RIM announces $485mm loss on unsold PlayBook inventory  

Research In Motion […] 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. 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.

In this very obtuse and dishonest press release, RIM suggests that, due to “recent shifts in the competitive dynamics of the tablet market” and “a delay in the release of the PlayBook OS 2.0 software,” the company is being forced to sell its enormous PlayBook inventory at a loss. These reasons are, at best, tangentially related to the problem; the real reasons people are not buying PlayBooks is because the PlayBook has absurd shortcomings (like a lack of built-in email functionality), is expensive, and is generally worse than its competitors on almost every key metric. It is a failed, confused product in search of a market that does not exist. It’s a little too small to be comfortable surfing the web for long periods of time, but it’s also a little too big to be more portable than a larger tablet.

I think the correct move for RIM at this point is to say, “we screwed up and we’re going to make a better product. Watch us closely in the next two quarters.” Instead, unless I am hugely underestimating their level of incompetence (which I believe to be very high), they lied in an official, SEC-registered press release. They know those two bullshit reasons were not the cause of the PlayBook’s failure.

The tablet market has not changed substantially since the introduction of the iPad. No Android tablet, with the possible exception of the Kindle Fire, has sold well enough to even dent the industry. The competitive dynamics have not changed. RIM needs to go back to the drawing board and make some drastic improvements to the PlayBook.

I have hope for RIM, but no faith in them.