The gap between reality and RIM's management's grasp on it is now so wide as to be all but unbridgeable. Martyn Warwick reports.
Things are now so bad at Canada's Research in Motion that the company has been forced to announce that it will take a "one-time" hit in its Q3 financial posting as it writes-off an incredible US$485 million to account for a warehouse full of BlackBerry devices that are so well past their sell by date the company couldn't even give them away. But, reading the company's marketing puff you'd think everything in the garden is lovely.
RIM says that the "exceptional" charge of close half a billion bucks worth of unsold inventory "reflects the current market environment". In other words RIM remains deep in the doo-doo.
The company claims it sold some 150,000 Blackberry PlayBook tablets "through the channels" in Q3 and "more than that" (whatever that means) "directly to end customers". RIM also says it shifted 14.1 million BlackBerry smartphones in the a same period. (RIM's Q3 closed on November 26). This figure falls neatly (and just) into the top end of the company's forecast for its smartphone range for the 12 weeks. This was set at between 13.5 million and 14.5 million sales. That said, the company acknowledges that it will miss its full-year earning forecast by the proverbial country mile.
But, in the face of such adversity, is RIm downhearted? No! Is it delusional? Yes! The company reckons that dismal sales of its PlayBook device will be reversed because the company is to "increase promotional activity". However, gilding the lily with upbeat talk and projections had little effect on the market and RIM's share price fell by 10 per cent as the dismal figures and wishful thinking filtered through. At close of business on Friday, RIM's stock price was down by 71 per cent for the year to date.
The fact is that RIM is still losing market share s despite the introduction of the much-vaunted PlayBook hasn't helped the company cause one little bit. The question now must be, how much longer will already restive shareholders give senior management to put things to rights? Co-captains Balsillie and Lazarides are still at the helm and, lashed together at the whel, continue to steer Research in Motionstraight towards the rocks. A mutiny is surely overdue?
RIM's Q4 forecast figures remain a mysterious work-in-progress even though Q4 itself actually started a couple of weeks ago. All we do know is that RIM expects that shipments in that period will "probably" be lower that in Q3.
But such prospects haven't stopped the company from yattering on about about how great the future is going to be.
Take nonsense like this for example; "Based on the positive response to the [PlayBook] promotions that are underway in select markets, RIM believes this strategy will accelerate adoption of its QNX-based platform by consumers and enterprises, as well as help to drive the development of a vibrant application ecosystem in advance of its next generation BlackBerry smartphones."
This classic case of wishful thinking is then bettered by the claim, "Since the launch of the new promotions across consumer and enterprise channels in the United States and Canada late in the third quarter, the Company has seen a significant increase in demand for the PlayBook." Possibly this is true, but we can't be sure because RIM hasn't released the figures to support the claim. What we do know though is that the majority of the Playbook's that have been sold have been gone for the hugely discounted sum of $199 and RIM is losing a lot cash for every one it shifts at that fire-sale price.
Not to worry though. Miker Lazarides says, “RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy. 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."
Meanwhile, Canada's Industry Minister, Christian Paradis, a man also wearing blinkers along with his rose-tinted glasses even as his sicks his bum in the air and his head in the sand, says "RIM is a Canadian jewel". He also points out that any attempted acquisition of a Canadian enterprise the size of RIM can be stopped by the national government on the grounds that such a such sale would not be of "net benefit" to the country.
Didn't do Nortel any good, did it?
And, did I mention that the latest figures don't include the $50 million charge against revenues resulting from the massive and world-wide BlackBerry and service outage that occurred in Q3? The company's sluggish and partial response to that PR disaster did a lot further to damage RIM's already tarnished reputation.
Buy hey, it's nearly Christmas and then everything will be alright. After all, the company's last market guidance report said that the PlayBook, in combination with the new range of BlackBerry 7 smartphones, will "get the company back on track during the holiday season."
"Now Dasher! Now Dancer, Now Prancer and Vixen! On Cupid! On Comet! On Donner and Blitzen..." Well, as far as RIM is concerned, Donner and Blitzen have turned up early, along with Bad Santa - and, boy, they are mad!
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