RIM delays new phone launch, takes a hit on tablets
Research In Motion said it won’t start selling phones with its new software platform until the “later part” of 2012 and had to take a $485 million inventory-related charge on its PlayBook tablet as part of another poor earnings report for the struggling smartphone maker.
Net income in RIM’s third quarter ended Nov. 26 dropped dramatically to $265 million, compared with $911 million in the same period last year. Revenue declined to $5.2 billion from $5.5 billion in the same quarter in 2010. RIM shipped 14.1 million phones during the quarter, up from 10.6 million in the second quarter this year.
Shipments of RIM’s PlayBook tablet continue to drop. The company shipped 150,000 during the quarter, compared with 200,000 in the second quarter this year. RIM has recently launched new promotional programs aimed at boosting sales, and those efforts have helped it work through most of its inventory, said Mike Lazaridis, co-CEO of RIM. However, the increased sales from those promotions won’t be reflected until the fourth quarter. In the meantime, the company took a $485 million charge related to PlayBook inventory in the third quarter.
Despite those challenges, RIM remains committed to the tablet market, executives said. The market is in its infancy and it makes sense to be in both the smartphone and the tablet markets, Lazaridis said. In addition, RIM hopes that when it releases an update to the operating system, which will include native email and a player for running Android apps, sales will improve.
The company also took a $54 million charge related to the service outage it experienced during the quarter.
Once the predominant developer of smartphones used in enterprises, RIM has failed to keep up with new competition from Apple, Google and others. It is preparing an overhaul of the software that runs on its phones but must convince people to buy its current generation of phones until that new platform is released. That is proving to be a challenge already. The company expects to ship between 11 million and 12 million phones in the fourth quarter, down from 14 million in the third. But RIM has now decided to push the launch of that new platform back.
While RIM previously hasn’t been specific about when it would launch the new phone platform, many observers had expected the phones to appear as early as the first quarter of 2012. Now RIM says it won’t ship until the “later part” of 2012 because the company has decided to use a more advanced chipset that will offer improved power efficiency. The chipsets won’t be available until the middle of the year, according to RIM.
In the meantime, RIM promised investors that it would aggressively work to cut costs. “I want to reiterate our commitment to completing this challenging transition. We’ll leave no stone unturned when evaluating the business,” Lazaridis said.
The company is looking at its supply chain, partnerships, licensing opportunities, organizational and management structure, and the number of products it releases for places to cut costs or improve performance. It is not looking at reducing headcount, however, they said.