With the Research in Motion (TSX: RIM) PlayBook tablet selling for about half its original price, RIM said Friday it is taking a $485 million charge on its third-quarter books.
RIM also said it is taking a $50 million charge for its near-global three-day network outage in mid-October after offering customers free apps and tech support.
Sales of the PlayBook exceeded 150,000 in the third quarter, RIM said Friday, down from about 500,000 in the first quarter and 250,000 in the second quarter.
The 7-in. tablet went on sale in April for $499 for the 16GB model. Promotions from various retailers have put the price at $199 or even less.
RIM said in a statement that it “now believes that an increase in promotional activity is required to drive sell-through [of the PlayBook] to customers.” RIM said the delay in the release of its PlayBook OS 2.0 software and recent competition from new tablets have justified the charge. Among the competition is the Kindle Fire 7-in. tablet from Amazon, which went on sale in November for $199.
RIM noted that its promotional pricing has helped sales and that current buyers will get the 2.0 upgrade for free in February.
“RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy,” said Mike Lazarides, co-CEO of RIM in the statement. “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.”
RIM also said it shipped about 14.1 million BlackBerry smartphones of all types in its third quarter, which ended Nov. 26, in the middle point of the 13.5 million to 14.5 million smartphones it told investors it would sell. In recent financial quarters, RIM’s smartphone shipments have fallen below previous guidance.
RIM also said it would take a $50 million charge related to the three-day service outage in mid-October. RIM offered users free apps and technical support.
Excluding that charge, revenue for the third quarter is expected to be slightly lower than earlier guidance of $5.3 billion to $5.6 billion, RIM added. Earnings will be at the low to middle point of the guidance of $1.20 to $1.40 per share, RIM said.