RIM is facing many different struggles this year and ever since they launched the Blackberry PlayBook, the sales have not lived up to expectations for them. With the poor sales showing, it seemed that part of it was the result of missing key features on the PlayBook which led to the problems. This is specifically the missing native Blackberry Mail and Blackberry Messenger services on the PlayBook and are still missing today. While RIM claims that it will be releasing the next major release of the PlayBook software which will contain the missing features, they do not exist today and increasing competition has forced RIM to take action to improve sales.
That action has resulted in them having to take a write off on the inventory to the tune of $485 million in after tax charges for the current quarter. While taking the write off, they will be able to continue to sell the Blackberry PlayBook at a discount of $300 for each of the three version, 16 GB at $199, 32 GB at $299 and the 64 GB version at $399.
As part of this same actions, RIM is now having to adjust sales estimates for the Blackberry PlayBook again. While the significantly lowered prices on the Blackberry PlayBook have resulted in improving sales, it comes at the cost of profits for the company. Taking a loss on each one sold is going to impact the quarterly revenue for the company. Previous estimates were provided at the 5.3 billion to $5.6 billion range and they are now indicated to be “slightly lower” but no specific numbers were reported. That is more than likely because RIM does not have a handle on just where things are at for this current quarter.
Part of the problems for them is the declining sales for their previously popular smart phones which have been suffering this year and need to have a complete revamp of the product line. That is not going to happen until next year with their new BBX OS which should hopefully turn things around along with new phone designs which are in the works, but that is next year.
As for the current value of the company, RIM’s stock is taking another hit today on the news of the write down on inventory. The value of the stock has seen a continue decline for most the year and with this news, it looks like the decline is going to continue for the remainder of the year. RIM is going to have difficulty reversing that direction until they release the next OS version for the Blackberry PlayBook and come out with new Blackberry phones. The new phones and BBX are probably not going to arrive until the second half of next year.
As for the tablet line, RIM already has designs in the works and have seen some leaks which look impressive. Unfortunately for RIM, the Amazon Kindle Fire is selling at the same $199 price and presents competition for them at a time when they truly want to move inventory in expectations of the Blackberry PlayBook II which is expected next year.
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