1. kennyliu's Avatar
    I've seen the above mentioned numerous times now.

    Book value of inventory is initially stated at the cost to produce. It doesn't matter how much you expect to profit, inventory is recorded at cost. A writedown occurs when the fair market value is less then the production cost.

    Assume something costs $100/unit to produce. You feel you can sell it for $250/unit. Inventory value is $100/unit. The $250 amount doesn't appear in the books.

    If market value of the same item were to fall to $75/unit, a maximum writedown could be taken to the amount of $25/unit. Inventory value would then be $75/unit.

    A writedown can only occur when market value falls below inventory value. Inventory value is the cost to produce. The value of the writedown is the difference between production cost and fair market value.
    Thanks. Indeed, re: GAAP, you use the lower of the cost or market value for inventory valuation.

    But wasn't the $0.5 bln a write-off? In which case, RIM simply wrote off the entire value of the inventory (as they probably were taking a huge loss on each unit) and now recording the sales as revenue. Which doesn't of-course change the obvious fact that at current prices they are still losing money.
    Last edited by kennyliu; 03-31-12 at 01:24 PM.
    03-31-12 01:22 PM
  2. kennyliu's Avatar
    So it's even worse than I thought. If we assume a production cost of $200-250 (based on previous reports) for each PlayBook, with an average of, say, $210 (based on the assumption that most units sold are 16GB models), $485 million divided by $210 means there were 2.3 million units in inventory at the time of the write down, which was offered at the same time RIM reported 850K units shipped. Even if we assume a running rate of 500K units a quarter, that means we're still talking a full year of unsold inventory.
    Yes. $0.5 bln should translate into 2 mln units at $250 cost. Even more if the cost was less. I guess it has something to do with the initial inventory contracted from Quanta though.

    cleacy, can the inventory that hasn't been yet produced or received from Quanta be written off?
    Last edited by kennyliu; 03-31-12 at 01:37 PM.
    03-31-12 01:28 PM
  3. kb5zht's Avatar
    Thats actually good for them since they lose money on every one sold, maybe next quarter they can get that down to 250,000
    What you must not know is that many tablets sell at a loss. The kindle fire is selling at a loss, each unit. And boy have they outsold the playbook.

    The strategy is to make your profit on apps. Thats why so many people screaming "its not about the apps!" have it partially wrong. Ipads probably sell at a profit. Heins recently made very controversial comments that can be interpreted many different ways. Regardless of which you subscribe to, if rim is dumping the consumer side of things in such a way as to run off app developers, you can kiss this playbook goodbye. Companies do not stay in business by losing money.
    03-31-12 02:19 PM
  4. cleacy's Avatar
    Yes. $0.5 bln should translate into 2 mln units at $250 cost. Even more if the cost was less. I guess it has something to do with the initial inventory contracted from Quanta though.

    cleacy, can the inventory that hasn't been yet produced or received from Quanta be written off?
    In regards to not yet produced (or paid for), no. I'm sure however that there were costs with ending contracts to produce (assuming they're not still manufacturing), which can be inventoried . Goods in process however but not yet received are part of inventory, and are subject to any writedowns.

    Is there anyone here employed by RIM that purchased a $99 playbook last November/December? The terms on the purchase was that the employee would be subject to a taxable benefit if they took advantage of the purchase. $99 + the amount of that benefit should indicate what they're valuing the playbook at.
    kennyliu likes this.
    03-31-12 02:31 PM
  5. Unsure2's Avatar
    A 3/30/12 article at Slashgear says RIM has reported Playbook sales of more than 1 million, see below. If true, that's disappointing. Hadn't sales already reached 1 million before the end of the year? I would think that at $200, the PB should be selling briskly--unless market saturation has already been reached. With the wildly different numbers reported, is there any definitive word on just how many Playbooks have been sold?

    Complete article at: RIM Blackberry Playbook boasts a million and counting - SlashGear

    "Determined to actually drive some good publicity for itself, Research in Motion has announced that more than a million Playbook tablets have made their way to end users, a little over a year after it was first introduced to the market. Of course, at this point RIM is losing money on every Playbook it sells, and probably isn�t making that money back on apps and content, so the good news only goes so far."
    04-01-12 12:44 AM
  6. Pearl9100's Avatar
    A 3/30/12 article at Slashgear says RIM has reported Playbook sales of more than 1 million, see below. If true, that's disappointing. Hadn't sales already reached 1 million before the end of the year? I would think that at $200, the PB should be selling briskly--unless market saturation has already been reached. With the wildly different numbers reported, is there any definitive word on just how many Playbooks have been sold?

    Complete article at: RIM Blackberry Playbook boasts a million and counting - SlashGear

    "Determined to actually drive some good publicity for itself, Research in Motion has announced that more than a million Playbook tablets have made their way to end users, a little over a year after it was first introduced to the market. Of course, at this point RIM is losing money on every Playbook it sells, and probably isn�t making that money back on apps and content, so the good news only goes so far."
    Disappointing is right indeed. And there is a lot of misinformation floating around. But one thing is for sure...the numbers are disappointing no matter how you cut it. This is such a huge disaster. To me, it is only a matter of time before Rim seriously considers axing the pb. But at least I am glad that heads are rolling. That is one step in the right direction...but there are many steps ahead.
    04-01-12 02:29 AM
  7. Unsure2's Avatar
    Disappointing is right indeed. And there is a lot of misinformation floating around. But one thing is for sure...the numbers are disappointing no matter how you cut it. This is such a huge disaster. To me, it is only a matter of time before Rim seriously considers axing the pb. But at least I am glad that heads are rolling. That is one step in the right direction...but there are many steps ahead.
    Well, stockholders would have a different perspective; but, as a Playbook owner, I hope RIM goes on supporting the device (and its OS) for years to come. But, if the PB really is not selling well even at $200, I suppose RIM won't have a lot of choice.
    04-01-12 04:03 AM
  8. FSeverino's Avatar
    Is there any groups of reason not to buy a playbook for $200 considering that isnthe same price as the fire?

    I'm not trolling, I'm asking an honest question and looking for honest answers.
    04-01-12 04:26 AM
  9. cleacy's Avatar
    Is there any groups of reason not to buy a playbook for $200 considering that isnthe same price as the fire?

    I'm not trolling, I'm asking an honest question and looking for honest answers.
    Media content.

    Personally, I think the Playbook is a great device compared to the Kindle Fire if you don't require a commercial source for media (music/video), and are comfortable with taking any necessary steps to obtain it yourself and move it to the Playbook. If you want something inexpensive though that's easy to obtain content on, it's going to be the Kindle Fire.
    04-01-12 08:42 AM
  10. Pearl9100's Avatar
    Well, stockholders would have a different perspective; but, as a Playbook owner, I hope RIM goes on supporting the device (and its OS) for years to come. But, if the PB really is not selling well even at $200, I suppose RIM won't have a lot of choice.
    well...it is okay with me if stockholders and I disagree if it was a good choice or not. I think looking back we will see that this musical chair bit with rim will benefit the company in the long run because we are ousting the people who got rim into this position.

    And I agree...if slashing prices to 200 doesn't work....then I don't know what will save the pb.
    04-02-12 12:38 AM
  11. greatwiseone's Avatar
    Why are people comparing the sales numbers of the PlayBook against the iPad? It's no point. The iPad is killing every tablet manufacturer. It's much better to compare Playbook sales with sales of other tablet devices (Android right now). RIM will never sell 3 million PlayBooks in one weekend and so stop saying it's disappointing that PlayBook is not outselling the iPad.
    04-02-12 02:02 AM
  12. Unsure2's Avatar
    Not comparing Playbook sales to those of the iPad. As competitors have found, the iPad is a tough act to follow. Fortunately, the Playbook does not really compete against the iPad. The Playbook, at $300 less than the iPad and 7" vs 10", has its own niche--or, should. When RIM dropped the price to $200, the PB seemed to sell like hot cakes; but, many of us wondered if RIM could really afford to go on selling it at that price. Now, if it's true that sales are stalling even at $200, what else can RIM do? Sell at $150?
    04-02-12 03:00 AM
  13. Unsure2's Avatar
    Media content.

    Personally, I think the Playbook is a great device compared to the Kindle Fire if you don't require a commercial source for media (music/video), and are comfortable with taking any necessary steps to obtain it yourself and move it to the Playbook. If you want something inexpensive though that's easy to obtain content on, it's going to be the Kindle Fire.
    Got to agree on the media, although the Playbook, if you can get it the media, can do some neat things, like play it to your HDTV over its HDML port.

    There's an additional reason why some might prefer the Fire: apps. The Android Fire has a huge selection of apps; the Playbook, because of its unique OS and not as much developer support, still lacks some key apps, including Netflix.
    04-02-12 03:07 AM
  14. howarmat's Avatar
    Got to agree on the media, although the Playbook, if you can get it the media, can do some neat things, like play it to your HDTV over its HDML port.

    There's an additional reason why some might prefer the Fire: apps. The Android Fire has a huge selection of apps; the Playbook, because of its unique OS and not as much developer support, still lacks some key apps, including Netflix.
    this is not a huge selling point anymore really. many phones have this capability and so do the playbooks competitors in the tablet world. I will admit that the presentation mode is a advantage over some of the other tabs/phones out there though.
    04-02-12 08:49 AM
  15. Pearl9100's Avatar
    Not comparing Playbook sales to those of the iPad. As competitors have found, the iPad is a tough act to follow. Fortunately, the Playbook does not really compete against the iPad. The Playbook, at $300 less than the iPad and 7" vs 10", has its own niche--or, should. When RIM dropped the price to $200, the PB seemed to sell like hot cakes; but, many of us wondered if RIM could really afford to go on selling it at that price. Now, if it's true that sales are stalling even at $200, what else can RIM do? Sell at $150?
    Exactly. I am not comparing it to the iPad. But no matter how you cut it the pb did not meet expectations and cost rim half a billion in write downs...how can a company remain sustainable with a product like that?
    04-02-12 11:28 AM
  16. BBOttawa's Avatar
    Umhh...economist pretender dudes, you do realize that they sold probably around 500,000 of their total sales of Playbooks at normal retail price before the fire sales began? So all your calculations are in fact, wrong as to the number of units produced, and remaining, and the actual cash loss for RIM getting to test drive their make or break BB OS10 SDK, attract developers, and optimize code.

    RIM was cash flow positive over $600 million last quarter, and has over $2 billion cash in the bank. They are not bleeding cash over Playbook sales right now. Selling better was the goal, but the end result is not horrible, it sets the table for BB OS10 phones which are entering carrier acceptance in late June/early July according to the last earnings call. They ain't dead yet.
    peter9477 and TheScionicMan like this.
    04-04-12 10:42 PM
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