RIM to Miss Financial Targets Again, Weak PlayBook Sales to Blame

Discounting to drive tablet sales costs Canadian company $485 million

BlackBerry manufacturer Research In Motion (RIM) today announced that it would not hit its projected third-quarter revenue estimate of $5.3-$5.6 billion that the Canadian company forecasted at the end of Q2.

The company, headquartered in Waterloo, Ont., pointed to discounting of its already weak PlayBook tablet sales as one reason the company will miss its financial goals. RIM said it was also expecting to miss its projected full-year earnings per share (EPS) of $5.25-$6.

Still, the company says it will stand behind the PlayBook tablet, and that 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," RIM co-CEO Mike Lazaridis said in a press release.

Recently, RIM slashed the price of its PlayBook tablet by $300, bringing the total cost down to $200 (from $500) for the base 16GB model. In an attempt to drive sales, the intense tablet discounting cost the manufacturer a reported $485 million — $360 million after tax. "Early results from recent PlayBook promotions indicate a significant increase in demand across most channels," Lazaridis said.

The company says it will record a pre-tax provision of $485 million in Q3 to write down the value of unsold Playbook tablets, 150,000 units of which RIM says it sold to retail channels in the same time period.

RIM's troubles adjusting to a post-iPhone/Android mobile market are well documented. The company hasn't been helped any by the widespread, media attention-grabbing outages or weak sales of the initially overpriced and not-quite-ready-for-its-closeup PlayBook tablet.

Even reports of unmet quarterly financial goals are becoming a bit of a theme — or recurring nightmare — for RIM. The company is forecasting an even weaker Q4 compared to Q3, "due to several factors including lower than expected sell-through in the third quarter and RIM’s current view of fourth quarter demand."
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