RIM Caps Already Dismal Year with Another Profit Warning

(REUTERS) -- Research in Motion capped an already dismal year with a steep profit warning on Friday, taking a huge charge to write down inventories on its languishing PlayBook tablet and sending its shares tumbling more than 8 percent.

Waterloo, Ontario-based RIM, the company whose ubiquitous BlackBerry virtually invented the smartphone, said it now no longer expects to meet its forecast for full-year adjusted earnings of $5.25 to $6.00 a share, due to the $360 million after-tax writedown on PlayBook inventories and a $50 million charge related to a damaging service outage in October.

RIM launched the PlayBook to unfavorable reviews in April, making it a late arrival to a new market segment where Apple's iPad had established an overwhelming dominance.

It slashed the price of the underwhelming device last month in an effort to drive up anemic sales. RIM sold only about 150,000 tablets in the third quarter, which ended November 26, down from 200,000 in the second quarter - a tiny fraction of the 11 million iPads that Apple sold in its latest quarter.

RIM is continuing to suffer from its Playbook endeavors, said CCS Insight analyst Geoff Blaber. It hurt RIM initially by diverting focus, but muted demand is now becoming clearly visible in the financials.

RIM, which launched its first BlackBerry in 1999, has rapidly fallen out of favor with investors as it struggled to keep pace in the rapidly evolving smartphone market it once pioneered.

In recent months, Apple's iPhone and Google Android devices have gobbled up RIM's once mighty market share.

The one-time technology darling has also been plagued with a series of product missteps and profit warnings, as well as an embarrassing global outage for its BlackBerry network in October, when customers were stranded without e-mail and the popular BlackBerry messaging service for several days.

RIM shares fell 8.7 percent to $16.97 by late morning, and the stock is down more than 70 percent this year. Its Canadian-listed shares fell 8.4 percent to C$17.24, hovering around seven-year lows.

The meltdown in RIM's stock price has actually prompted some analysts to raise their ratings on RIM, with Goldman Sachs contending that the current valuation already fairly captures the fundamental concerns. Speculation has also been rife that RIM could be the target of a strategic buyout.

FULL YEAR EARNINGS

The severe outage in October did little for consumer confidence and undoubtedly dented sales during that time, said Blaber.

RIM had previously forecast full-year earnings of $7.50 a share, but it backed away from that forecast in mid-June, due to product delays and lackluster sales.

Bernstein Research analyst Pierre Ferragu said the latest cuts come as no surprise.

What is more worrying, of course, is the profound denial the tone of the release reflects. Although it appears obvious to us that RIM's current strategy is bound to fail rapidly, the company continues to support it vehemently, he said.

We can only hope that this increasing dissonance will accelerate necessary changes at the top of the company.

Excluding the two charges, RIM now expects adjusted earnings in the third-quarter to be at the low to mid-point of its previously forecast $1.20 to $1.40 per share range.

Revenue, excluding the outage charge, is expected to be slightly lower than the previously forecast range of $5.3 billion to $5.6 billion, in part because of the PlayBook discounting, which it plans to expand.

RIM, which is still finalizing its quarterly results, said it shipped about 14.1 million BlackBerry phones in the third quarter, in line with its earlier forecast of between 13.5 and 14.5 million.

The company, which will report its quarterly results on December 15, said it was confident the PlayBook promotion will help boost sales and reduce its inventories.

RIM is committed to the BlackBerry PlayBook, Co-Chief Executive Mike Lazaridis said in a statement. Early results from recent PlayBook promotions indicate a significant increase in demand across most channels.

RIM said it expects to ship fewer smartphones in the current quarter than in the recently-ended third quarter.

We do not see any sign that RIM's downward spiral is about to bottom out. The company has a number of new phones on the market, yet guidance for Q4 suggests that their momentum is already starting to stall, Nomura analyst Stuart Jeffrey said in a note for clients.

(Reporting By Euan Rocha and Alastair Sharp in Toronto and Tarmo Virki in Helsinki; Editing by Frank McGurty and Janet Guttsman)