[cgk]

Research In Motion Ltd. (RIMM) (RIMM)’s stockpiles of BlackBerry smartphones and PlayBook tablets have swollen by two-thirds in the past year because of slumping sales, raising the chances of the company’s third writedown since December.

The value of RIM’s in-house supplies grew 18 percent last quarter alone, a faster rate than at any other company in the industry, according to data compiled by Bloomberg. And that doesn’t include the BlackBerrys gathering dust at RIM’s carriers and retail partners. Apple Inc. (AAPL) (AAPL), meanwhile, saw its inventory decline 11 percent in the period from the previous three months.

RIM faces an exodus of customers switching to Apple’s iPhone and devices running Google Inc. (GOOG) (GOOG)’s Android operating system. While the company is preparing to release a new lineup of phones based on the BlackBerry 10 software, the transition makes its current models even less appealing. That means RIM is more likely to record another quarterly expense next month to account for the inventory’s declining value, said Neeraj Monga, an analyst at Veritas Investment Research in Toronto.

“Clearly this stuff isn’t selling,” said Monga, who maintains a buy recommendation on RIM’s stock in anticipation of the company being sold. “Despite all the writedowns they’re taking on the inventory, these inventory levels are not dropping.”

RIM Writedown Risked With $1 Billion Inventory: Corporate Canada - Businessweek

Horace Dediu (and if you are interested in the numbers side of mobile and are not reading Horace, you are missing out - no bluster, no trash-talk, just lets the numbers speak for themselves), suggests that:

RIM has just entered what I call the Post-traumatic period of a phone maker’s life. This period is defined as beginning with a loss-making quarter and ending with the company’s exit from the business. These post-traumatic periods were visualized first here and the pattern was first discussed about a year ago here.

Post-traumatic life expectancy of phone vendors | asymco

[cgk]

Couple of initial thoughts about this:

1) Further discounting on the playbook to shift units?

2) The level at which this is raising suggests that either the channel is already choked with inventory or carriers/retails are significantly reducing orders - more than likely a mixture of the two.

My *guess* is that the low margin, high volume curves are still selling through to enterprise, lower social-economic groups, children and people in the third world but it's the higher priced 'premium' Bolds that are not selling.

Also if we say half the write-down is on playbooks, then the total write-down is about $2 billion - some people on here have claimed this is a deliberate strategy to use the playbook as a test-bed. Can those people get in touch as I have a great offer on a bridge I wish to discuss with them.

[lawguyman]

Playbooks have already been written down. This has to be just about phones. My guess is it is mostly the non-9900/9930 7.0 phones, although I don't think the 9900/9930 are selling too well either.

[cgk]

Playbooks have already been written down.

I didn't think they wrote down the full value? It sounds like that is what will occur this time, they will write them down to zero.

[ekv]

Hope it places more BBs in hands of people who cant afford it Perhaps, they would understand its potential instead of getting a low end android

Sent from my BlackBerry 9900 using Tapatalk

[Stewartj1]

Also if we say half the write-down is on playbooks, then the total write-down is about $2 billion - some people on here have claimed this is a deliberate strategy to use the playbook as a test-bed. Can those people get in touch as I have a great offer on a bridge I wish to discuss with them.

I think the PB's were intended, in part, as a beta platform but were expected to make money or at least break even.

Good pun, "I have a BRIDGE....". LOL

[cgk]

Pretty much every OS is launched as 'beta' with the early adopters providing feed-back for development but there has been an attempt at revisionist history by some to suggest that they *expected* to lose billions of dollars on the platform - that's a step too far into conspiracy theory for me.

[lawguyman]

I didn't think they wrote down the full value? It sounds like that is what will occur this time, they will write them down to zero.

We only know the amount of the writedown, not their original value or the post-writedown value of Playbook inventory. The way the numbers worked, it appeared that the Playbooks were written down to $0 (that or RIM has a huge inventory). But, could be wrong about that.

It is also possible that there will not be any additional writedown because whatever inventory that is being carried is normal or planned.

[dandbj13]

Playbooks have already been written down. This has to be just about phones. My guess is it is mostly the non-9900/9930 7.0 phones, although I don't think the 9900/9930 are selling too well either.

Thing is, BB7 phones have also been written down.

[conix67]

I think the PB's were intended, in part, as a beta platform but were expected to make money or at least break even.

Good pun, "I have a BRIDGE....". LOL

If PB's were intended to be a beta platform, RIM deserves the trouble they are going through right now.

[Stewartj1]

If PB's were intended to be a beta platform, RIM deserves the trouble they are going through right now.

I'll rephrase that to TEST BED then.

[Chrisy]

So when is the 9930 going to be less expensive?

[southlander]

The playbook as a "testbed" for the BB10 platform was surely not its sole purpose. Obviously RIM hoped it would sell well and generate growing revenue as well. They were wrong. And being wrong, the only thing one could salvage is to use the PlayBook to foster the coming BB10 apps as much as is possible. Thus the discounting and free PlayBooks for devs, etc.

Sent from my BlackBerry Bold 9930 using Tapatalk

[anthogag]

RIM is definitely now in the next transition phase where their exciting new smartphone experience is now too close, many people are waiting for it and some are thinking screw-it, I'm not going to wait x-months

[Sucroid]

We only know the amount of the writedown, not their original value or the post-writedown value of Playbook inventory. The way the numbers worked, it appeared that the Playbooks were written down to $0 (that or RIM has a huge inventory). But, could be wrong about that.

It is also possible that there will not be any additional writedown because whatever inventory that is being carried is normal or planned.

I wonder if there is going to be another round of fire sale of BBs and PBs.

P.S. $1 billion write-down sounds a little high.

[Tre Lawrence]

The playbook as a "testbed" for the BB10 platform was surely not its sole purpose. Obviously RIM hoped it would sell well and generate growing revenue as well. They were wrong. And being wrong, the only thing one could salvage is to use the PlayBook to foster the coming BB10 apps as much as is possible. Thus the discounting and free PlayBooks for devs, etc.

Sent from my BlackBerry Bold 9930 using Tapatalk

Ah... logical and concise. This makes sense.

When people start saying that this whole fiasco was calculated to occur JUST like this by RIM, I start to worry.

[cgk]

I wonder if there is going to be another round of fire sale of BBs and PBs.

P.S. $1 billion write-down sounds a little high.

I'm not sure sure - if we are seeing an 18% in one quarter, there could be a lot of product hanging around - as mentioned above my *hunch* is that it will be the 'premium' phones because they don't actually have any perceived premium value in the market.

[Sucroid]

Ah... logical and concise. This makes sense.

When people start saying that this whole fiasco was calculated to occur JUST like this by RIM, I start to worry.

Not every business decision can be a success. The question is how do you deal with a failed launch. In RIM's case, it's using the PB experience and build a phone that can withstand the competition.

I don't understand all the doom and gloom surrounding RIM. If Mr. Heins didn't believe there is chance to make it through BB10 launch, why bother transforming the relationship with devs? I don't know any dev who would knowingly develop for and get excited over a sinking ship.

[machus]

I'm not so surer about further write downs. Most of the of the inventory seems to be raw materials. See A Hidden Reason Research In Motion's Future Looks Bright - DailyFinance

[Rickroller]

I don't understand all the doom and gloom surrounding RIM. If Mr. Heins didn't believe there is chance to make it through BB10 launch, why bother transforming the relationship with devs? I don't know any dev who would knowingly develop for and get excited over a sinking ship.

Well of course Heins believes he can transform the company..he's getting paid to. But whether or not he can is the question, and only time will tell. As for the developers..if they wouldn't develop and get excited over a sinking ship, then perhaps this is why the PB AppWorld is still a barren wasteland..

[addicted44]

I wonder if there is going to be another round of fire sale of BBs and PBs.

P.S. $1 billion write-down sounds a little high.

Their inventory is estimated at $1Bn. At the peak of their operations, they maintained inventory worth 500mn. I doubt they will write down the entire 1bn. Most likely 200-300mn.

[Geeoff]

Thor hinted at this in the previous earnings call.

Quoting from Thor, the bad news is: "The Bold 9900 is doing well in its market segment of full credit professionals as an iconic and high-productive device, and it is as well addressing consumers. However, this segment is not growing as quickly as the market for full touch-based devices. Our current full touch devices face a challenging position in the market, given all the various competitive products out there."

But fear not Blackberry fans! All is not lost!

Brian, the CFO also said: "Estimated sell-through in the quarter was strong at approximately 13.6 million units, including phone-only sales." As well, "In Q4, we shipped over 500,000 PlayBooks and sell-through to end customers based on RIM's internal data was higher than this."

A "strong sell-through" implies inventory levels that were not bloated with finished product at that point in time.

Combining this information, along with the excellent inventory article posted a couple comments before mine, and the overall picture is one where inventory might be growing, but it is not completely out of line with recent expectations.

So maybe there will be another inventory write-down, but it is not an insurmountable problem. And any write-down will not be for a billion dollars.

[kill_9]

When Research In Motion decided to pursue consumers, rather than maintain their focus on the government, business, and professional user market demographic, it marked the beginning of the turmoil and quagmire in which it finds itself today. With the proper marketing strategy the BlackBerry PlayBook might have been adopted by organizations and professional-level Blackberry smartphone users thereby avoiding the write-downs. Only two models of smartphone are needed: full QWERTY keyboard (Bold) and touchscreen with side-sliding keyboard or embedded front-facing QWERTY keyboard (Torch or concept Blade). Then introduce the BlackBerry Mobile Fusion suite allowing heterogeneous mobile device management (MDM) for those smartphones and tablets from Apple et al. within the BlackBerry Enterprise Server environment.

[W Hoa]

To quote from the article machus pointed to:

Advanced inventory


I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)


A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."

On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.

What's going on with the inventory at Research In Motion Limited? I chart the details below for both quarterly and 12-month periods.

[addicted44]

When Research In Motion decided to pursue consumers, rather than maintain their focus on the government, business, and professional user market demographic, it marked the beginning of the turmoil and quagmire in which it finds itself today. With the proper marketing strategy the BlackBerry PlayBook might have been adopted by organizations and professional-level Blackberry smartphone users thereby avoiding the write-downs. Only two models of smartphone are needed: full QWERTY keyboard (Bold) and touchscreen with side-sliding keyboard or embedded front-facing QWERTY keyboard (Torch or concept Blade). Then introduce the BlackBerry Mobile Fusion suite allowing heterogeneous mobile device management (MDM) for those smartphones and tablets from Apple et al. within the BlackBerry Enterprise Server environment.

I completely disagree. The reality is that RIM did not focus on consumers soon enough (the Pearl was not "focusing" on consumers, but just packaging their business product in a slightly more consumer friendly case). What is hurting BB sales is not businesses saying that BB is not the best business device out there. What is hurting BB sales is businesses allowing their employees to make the decision as to which device they carry.

Additionally, the dead easy and powerful development tools for the other OS platforms has made them increasingly powerful business tools, since many can easily deploy custom applications to improve employee efficiency.