Research In Motion, the Canadian manufacturer of the BlackBerry family of smartphones, capped a string of profit warnings with a $485m pre-tax writedown on the value of unsold BlackBerry Playbook tablets, which it said would mean it misses its revised 2012 profit targets
RIM shares slumped more than 9 per cent to $16.85 in early New York trading on the news. So far this year the shares have fallen by more than 70 per cent.
The inventory writedown is the latest in a series of setbacks for RIM which has faced increased competition from rivals including Apple and Google Android-based smartphone and PC tablet makers, and has struggled to update its own ageing product portfolio.
RIM also took a $50m charge against revenues to cover the extended network outage it suffered earlier this autumn, which left millions of BlackBerry users unable to access the smartphone network for days.
As a result it said it expected adjusted diluted earnings per share in the third quarter to be at the low to midpoint of the previously indicated range of $1.20 to $1.40 per share and no longer expects to meet its forecast for full year adjusted earnings of $5.25 to $6.00 a share.
The Waterloo, Ontario-based group has reduced its profit guidance in each of the past three quarters, and is due to report fiscal third-quarter results on December 15. In the latest period, it said it sold about 14.1m BlackBerry handsets, in line with its earlier forecast of between 13.5m and 14.5m. But increased competition has steadily eroded average selling prices and eaten into revenues.
RIM has continued to grow outside North America, but has been losing market share to rivals in the US, where a growing number of companies and consumers have been switching to iPhone or Android-based handsets.
As part of its efforts to upgrade its devices, RIM introduced a new operating system when it launched the PlayBook tablet in April. Unfortunately, PlayBook, intended to be RIM’s answer to Apple’s iPad, lacked some key features including the ability to send email directly from the device and was widely panned by reviewers.
Since then PlayBook sales have fallen far short of RIM’s expectations, leading to inventory build-up in the mobile network operator stores and other retail outlets where it is sold. In an effort to clear the backlog, RIM slashed the price of the device last month but still only managed to sell about 150,000 tablets in the third quarter, which ended November 26, down from 200,000 in the second quarter.
In contrast, Apple sold 11m iPads in the latest quarter and continues to dominate both the consumer and corporate tablet market.
The disappointing sales of the PlayBook have led some analysts to speculate that RIM might abandon the tablet market altogether. But despite its lacklustre performance, RIM’s senior management made it clear on Friday that it would not ditch the device.
“RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy,” said Mike Lazaridis, co-chief executive.
Analysts said the latest profit warning should come as no surprise, but expressed concern about the tone of the company’s statements. Pierre Ferragu of Bernstein Research said: “What is more worrying, of course, is the profound denial the tone of the release reflects. Although it appears obvious to us that RIM’s current strategy is bound to fail rapidly, the company continues to support it vehemently.”