[the_sleuth]

Rumour: RIM will take huge write-down charge in PB inventory

This is the real reason for the stock's decline for the past week. A friend of mine working in Bay Street said the rumour is $3 per share charge for inventory write-down and the costs of BIS outage. This would take the book value below $18.92 USD.

It appears this analyst is quoting the same write-down:

RIM: Pac Crest Still Bearish, But Less So - Tech Trader Daily - Barrons.com

With 520.69 million shares outstanding, this would equate to $1.5 Billion write-down and charges.

[Mystic205]

no its not the "real reason" at all... an inventory write down is an EFFECT of company performance, not a CAUSE.

Mebbe just mebbe its simply a consistent quarter by quarter continued decline in company performance, including eroding customer confidence, weak sales of a highly touted but seriously flawed tablet, late introduction dates and poor engineering control.

[Superfly_FR]

no its not the "real reason" at all... an inventory write down is an EFFECT of company performance, not a CAUSE.

Mebbe just mebbe its simply a consistent quarter by quarter continued decline in company performance, including eroding customer confidence, weak sales of a highly touted but seriously flawed tablet, late introduction dates and poor engineering control.

wow ... machine gun kill ...

Maybe it's just that they clear the stock ... just before they launch PB 2 ... *eventually* may them "refurbish" them ... adding a SIM chip and cover adjustment ?
oh, looks like I'm a bit too much enthusiastic after reading this : http://forums.crackberry.com/news-ru...nly-os-669138/
... or not ...

[DBX00]

In order for you to have an inventory write down, the hardware would need to be obsolete. In this case, stores would have to stop selling the product and RIMM would need to be "stuck" with excess inventory. A $3.00/per share loss (given 500 million shares outstanding) would equate to a $1.5 billion loss. Hmm, $1.5 billion / 800,000 Playbook order commitments = an average manufacturing cost of $1,875 for the Playbook. That is just stupid.

They will definitely have margin compression from selling devices at $199-$399 over the course of the quarter. However, the level of that compression is dependent on how many devices they sell over the quarter. If they sell a lot the news story is that they sold 800,000 Playbooks, if they don't then the financial impact is less but you can't push these things out the door. Reality is that they won't write this stuff off as long as they think they are making progress selling to enterprise. Btw, enterprise buy a lot of PCs and if tablets are the next form factor then they should stay in the game.

[princesultan]

In order for you to have an inventory write down, the hardware would need to be obsolete. In this case, stores would have to stop selling the product and RIMM would need to be "stuck" with excess inventory. A $3.00/per share loss (given 500 million shares outstanding) would equate to a $1.5 billion loss. Hmm, $1.5 billion / 800,000 Playbook order commitments = an average manufacturing cost of $1,875 for the Playbook. That is just stupid.

well, you could have an inventory write down if the market value of the inventory is less than the cost of the inventory on its books, so it doesn't necessarily need to be fully obsolete. and to be honest, i doubt they're at the point where they're selling playbooks at below cost.

on top of that, the article says that the write downs would come from accounts receivable, not inventory. so i'm curious to know which receivables are going bad.

[rcheung135]

They still have assets being owed from Lehman Brothers Holdings in Europe...

[princesultan]

They still have assets being owed from Lehman Brothers Holdings in Europe...

so that would make sense then.

[Blackberry_boffin]

What a cagey, cryptic 'analysis'

[the_sleuth]

Well it's all rumour and speculation, nevertheless whether inventory or account receivable write-down, the analysts appear to believe the book value is going down for RIM.

Dec earnings release will bring some surprises: the good (9900/9930) selling well due to refresh to the loyal base and the bad (costs of outage and free apps, maybe asset write-down).

All will be revealed on Dec. 15th

[PhoneAddict]

They still have assets being owed from Lehman Brothers Holdings in Europe...

But that would not be an "Accounts Receivable" as quoted in the story, but some type of loss on investments. Could be just an error in the story.

[Mystic205]

sigh...

As far as results are concerned, for sure a write down affects the P&L but its common practice to throw this stuff in when you know you will fail to beat expectations.

Book value is largely hypothetical mathematics at best.. And as far as market cap is concerned, the story and the belief of the market is what drives the share price...

this is a pointless thread.

Well it's all rumour and speculation, nevertheless whether inventory or account receivable write-down, the analysts appear to believe the book value is going down for RIM.

Dec earnings release will bring some surprises: the good (9900/9930) selling well due to refresh to the loyal base and the bad (costs of outage and free apps, maybe asset write-down).

All will be revealed on Dec. 15th

[lnichols]

I expect the upcoming earnings call to be awful, and investors will be demanding someone's head. Balsillie's would be the best peace offering to investors as he seems to provide little to no value add other than making statements that never materialize.

[inicophone]

I think Jim is going to be the one to go. He'll probably stay on the board, but he will stand down and leave the CEO title to Mike.

I am yet to see what he brings as so far, it's just statements that are, quite frankly, questionable and wild at best.

[lawguyman]

I expect the upcoming earnings call to be awful, and investors will be demanding someone's head. Balsillie's would be the best peace offering to investors as he seems to provide little to no value add other than making statements that never materialize.

I agree that Balsille usually can't put a sentence together and when he does, it almost always contains some lie or severe exaggeration.

But, I think that RIM's falling so far behind in technology is not Balsillie's fault. Lazaridis is the tech guy and he should take the blame for that.

Lazaridis was pushing SurePress and SureType as its technological accomplishents when everyone else was focusing on things that people actually cared about. It took RIM years to come up with a decent web browser and it had to buy Torch Mobile to do that. It took RIM years to come up with a competitive OS and it had to buy QNX to do it. This is all Lazaridis's fault.

He was not moving the company forward and, in fact, seems to have resisted change. He refused to put cameras on RIMs phones. He was against putting any kind of mp3 player on phones. He denied the importance of touchscreens ("who wants to type on glass!"). He decided against faster processors in favor of better battery life.

Lazaridis was wrong every single step of the way. It would have been hard to misread the market any more than he did.

[Rootbrian]

I always laugh at rumours because some of the time they aren't true, but just negative hype. I take it as a rain of salt until anything real happens.

Posted from my CrackBerry at wapforums.crackberry.com

[the_sleuth]

More news....

RIM's inventory overhang could crimp future results

DAVID MILSTEAD | Columnist profile | E-mail
From Tuesday's Globe and Mail
Published Monday, Nov. 21, 2011 6:32PM EST
Last updated Monday, Nov. 21, 2011 6:54PM EST


Research In Motion (RIMM-Q17.36-0.83-4.56%) has had some difficulty selling its products this year, to put it mildly; that has, in turn, provided investors with a couple of deeply disappointing quarters.

RIM optimists who hope to put the last six months behind them, however, should be warned: Lurking in RIM's financial statements are warnings that this summer's dismal performance is creating an overhang that could further crimp RIM's future results.

The chief warning sign are the ballooning inventories at RIM, which have doubled in just two quarters from $600-million (U.S.) in late February to almost $1.4-billion in late August.

Much of that inventory are the raw materials need to make BlackBerrys and PlayBooks. But �finished goods� inventory � products ready to sell, but unsold � tripled in that time to $298-million from $94-million.

RIM's accounting policies suggest most of that finished-goods inventory is PlayBooks. (Last week's announcement that the first-generation PlayBook will now be sold for as little as $199 seems to be further evidence.)

RIM, in keeping with industry practice, has traditionally booked revenue for its products when they were sold to retailers and wireless carriers � not when those products were ultimately sold to the end user.

RIM then subtracted from revenue an allowance for future discounts and sales incentives used to get BlackBerrys into consumers' hands.

This was not a big deal when BlackBerrys flew off the shelves. But, according to disclosures in the company's securities filings, RIM changed its accounting policy this fiscal year to recognize that a retailer or carrier has the right to return unsold products.

RIM also disclosed that now, if it cannot �reasonably and reliably� estimate product returns �based on historical experience,� it waits to recognize revenue when a product �sells through the distribution channel� to the end user.

A logical interpretation of that: Since the brand-new PlayBook has no historical sales and return data, RIM isn't recognizing revenue on the PlayBooks until they're sold to the end user.

BlackBerrys, on which revenue is recognized when they pass to retailers, wouldn't be counted on the financial statements as inventory, but the PlayBooks would. And that would explain the tripling of finished-goods inventory levels.

What does RIM say about this? I don't know. I first approached the company Oct. 10 with my questions. After a series of phone calls and e-mails, a RIM spokeswoman now seems unwilling or unable to answer the queries.

But there are a couple more things I can observe: If RIM is delaying booking PlayBook revenue, it deserves credit for a conservative accounting policy. However, it also has created a situation in which it may have to take a writedown on some amount of that $298-million in finished goods inventory if it cannot clear out the piled-up PlayBooks at the new discount prices.

Analyst Jeff Fidacaro of Susquehanna Financial Group notes that at discount prices of around $199 for the PlayBook, RIM will be taking a loss on the tablet's hardware compared to the $205 that IHS iSuppli estimates the components cost.

That means RIM's gross margins, already under pressure, could decline further as devices are sold at a discount. Any of the unsold PlayBooks would have to be written off in a non-cash charge that flows directly to RIM's bottom line.

�I think there is a chance of a writedown given the obvious efforts to clear product out of the channels,� says analyst Barry Richards of Paradigm Capital.

However, Mr. Richards believes some of the impact of potential PlayBook clearance sales were already built into the company's guidance for the quarter that ends this month. Excluding these discount sales, RIM's margins �might actually be better than we expected.�

The future earnings hazards are not all PlayBook-related. If RIM is applying historical estimates of incentives and returns for BlackBerrys in calculating its revenue-netting number � and the current experience turns out to be worse than RIM's estimates � there is the potential for additional downward adjustments to revenue and income.

To be clear: These issues won't be the key driver of RIM's stock price; the company's latest sales, profit and BlackBerry-shipment numbers will make the headlines.

But in what has become a lost year for RIM, they threaten to pour salt in investors' wounds.

RIM's inventory overhang could crimp future results - The Globe and Mail

[anthogag]

Let's hope this round of playbook price discounts sells a large chunk of inventory.
The only pb they're selling at cost is probably the 16 GB pb.

Stormy seas for RIM right now, a metamorphosis is never easy to watch

[Caymancroc]

Reminds me of the Seinfeld....

[YT]http://www.youtube.com/watch?v=rCZRqH7sRyA&feature=youtube_gdata_player[/YT]

[anthogag]

Brilliant video for this thread, thanks

[princesultan]

hahah, good ol' seinfeld.

[blackberrystorm1234]

I agree that Balsille usually can't put a sentence together and when he does, it almost always contains some lie or severe exaggeration.

But, I think that RIM's falling so far behind in technology is not Balsillie's fault. Lazaridis is the tech guy and he should take the blame for that.

Lazaridis was pushing SurePress and SureType as its technological accomplishents when everyone else was focusing on things that people actually cared about. It took RIM years to come up with a decent web browser and it had to buy Torch Mobile to do that. It took RIM years to come up with a competitive OS and it had to buy QNX to do it. This is all Lazaridis's fault.

He was not moving the company forward and, in fact, seems to have resisted change. He refused to put cameras on RIMs phones. He was against putting any kind of mp3 player on phones. He denied the importance of touchscreens ("who wants to type on glass!"). He decided against faster processors in favor of better battery life.

Lazaridis was wrong every single step of the way. It would have been hard to misread the market any more than he did.

Good Call: Balsillie, Lazaridis, step down as RIM CEOs - CityNews