Research in Motion warned on Friday it would fall short of its financial targets after taking a huge charge to write down the value of its PlayBook tablet, and the BlackBerry maker's shares tumbled.
Aiming to drive up anemic sales of the PlayBook, RIM last month began to offer the tablet computer at sharp markdowns, forcing it to book a $360 million after-tax 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.
Even with the discounts, consumers have failed to warm to RIM's entry. RIM said it sold about 150,000 tablets in the third quarter ended November 26, down from 200,000 in the second quarter. That's a small 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 category. 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 3.7 percent to $17.90 in trade before the morning bell in New York. For the year, the stock has dived about 65 percent.
FULL YEAR EARNINGS
The Waterloo, Ontario-based company said it 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 the global service outage.
The severe outage in October did little for consumer confidence and undoubtedly dented sales during that time, said Blaber.
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 December 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.
(Reporting by Euan Rocha in Toronto and Tarmo Virki in
Helsinki; Editing by Frank McGurty)