With many users waiting for the release of BlackBerry 10 devices in the fall, RIM is possibly facing a large write-off of unsold units that are in stock. The stockpile of PlayBook tablets and BlackBerry smartphones has swelled by over two-thirds in the pas year. This abundance can be attributed to an 18% increase in RIM’s inventory of devices, and that does not even factor in the unsold devices that carriers have sitting in their inventory.
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.”
While many people may be looking at this potential writedown as a risk that could hurt RIM, we see it as a necessary evil in launching the new BB10 platform. I am sure that RIM realized that this was going to be a possibility when they started to develop the QNX based operating system. This isn’t the first writedown that RIM has had to take recently either, has a previous writedown on PlayBook’s has been done.
RIM took a $485 million pretax charge to write down the value of its PlayBook inventory in December, after shipping just 150,000 of the tablet computers in the quarter. Then in March, the company recorded a $267 million expense for BlackBerry inventory. RIM said at the time that it would stop giving sales and profit guidance because of “ongoing weakness” in the U.S.
What do you all think of this possible writedown? And do you think that it will affect RIM in a huge way, or is it merely a necessary evil? Please let us know in the comments.