Aiming to drive up anemic sales of the PlayBook, the
BlackBerry-maker last month began to offer the tablet computer at sharp
markdowns, prompting it to book a $360 million after-tax inventory writedown.
RIM was late to the game with its PlayBook, introducing
the tablet last April, long after Apple's iPad had established an overwhelming
dominance of the new segment.
But consumers have remained wary. RIM said it sold about
150,000 tablets in the third quarter, which ended Nov. 26, down from 200,000 in
the second quarter. That's a tiny fraction of the 11 million iPads that Apple
sold in its latest quarter.
"RIM is continuing to suffer from its Playbook
endeavors," said CCS Insight analyst Geoff Blaber. "It hurt RIM
initially by diverting focus, but muted demand is now becoming clearly visible
in the financials."
It is the latest of a series of setbacks for the company
that virtually invented the smartphone. In recent quarters, Apple's iPhone and
Google Android devices have gobbled up RIM's once mighty market share. It has
been plagued by product missteps, profit warnings and an embarrassing global
outage for its BlackBerry network last month.
On Friday, RIM shares fell 8.7 percent to $16.98 soon
after the New York market opened. A stock that was not too long ago an investor
darling, is down more than 70 percent this year.
RIM's Canadian-listed shares fell 8.2 percent to
C$17.26.
FULL YEAR EARNINGS
Waterloo, Ontario-based RIM said it now no longer expects
to meet its forecast for full-year adjusted earnings of $5.25 to $6.00 a share,
due to the PlayBook writedown and a charge related to a damaging global service
outage in October, when customers were without email and the popular BlackBerry
messaging system for several days.
"The severe outage in October did little for
consumer confidence and undoubtedly dented sales during that time," said
Blaber.
RIM had previously forecast full-year earnings of $7.50 a
share. It was forced to back away from that forecast in mid-June, due to
product delays and lackluster sales.
Bernstein Research analyst Pierre Ferragu said the latest
cuts come as no surprise.
"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," said Ferragu.
"We can only hope that this increasing dissonance
will accelerate necessary changes at the top of the company."
Excluding the $360 million PlayBook provision and a $50
million charge for the outage, RIM now expects adjusted earnings in the
third-quarter to be at the low to mid-point of its previously forecast $1.20 to
$1.40 per share range.
Revenue, excluding the outage charge, is expected to be
slightly lower than the previously forecast range of $5.3 billion to $5.6
billion, in part because of the PlayBook discounting, which it plans to expand.
RIM, which is still finalizing its quarterly results,
said it shipped about 14.1 million BlackBerry phones in the third quarter, in
line with its earlier forecast of between 13.5 and 14.5 million.
The company, which will report its quarterly results on
Dec. 15, said it was confident the PlayBook promotion will help boost sales and
reduce its inventories.
"RIM is committed to the BlackBerry PlayBook,"
Co-Chief Executive Mike Lazaridis said in a statement. "Early results from
recent PlayBook promotions indicate a significant increase in demand across
most channels."
