12/02/2011 09:43 EST | Updated 12/02/2011 11:45 EST

Research In Motion's PlayBook Leads To $485 Million Write-Down


TORONTO - Research In Motion Ltd. expects to miss its own financial targets this year as the company books a big charge for the discounts it is forced to take because of poor sales of its PlayBook tablets.

The company, best known for creating BlackBerry smartphone devices, warned investors on Friday that it will take a pre-tax charge of about US$485 million in the third-quarter on the high PlayBook inventory that it has been trying to sell off with deep discounts in recent weeks.

The impact will cause RIM to miss its full-year forecast of earnings per share between $5.25 and $6, it said, as costs rise.

"The company now believes that an increase in promotional activity is required to drive sell-through to end customers," RIM said in a release.

"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."

Third-quarter adjusted earnings per share are expected to come in "at the low to mid point" of $1.20 to $1.40.

RIM shares fell 98 cents, or 5.3 per cent, to US$17.60 in pre-market trading Friday. The stock hit a seven-year low of $15.98 last month on U.S. markets.

Sales of the PlayBook have been weaker than expected for the company as it battles for a position among competitors like Apple's iPad and e-readers such as the Kindle.

In recent months, some retailers have drastically slashed the selling price of PlayBooks to clear out their inventory.

"Early results from recent PlayBook promotions indicate a significant increase in demand across most channels," said RIM's co-CEO Mike Lazaridis in a release.

RIM (TSX:RIM) said the charge of $360 million after tax includes such factors as the promotional activity revolving around the push for higher PlayBook sales.

The company moved about 150,000 BlackBerry PlayBook tablets into the market during the fiscal 2012 third quarter, which ended Nov. 26.

And it expects the sales of tablets to customers was actually higher than this number, though it did not include estimates.

In the key U.S. market, the model originally was priced at US$500 but now costs $200.

When the company launched the tablet this spring, reviewers criticized its lack of email software, saying the device seemed half-baked.

RIM now promises updated software in February.

RIM also disclosed Friday that it expects to take a $50 million hit against its revenue related to the widespread service outage that affected users in October. Adjusted revenue is expected to come in at between $5.3 billion and $5.6 billion, it said.

Meanwhile, the company also said it sold 14.1 million BlackBerrys in the latest quarter, slightly better than analysts expected.

RIM reports fiscal third-quarter earnings on Dec. 15.