RIM: $485 Million Charge On PlayBook Surplus, Admits It Won't Make Targets

News today from Research In Motion that underscores why, sometimes, the number of shipped devices is not always the best short-term indication of how well a product is really doing. RIM (NSDQ: RIMM) announced that it would be taking a pre-tax charge of $485 million in Q3 2012 because of an oversupply of unsold BlackBerry PlayBook tablets. It also admitted that it does not expect to meet previous sales targets in the next quarter.

The charge has long been expected: in its last quarterly earnings in September, RIM had already noted that PlayBooks were selling below earlier forecasts, with only 200,000 devices shipped.

But it’s not all bad news: the statement reiterated something we have heard before from the company: RIM is remaining committed to the tablet market for the longer run, citing increasing demand for its tablets.

That increasing demand in the last few months may well have been because of the many promotions that we’ve seen, offering PlayBooks at big discounts to their original prices of just under $500.

It looks like there may more of that aggressive discounting, and more marketing in general, to come: “The Company now believes that an increase in promotional activity is required to drive sell-through to end customers,” RIM notes in today’s announcement, also making a not-so-direct reference to Amazon’s sub-$200 Fire tablet and the massively discounted TouchPads from HP (NYSE: HPQ) in the “shifts in the competitive dynamics of the tablet market.”

What’s not clear is whether RIM is effectively now preparing itself to sell these devices at a loss, as Amazon and HP have done, just to get them out into the field to establish some semblance of market share in the face of continuing domination from the Apple (NSDQ: AAPL) iPad.

One of the bigger stumbling blocks for the PlayBook, in addition to price, has been its functionality: those who want to use their BlackBerry email on PlayBooks need to have their smartphones physically tethered to the PlayBook to make the service work. Other popular BlackBerry features like BBM don’t feature on the tablet at all. The updated QNX operating system, which may have gone some way to adding this functionality, was expected by now but it won’t be coming out until February 2012. (Those who buy the PlayBook now will get an upgrade to QNX 2.0 free of charge, the company noted.)

Also provided today was a little bit of a preview of what we might see in RIM’s Q3 results, which will be out December 15. RIM says that it has sold 150,000 PlayBook tablets into the channel in Q3, and it says that its internal data indicates that sell-through of those devices was even higher than that amount. It also noted that it has shipped 14.1 million BlackBerry smartphones for the quarter, which is in line with previous guidance of between 13.5 million and 14.5 million.

But it also admitted that revenues will be lower than previous guidance of $5.3 billion – $5.6 billion, partly because of the PlayBook charge and because of ongoing costs related to the service outage from this past autumn. Earnings per share will also be at the lower end of its forecast, it said.

Looking ahead, RIM is not holding out huge hopes for Q4, with shipments to be lower than those of Q3, because of lower-than-expected sell-through of shipments from the third quarter (that inventory overhang getting corrected again, it seems), and lower demand in general for RIM’s devices. In line with that the company also added that it no longer expects to meet its full-year guidance for earnings per share, either.

All in all, it looks like year that RIM would like to close off sooner rather than later to look ahead for a brighter 2013.