Research In Motion Ltd., the struggling maker of the BlackBerry phones, is writing off much of its inventory of PlayBook tablets, since it has to sell them at a deep discount.
The Canadian company on Friday said it's taking a pre-tax charge of $485 million in the just-ended quarter to account for the declining value of the tablets. The model originally priced at $500 now costs $200.
A year ago, co-CEO Jim Balsillie said pent-up interest in the PlayBook was "really overwhelming." Companies are looking for an equivalent of the iPad of corporate use, he said.
In March, Balsillie said "The launch of the PlayBook may well be the most significant development for RIM since the launch of the of the first BlackBerry device back in 1999."
But when the tablet went on sale in April, reviewers puzzled over the lack of email software, saying the device seemed half-baked. RIM now promises updated software in February.
RIM said it shipped 150,000 PlayBooks to stores and distributors in the fiscal third quarter, which ended Nov. 26. "Sell-through," or the number actually bought by users, was slightly higher, reflecting sales of tablets shipped earlier. It shipped 500,000 in the first quarter and 200,000 in the second.
Apple Inc., meanwhile, sold 11.1 million iPad tablets in its most recent quarter, which ended Sept. 24.
RIM Co-CEO Mike Lazaridis said RIM is still committed to the PlayBook, despite its issues.
RIM also said it sold 14.1 million BlackBerrys in the third quarter, slightly better than analysts expected. It then expects sales to fall slightly in the current quarter, roughly in line with analysts' expectations.
The company provided preliminary revenue and profit figures for the third quarter that were lower than it previously projected, but not a surprise to analysts.
RIM said it expects earnings at the "low to mid point" of the $1.20 to $1.40 per share it previously forecast. Analysts polled by FactSet have on average been expecting $1.18 per share.
The company expects revenue slightly the below the $5.3 billion to $5.6 billion in its previous forecast. Analysts had been expecting $5.27 billion, on average.
RIM shares fell $1.81, or 9.7 percent, to close Friday at $16.77. The stock hit a seven-year low of $15.98 last month.
The PlayBook charge comes as analysts have started to conclude that RIM's management has no chance of really righting the ship. They've started to value the company not on its future prospects, but on how much it would be worth if acquired, broken up, or simply run down while keeping BlackBerry service going.
The company is also taking a charge of $50 million for an embarrassing October outage of email and Web services that lasted days for millions of overseas BlackBerry users. It briefly spread to the U.S. and Canada before the company was able to contain the damage.
RIM reports fiscal third-quarter earnings on Dec. 15.
RIM's announcement is the latest in a string of bad news for the company. A widespread outage frustrated tens of millions of BlackBerry users in October. On Thursday, RIM suspended two employees after their drunken rowdiness forced an Air Canada flight from Toronto to Beijing to be diverted to Vancouver.
RIM has also delayed the launch of new phones with the company's new QNX operating system for several months. RIM disappointed many in October when the company didn't announce a clear timeline for when it would release phones with the new software which is now called BBX.
The Waterloo, Ontario-based company continues to have success overseas but has increasingly lost market share in North America. Many U.S. users have moved on to phones with big touchscreens such as the iPhone and various competing models that run Google's Android software.