early Friday, but by a relatively modest amount amid recent volatile trading in the stock. RIM shares were trading down $1.57, or 8.4%, at $17.01 in early trading in New York. So far this year, RIM shares have fallen more than 70%.
More worrying to some analysts than the PlayBook write-down was the weaker-than-expected BlackBerry outlook. RIM said it shipped more phones in its November-ended fiscal third quarter than the previous quarter. But it also warned it expected to ship fewer BlackBerrys in the fiscal fourth quarter, traditionally one of RIM's strongest periods.
"I think the PlayBook news is a bit of a sideshow," said Mike Abramsky, an analyst at RBC Capital. "This is more about the declining [BlackBerry] momentum in the midst of what was supposed to be a strong product cycle."
RIM is struggling with a fast-shrinking share of the North American smartphone market, as rivals Apple Inc. and others make big gains. Earlier this year, RIM reported two consecutive quarters of falling BlackBerry shipments.
While a new line of phones appeared to be selling well starting this summer, shipments of older models appear to have fallen more sharply than the company expected. RIM has promised a next-generation phone next year that will run off a new, more-powerful operating system. But it hasn't said when exactly that phone will be hitting stores.
RIM said Friday that because of the lowered forecast of device shipments, it won't meet its previous guidance for year-end adjusted diluted earnings of $5.25 to $6 a hare.
RIM is expected to report third-quarter results later this month.
The poor-selling PlayBook has been a big setback for RIM, which launched the device in April. It shipped just 500,000 tablets in the first quarter of availability, then 250,000 in the following quarter. RIM said Friday it shipped 150,000 PlayBooks in the third quarter.
RIM blamed the disappointing sales on a number of factors, including a delay of an updated operating system for the device, until February, well after the holiday-shopping season.
The PlayBook was generally panned by critics for its inability to run an email application without being tethered to a BlackBerry smartphone. RIM has promised its delayed software update will fix that.
RIM said it would continue to aggressively market the PlayBook, which it is now selling for as little as $199, less than half its debut price.
"RIM is committed to the BlackBerry PlayBook," RIM said in a statement.
RIM said it sold 14.1 million BlackBerrys in the third quarter, inside its guidance range of 13.5 million to 14.5 million. It said adjusted revenue in the quarter would fall "slightly" short of its previous guidance of $5.3 billion to $5.6 billion. It blamed the PlayBook and "product mix."
The company said adjusted diluted earnings for the third quarter would be in the low to midrange of its $1.20 to $1.40 per share guidance.
source
The large charge transforms the PlayBook launch—marred by poor reviews, a confused marketing strategy and dismal sales—into a significant financial hit for the Waterloo, Ont., company. RIM remains profitable and has been sitting on a large cash pile.
Still, some analysts have worried that the PlayBook's large stock of unsold inventory could sap earnings and cash for several quarters to come. Friday's announcement suggests that RIM aims to put the PlayBook behind it, by taking a large charge now. The company said it remains committed to the tablet.
Investors sold down shares early Friday, but by a relatively modest amount amid recent volatile trading in the stock. RIM shares were trading down $1.57, or 8.4%, at $17.01 in early trading in New York. So far this year, RIM shares have fallen more than 70%.
More worrying to some analysts than the PlayBook write-down was the weaker-than-expected BlackBerry outlook. RIM said it shipped more phones in its November-ended fiscal third quarter than the previous quarter. But it also warned it expected to ship fewer BlackBerrys in the fiscal fourth quarter, traditionally one of RIM's strongest periods.
"I think the PlayBook news is a bit of a sideshow," said Mike Abramsky, an analyst at RBC Capital. "This is more about the declining [BlackBerry] momentum in the midst of what was supposed to be a strong product cycle."
RIM is struggling with a fast-shrinking share of the North American smartphone market, as rivals Apple Inc. and others make big gains. Earlier this year, RIM reported two consecutive quarters of falling BlackBerry shipments.
While a new line of phones appeared to be selling well starting this summer, shipments of older models appear to have fallen more sharply than the company expected. RIM has promised a next-generation phone next year that will run off a new, more-powerful operating system. But it hasn't said when exactly that phone will be hitting stores.
RIM said Friday that because of the lowered forecast of device shipments, it won't meet its previous guidance for year-end adjusted diluted earnings of $5.25 to $6 a hare.
RIM is expected to report third-quarter results later this month.
The poor-selling PlayBook has been a big setback for RIM, which launched the device in April. It shipped just 500,000 tablets in the first quarter of availability, then 250,000 in the following quarter. RIM said Friday it shipped 150,000 PlayBooks in the third quarter.
RIM blamed the disappointing sales on a number of factors, including a delay of an updated operating system for the device, until February, well after the holiday-shopping season.
The PlayBook was generally panned by critics for its inability to run an email application without being tethered to a BlackBerry smartphone. RIM has promised its delayed software update will fix that.
RIM said it would continue to aggressively market the PlayBook, which it is now selling for as little as $199, less than half its debut price.
"RIM is committed to the BlackBerry PlayBook," RIM said in a statement.
RIM said it sold 14.1 million BlackBerrys in the third quarter, inside its guidance range of 13.5 million to 14.5 million. It said adjusted revenue in the quarter would fall "slightly" short of its previous guidance of $5.3 billion to $5.6 billion. It blamed the PlayBook and "product mix."
The company said adjusted diluted earnings for the third quarter would be in the low to midrange of its $1.20 to $1.40 per share guidance.
source
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