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RIM Taking $485 Million PlayBook Q3 Provision – Miss Q3 and Full Year Guidance

Holiday BlackBerrys playbook_promo 199

As I said before it is going to get worse for RIM before they have a chance to make it better. They just announced today that they will be recording a pre-tax provision in Q3 fiscal 2012 of approximately $485 million, $360 million after tax, related to its inventory valuation of BlackBerry PlayBook tablets. This is mostly not cash which is good and it looks like RIM is doing this to value the PlayBooks based on the new prices they are selling at.

RIM confirms yet again that it has a “high level of BlackBerry PlayBook inventory” and they “believe that an increase in promotional activity is required to drive sell-through.” They clearly note that this is because of competition and the delay in releasing PlayBook OS 2.0. They shipped an estimated 150,000 more PlayBooks into channels and RIM claims more than that were sold to end customers from previous inventory. RIM also confirms its commitment to the PlayBook and QNX.

Then RIM goes on to revise their quarterly outlook (Downward). They shipped ~14.1 million BlackBerry smartphones which falls into line with their last guidance of 13.5-14.5. The thing  is they plan on their revenue for Q3 to be slightly lower than the guidance they gave of $5.3 to $5.6 billion due to the PlayBook. RIM is also saying that they no longer expect to meet their full year earnings per share guidance of $5.25-6.00 and they plan on Q4 BlackBerry smartphone sales to be less than Q3.

All of these numbers and estimates are really nothing compared to how much RIM has banking on QNX and BBX phones succeeding. That is really where we want to see more guidance from RIM. They have mentioned that their cash reserves have grown by $80 million to ~1.5 billion and the outage last month cost them a write down of $50 million.

Check out the full announcement below:

Research In Motion Announces Third Quarter Provision Related To PlayBook Inventory and Confirms Commitment to Tablet Market; Provides Update to Q3 and Fiscal 2012 Guidance

Waterloo, ON – Research In Motion Limited (RIM) (Nasdaq: RIMM; TSX: RIM), a world leader in the mobile communications market, today announced that it would record a pre-tax provision in the third quarter of fiscal 2012 of approximately $485 million, $360 million after tax, related to its inventory valuation of BlackBerry PlayBook tablets.  The charge is expected to be predominantly non-cash.  All figures in this release are in U.S. Dollars and U.S. GAAP, except where otherwise indicated.

As previously disclosed, RIM has a high level of BlackBerry PlayBook inventory.  The Company now believes that an increase in promotional activity is required to drive sell-through to end customers.  This is due to several factors, including recent shifts in the competitive dynamics of the tablet market and a delay in the release of the PlayBook OS 2.0 software.  As a result, RIM will record a provision that reflects the current market environment and allows it to expand upon the aggressive level of promotional activity recently employed by the Company in order to drive PlayBook adoption around the world.

Based on the positive response to the promotions that are underway in select markets, RIM believes this strategy will accelerate adoption of its QNX-based platform by consumers and enterprises, as well as help to drive the development of a vibrant application ecosystem in advance of its next generation BlackBerry smartphones.  RIM sold into the channels approximately 150,000 BlackBerry PlayBook tablets in the third quarter and sell-through to end customers, based on RIM’s internal data, was higher than this amount.  Since the launch of the new promotions across consumer and enterprise channels in the United States and Canada late in the third quarter, the Company has seen a significant increase in demand for the PlayBook.  Both consumer and enterprise customers who purchase a new BlackBerry PlayBook at the current promotional pricing, along with existing PlayBook customers, will be able to upgrade to the enhanced PlayBook OS 2.0 software at no additional charge when it becomes available in February 2012.

“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.  We look forward to continuing to grow the installed base of PlayBook users and to attracting more and more developers to expand the volume of applications, content and services that leverage the power of the industry leading QNX-based platform.”

Updated Third Quarter Fiscal 2012 Guidance and Outlook

While the Company is still in the process of finalizing its third quarter financial results, the Company shipped approximately 14.1 million BlackBerry smartphones in the third quarter ended November 26, 2011 which was in line with previous guidance of between 13.5-14.5 million.  Adjusted revenue in the third quarter, excluding a charge against revenue of approximately $50 million related to the service outage that occurred in the quarter, is expected to be slightly lower than the previously guided range of $5.3-5.6 billion, reflecting product mix and the impact of PlayBook sell-through programs in the quarter.   Gross margin is expected to be in line with previous guidance of approximately 37%.  Excluding the PlayBook provision and the outage related impact described above, RIM expects adjusted diluted earnings per share in the third quarter to be at the low to mid point of the $1.20-$1.40 per share range it previously guided.  The Company’s cash balance at the end of the quarter increased by approximately $80 million to approximately $1.5 billion.  The Company is still in the process of finalizing its fourth quarter outlook, and based on preliminary estimates, RIM expects unit shipments in the fourth quarter to be below third quarter levels.  The lower expected shipments in the fourth quarter are due to several factors including lower than expected sell-through in the third quarter and RIM’s current view of fourth quarter demand.  The Company no longer expects to meet its full year adjusted diluted earnings per share guidance of $5.25-6.00.

Note: Adjusted diluted earnings per share and adjusted revenue do not have any standardized meaning prescribed by GAAP and thus are not comparable to similarly titled measures presented by other issuers.  The Company believes that the use of adjusted diluted earnings per share and adjusted revenue enables the Company and its shareholders to better assess RIM’s operating results relative to its operating results in prior periods and improves the comparability of the information presented.  Investors should consider RIM’s use of non-GAAP financial measures in the context of RIM’s GAAP results.  A reconciliation of adjusted diluted earnings per share and adjusted revenue to GAAP diluted earnings per share and GAAP revenue will be included when RIM releases its financial results for the third quarter of fiscal 2012 on December 15, 2011.

42 total comments on this postSubmit your comment!
  1. Ronen, do you have any idea how many Playbooks were actually manufactured… based on the numbers… I am guesstimating there are over 2 million in the system

  2. Looks like I was right about the PlayBook not flying off the shelves compared to the Kindle which sold 3-4M in less than a month.
    Hopefully, RIM’s continuous effort will pay off and the user base will keep growing.

    • hahahahahaahahahahahahahaahahahahahahahahah


      Ofutur… please re read the WHOLE PRESS RELEASE.


      This has NOTHING to do with low Playbook sales at $199.99.

      This has 100% to do with RIM MAKING NO MONEY at $199.99

      hahaha Ofutur….

      you just made my day

      Troll King Win!

      • Did you even read the press release?

        “RIM has a high level of BlackBerry PlayBook inventory”

        “RIM sold into the channels approximately 150,000 BlackBerry PlayBook tablets in the third quarter and sell-through to end customers, based on RIM’s internal data, was higher than this amount”

        RIM is sitting on a pile of PlayBooks while Amazon can’t manufacture Kindle Fires fast enough.

        • Yes I did read that… Ofutur…

          You can’t compare Kindle numbers to Playbook numbers..

          How much advertising has there been for the Kindle compared to Playbook in the last 2-3 months? Tons vs Zero

          How much bad press has Amazon had compared to RIM in the last 2-3 months? Zero vs Tons

          Look at their sales in the previous quarter to the last quarter..they INCREASED

          god…. your perspective on this release is so skewed

          • PlayBook sales have increased because of a heavily discounted price…. What a surprise :)

            Your argument regarding advertising doesn’t hold water. It’s only RIM’s fault if they didn’t deem necessary to run a huge campaign to sell the PlayBook, but again, they would have nothing new to say since OS 2.0 hasn’t been released yet. The Kindle Fire would still have won in the eyes of the customers looking for…. content.

            • Ofutur.. you literally miss every point….over and over…

              Yes.. its RIM’s fault there is no ads.. but thats not the point.

              The point is.. they are selling at an very very increased rate.. with NO advertising.

              You have to weight and proportion things before comparing them

              You clearly have NOT seen the Kindle Fire ads if you think they show things the Playbook can not do. The Kindle Fire ads show basica browsing, movies and book reading… and then they show a MASSIVE $199.99. Its very simple advertising and could be easily matched..

              In the end, RIM will sell ALL its Playbook inventory at the $199.99… maybe they could do it faster with serious advertising, but, why would they? They don’t NEED To sell their inventory in the next 2 weeks.

        • And on another note, the Playbook is selling faster than the stores can keep them stocked….

          thats what SOLD OUT means….


  3. Like I said. RIM blew sales of the Playbook due to their crappy phones (Recall even the OS7 phones were not out when the playbook came out). Amazon has a good reputation and so is able to sell a crappy product for a high price [Recall the kindle won’t do amy of the things other tablets can do yet is sold at a high price for what it does do, which is deliver you to the Amazon website to buy stuff]

    • kiddo… don’t fall into Ofutur’s trap… Playbook sales are going VERY well at the discount price.

      • So well, that RIM had to tell all its investors that they’re sitting on a huge pile of hardware that they will have to heavily promote in order to get rid of.

        • YES!!!

          They still have a lot sitting there.. WHY? because it only got discounted 2-3 weeks ago!!!!!

          Jesus christ.

          Everything that was in stores got sold. Now they need to repopulate the stores..

          That takes time!!

          Do you think they just do airplane drops into stores from sky??

          Lol… I can’t believe you are trying to say the Playbook sales at $199.99 are NOT going well… you must be mad

          • If you had taken the time to read the press release…Even RIM is proving you wrong: “RIM expects unit shipments in the fourth quarter to be below third quarter levels”

            • FOR MAINLY SMARTPHONES!!!!!!!!!!!!!!!!!!!!!!!!!!!

              holy crap… are you serious…

              stop ofutur… you are embarassing yourself

              • I’m sorry you can’t process what you read, but let me try to help you:
                “The lower expected shipments in the fourth quarter are due to several factors including lower than expected sell-through in the third quarter and RIM’s current view of fourth quarter demand”

                Nowhere do they mention that this is a smartphone only phenomena. They would have shouted it from the rooftop if the PlayBook was going to help counter balance the decline in smartphone sales.

                • lol…I read “units” as smartphones.

                  How in gods name would increased Playbook sales help counter balance the decline in smartphone sales?

                  We are talking about 200 000 – 300 000 thousand playbooks to millions of smartphones


                  In the end RIM isn’t clear so neither of us can prove if we are right..

                  To me it reads like its talking about Smartphone shipments

    • I agree that the timing of the release of OS7 was unfortunate. RIM could have created some nice bundles in Q211.
      The Kindle delivers content people want and that RIM hasn’t been able to produce. Hopefully OS 2.0 and its Android player will be able to change all that.

  4. Hey guys love the discussion but keep it friendly. :)
    I will chime in with my two cents in saying that RIM is getting tons more interest in the PlayBook with the new pricing. They just need to keep that interest and I am hoping that means they roll out at least public betas of PlayBook OS 2.0 before February.

    • agreed

    • That can only be a good thing, because so far even enterprises were not that interested, but unfortunately more interest doesn’t always convert into sales.
      This strategy would have worked much better if 2.0 had been released. I don’t know many people who buy something now while hoping it will get better in 4 months. So much can change during that time.

      • Yeah RIM really needs to up the value proposition. They need to treat the PlayBook more like a startup company. Quick fast agile improvements…

      • You’re exactly right ofutur…RIM has so totally blown every aspect of the PlayBook basically from Day 1. Corporations have shown marginal interest, and by now have moved on to iPad’s even with their flaws. RIM had an awesome device hit the market at a really good time but they have so bungled the software side (BBX) that nobody but hardcore BlackBerry fans are interested in PlayBook any more. Seriously, over a year from launch to field a frigging native email client? Utter failure…. Stockholders should be demanding heads on platters, management’s total PlayBook fail has cost the shareholders billions.

        “believe that an increase in promotional activity is required to drive sell-through.”
        I’d be willing to bet that even cutting the current sale price by half again to TouchPad-like $99 STILL wing generate enough interest to make PlayBook anything other than a blip in the tablet world.

  5. BB7 stopgap is already starting to falter (which is insanely fast). The Q3 sales increase isn’t continuing into Q4 which is basically previously unheard of…

    If BB7 no longer carries the weight + costs of the PB+BBX R&D (PB isn’t really making money at the sale prices, and above them it doesn’t sell) and they can’t get out BBX phones fast (which based on all deadlines in the last year+ they won’t), what exactly is going to tide them over?

    • Ok… maybe over the next couple quarters before BBX they drop to 10 million handsets… or 8 million.. they can survive on that…

      plus they have 40 billion in cash

      i am pretty sure they can last until next summer without going under


      • 40 billion in cash, do u even know what u r talking about?? A compnay with 40 billion in cash and 4 dollar total liability won’t trade at 8.8 billion market cap.

    • its not like they are going to drop to zero sales in 3 months lol

      The real test of RIM will be the results the quarterly results they divulge on December 15, 2012

      That will be the important quarterly results

      • @BBA Brian Kindly read the balance sheet before making such absurd remarks.I do this for a living.RIM don’t have 40 billion dollar in cash.They have 1400 million dollars in cash/cash equivalents.

  6. The issue isn’t that they will die overnight. It’s that there’s no brightline. Nothing.

    Everything now hinges on BBX phones alone and RIMs track record this year has been “we can’t deliver anything on time, and when we do it’s unfinished”.

    BB7 phones are the only thing selling at a profit right now and they already expect the sales boost from Q3 to fizzle in Q4, the biggest shopping season of the year when sales should be higher. That’s really bad.

    • I think sales will be steady in December… it will be January/February that will blow big balls.

      Remember, CES 2012 is January 10-13.

      I have to believe BBX phones will be shown off

      Who in their right mind would go buy a BB7 phone after a BBX phone is shown off!!!!!

  7. They HAVE to show at CES.
    They HAVE to release before Q3 2012.

    As a PB adopter my confidence in them to deliver is more or less shattered though…

    • God yes!!! They need the first BBX phone out before May 1.

      If they show BBX at ces…. Os7 sales will tank and tank hard

  8. interesting discussion here except for BBA Brian who is a blabbering idiot and won’t listen to reason.

    Just bought my Playbook and waiting for delivery. Paid $210 for 32gig version tax included (through a friend at RIM).

    I’m from the KW area and would love for RIM to prosper and make Canada proud, however when you sell your shiny new slate well below cost then it doesn’t look good long term.

    Also their app store is a joke, that has to improve big time fast and the PB sales will depend on it. Now that the prices are back to $500-700.

    They can afford it for now, but i don’t see rim competing in the slate market.

  9. Lol… Passionate… But thanks for the input unregistered user..

    Can you please indicate where I am wrong?

    Blabbering idiot is a bold statement.

    Please, back yourself up.

  10. i’m sorry but you’re bullying ofutur and your answers are just ignorant. You keep saying the playbook sales are increasing and everything is peachy, what do you expect at this price point?

    At $200 it’s below cost and this business model is shit. Do you think the sales are gonna increase at regular prices?

    • I can see why you think its bullying but ofutur and I have a history…

      Sorry for coming off that way.

      To answer your question, no, at this point they will not sell at 499.99.

      I by no means think things are peachy, but, I think they are making thbest of a shitty situation.

      I think long term with RIM, not the next 6 months..

      Again, sorry I offended you

  11. No problem, didn’t know you guys know each other.:)
    Anyway it’s better to give the pb away and stir up some interest.

    But seriously, the app store has to get better, AND last night I’ve spent 3hrs trying trying to find an SDK to develop apps for the PB. I ended up with instructions to download 4-5 programs from different vendors. One of them was pricey.

    RIM should give the SDK away to promote app creation instead of relaying on various 3rd party dev tools. It just looks complicated.

    • yeah this is another aspect of BBX that has been a total fail on RIM. The mixed bag of what will or what be supported for development for BBX I thought couldn’t be worse that in years past for BBOS, but I was wrong. By adding MORE options yet completely kicking to the curb the development community there WAS for BlackBerry, they’ve made things even worse than they were.

  12. No email and not enough apps, what did you expect?

  13. Don’t discount BBA Brian, he has a good point. Contrary to what Otufur said, I’ve read that although initial Kindle Fire sales were great, they are already declining, due to customers realizing thst the Kindle Fire is little more than a e- reader. RIMM has 7 things that will keep them in the game and if they can capitalize on it they may pull ahead. 1. Efficiency – universal search, keyboard, shortcuts, conveinance keys and integration of apps make it the get things done phone 2. Enterprise – RIMM’s presence is expanded with Mobile Fusion 3. First Party apps: BBM, Blackberry Traffic, Blackberry maps, and even BBM music (although it needs refinement), 4. QNX – has loads of potential that needs to be developed, 5. TAT – see number 4, 6. The “highlander” OS that will combine the best of QNX and Blackberry OS, 7. NFC – the wave of the future, that RIMM is diving headfirst into. So, the potential is already there. The challenge for RIMM is to put it all this together and market this well to overcome the negative stereotypes that have developed and spread by the media.

    • Agreed, but only if they udjust their prices. However at $599 (32gig) they have no chance competing with ipad2 costing $619 in the consumer’s market.

      I’m thinking $400-500 they might be able to pull it off PLUS the app situation has to be resolved. Really hoping for it to be able to use Android apps.

  14. Personally I think this just highlights how critical BBX is to RIM. I kind of feel like we are watching one of those movies where the main actors are on a really big ship that they need to turn around before it gets flipped over by a wave going the opposite direction. The question is if they have enough time to finish the turn or at least make it a significant portion of the way before it knocks them out…
    They have the potential to pull out ahead from all of this. The question is if they have what it takes to mold potential into product.

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