Someone Has to Pay for All These PlayBooks

There are an awful lot of Research In Motion (Nasdaq: RIMM  ) PlayBooks sitting around. The BlackBerry maker has tried just about everything to get the tablets moving, but it seems buyers think it isn't worth it.

Let's recap recent events related to RIM's ill-fated slab.

  • September: Retailer Best Buy (NYSE: BBY  ) slashes $50 to $150 off the PlayBook price in an attempt to spur sales. A couple weeks later, RIM reported earnings and disclosed shipping only 200,000 units.
  • October: RIM experiences its worst service outage in the company's history. The company unveils its new operating system, BBX, which will unify BlackBerry smartphones and tablets. PlayBook OS 2.0 is detailed and includes support for Google (Nasdaq: GOOG  ) Android.
  • November: Other retailers like Staples (Nasdaq: SPLS  ) say they will take $300 off the asking price for Black Friday, bringing the 16 GB model down to $199, the same price point as Amazon.com's (Nasdaq: AMZN  ) Kindle Fire. Canadian retailers start offering that price by Nov. 18. A few days later, Research In Motion officially confirms the $199 pricing but says it will be for a "limited time."
  • RIM launches a new promotion that offers the PlayBook for free to enterprise customers that upgrade to the newest version of BlackBerry Enterprise Server 5.0 through Dec. 31.
  • Best Buy announces it sells out of PlayBooks thanks to the Black Friday promotion and reminds us all of Hewlett-Packard's (NYSE: HPQ  ) $99 TouchPad sale. Further jogging our TouchPad nostalgia, RIM begins offering PlayBooks for $99 to employees, who are allowed to order up to eight units.

The company has now announced that it won't be meeting its previous guidance and is taking a big hit on those PlayBooks. In its press release, RIM says it "has a high level of BlackBerry PlayBook inventory" and that "an increase in promotional activity is required to drive sell-through to end customers."

It will record a pre-tax noncash charge of roughly $485 million in the third quarter while RIM remains committed to the PlayBook and the tablet market. The previous diluted earnings-per-share guidance of $5.25 to $6 is now out of reach, as RIM no longer expects to hit that target.

It's no wonder that investors are sending shares down by roughly 10% today. Even though RIM occasionally does something right, continuing to commit itself to the PlayBook is a big mistake.

Add Research In Motion to your watchlist to keep up with the PlayBook. Get access to this free report on one stock that will cash in on the mobile revolution.

Fool contributor Evan Niu owns shares of Amazon.com, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Best Buy and Google. Motley Fool newsletter services have recommended buying shares of Google, Staples, and Amazon.com. Motley Fool newsletter services have recommended writing covered calls in Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 03, 2011, at 8:05 PM, H3D wrote:

    How about addressing the situation of how many of these things there are, rather than just saying lots.

    They would only write down from cost, down to what they can sell then for.

    So if, say, they cost $300 to make and they can only get $150 for them then they would be writing down $150 per unit, so a $485 write down would suggest that they are sitting on 3.2 million units.

    Are those numbers about right?

    Best guess is they've sold about 900 thousand so maybe there were 4 million built.

    Why?

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