Research in Motion (RIM) announced Friday it will take a hard-hitting charge of $485 million due to weak sales of its BlackBerry PlayBook tablets. The mobile communications giant will be recording a pre-tax provision in the third quarter, while continuing to sit on a "high level" of PlayBook inventory.
RIM said its lackluster PlayBook sales can be attributed to "recent shifts in the competitive dynamics of the tablet market." The iPad, holding tightly to its market reign, is expected to claim an impressive 65.6 percent market share in Q4, according to industry analysts IHS iSuppli. Amazon’s Kindle Fire holds the runner-up spot with an anticipated13.8 percent, while Samsung’s Galaxy tablets take the third spot with a projected 4.8 percent.
RIM also cited the delayed release of PlayBook OS 2.0 software as a hindrance to tablet sales. The company announced in October that the OS 2.0 launch date would be pushed into February 2012 in order to ensure the product fully meets developer and end-user expectations.
In an effort to turn the tables and up sales, RIM has initiated a series of BlackBerry PlayBook promotional activities. The tablet, which was originally priced around $500, is now selling for as low as $199.
Despite the PlayBook’s setback, RIM has expressed its continued commitment to the product.
"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. "Early results from recent PlayBook promotions indicate a significant increase in demand across most channels.”
RIM said it expects quarterly revenue to fall short of its projected $5.3 billion to $5.6 billion in light of these sluggish sales. The company also no longer expects to meet its full-year adjusted diluted earnings per share projection of $5.25 to $6.00 a share.
In the third quarter, RIM sold approximately 150,000 BlackBerry PlayBook devices. Apple, as a point of comparison, sold 9.25 million iPads.
RIM did, however, ship 14.1 million BlackBerry smartphones in the third quarter, falling safely within its forecast of 13.5 million to 14.5 million.