RIM devalues Playbook Inventory by $485 Million

Research In Motion said that it will record a $485 million charge on the inventory valuation of the company's BlackBerry PlayBook tablets when it reports results for its third business quarter later this month. "A number of factors have led to the need for an inventory provision in the third quarter," said RIM co-CEO Mike Lazaridis.

However, RIM has no intention of emulating HP, which quickly sold off its remaining TouchPad tablet inventory and abandoned the market last August. The BlackBerry maker's goal is to dramatically increase the number of PlayBooks in the hands of more customers by cutting prices.

The PlayBook inventory write-down is merely the first page in RIM's new playbook for more effectively competing with lower-priced tablet models such as Amazon's $199 Kindle Fire and the new $249 Nook Tablet from Barnes & Noble. RIM is also aware that delays in the release of the new PlayBook OS 2.0 software featuring more advanced capabilities has hindered the BlackBerry tablet's immediate sales prospects at the old price.

Lazaridis said RIM remained committed to the PlayBook platform and believed the tablet market was still in its infancy.

"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," Lazaridis said.

By reducing the PlayBook's retail price, RIM hopes to drive the development of a vibrant application ecosystem in advance of the launch of its upgraded BlackBerry smartphones. However, the PlayBook's sales prospects - even at sharply reduced prices - are limited because of the relatively few applications and multimedia entertainment options available for the current PlayBook platform.

Even with the special promotions, RIM said that it only sold 150,000 PlayBook units to retailers and distributors during the business quarter which ended on Nov. 26. On the other hand, RIM said its own internal numbers indicate that the actual sell-through to consumers was even higher as distributors presumably moved to clear their store shelves.

Still, it remains unclear whether RIM's new PlayBook strategy will put into play enough units to encourage software developers to create more apps for the company's PlayBook OS 2.0 platform, which is expected to launch in February.

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