RIM PlayBook sales hurt earnings targets

Research In Motion Ltd. will write off much of its PlayBook inventory and book a $360-million after-tax charge due to poor sales and discounting of the tablet, a move that will impact the BlackBerry maker's financial targets.

The Waterloo, Ont., company warned investors on Friday that it will take the charge in the third-quarter on the high PlayBook inventory that it has been trying to sell off with deep discounts in recent weeks.

RIM acknowledged that discounting the PlayBook seems to be the best way to sell it after promoting the tablet as its most significant development since the launch of the BlackBerry smartphone in 1999.

"Early results from recent PlayBook promotions indicate a significant increase in demand across most channels," co-CEO Mike Lazaridis said in a news release.

"RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy," Lazaridis said.

The impact of poor PlayBook sales will cause RIM to miss its full-year forecast of earnings per share between $5.25 and $6, RIM said, as costs rise.

Third-quarter adjusted earnings per share are expected to come in "at the low to mid point" of $1.20 to $1.40.

RIM shares fell $1.73, or more than nine per cent, to $17.08 on the Toronto Stock Exchange.

Sales of the PlayBook haven't been able to make a dent in the competition from Apple's iPad or Android-based tablets.

Research In Motion has shipped about 850,000 PlayBook tablets since its launch last April, below what analysts had expected.

Best Buy, Future Shop, Sears, The Source and Walmart were among Canadian retailers selling the tablets at $300 off, making the cheapest 16-gigabyte model about $200. RIM also offered discounting on the PlayBook earlier this fall.

Research In Motion also disclosed Friday that it expects to take a $50-million hit against its revenue related to the widespread service outage that millions of users globally in October. Adjusted revenue is expected to come in at between $5.3 billion and $5.6 billion, RIM said.

Wunderlich Securities analyst Matthew Robison said RIM's PlayBook doesn't have any significance in the market.

"Nobody cares about the PlayBook since the quarter before last," Robison said from San Francisco. He said he sees the service outage has having done more damage to BlackBerry maker in its business markets.

'RIM's like a plane at 30,000 feet and the engines have stopped running.' Wunderlich Securities analyst Matthew Robison

"The outage has expedited efforts to accommodate iPads and iPhones by IT personnel," Robison said.

RIM's downward fall is simply continuing, he said.

"RIM's like a plane at 30,000 feet and the engines have stopped running."

National Bank Financial analyst Kris Thompson also seemed to have written off the PlayBook.

"RIM is not surprisingly taking a massive inventory charge in Q3 to write down unwanted PlayBook inventory," Thompson said in a research note.

Thompson also sounded the alarm for RIM's BlackBerry using business customers.

"Our thesis remains that BB (business-to business) channel inventory remains at risk of becoming stale next year, much like the failed PlayBook."

Thompson has reduced RIM's fiscal 2013 earnings per share to $2.81 and has lowered the stock's target price to around $16 US.

Meanwhile, RIM also said it sold 14.1 million BlackBerrys in the latest quarter, slightly better than analysts expected. RIM reports fiscal third-quarter earnings on Dec. 15.