Failed “Playbook” Venture Sinks RIMM

When Research in Motion ($RIMM) announced their new “Playbook” tablet back in September 2010, the company had clear ambitions to be a major player in this emerging market.

Not only were $RIMM executives convinced that this product would be a huge hit with consumers, they were also convinced that the Playbook would eventually surpass the iPad as the most popular tablet in the marketplace.

The unveiling announcement featured some surprising brash quotes from various $RIMM executives..

“Introducing the first professional tablet…”
 – RIMM Co-CEO, Mike Lazaridis 

“The PlayBook will be the most significant development for RIM since the launch of the first BlackBerry”
 – RIMM Co-CEO, Jim Balsillie

So 12 months later…. how did this venture work out for $RIMM?

The picture above accurately describes the current status of $RIMM’s Playbook venture  – the project is an unmitigated disaster.

While the Playbook has a surprisingly nice screen and decent technical capabilities, $RIMM completely botched the user-interface component of their tablet.

As of today, the Playbook still does not have a native eMail application, which is pretty much a basic requirement for all tablets on the market.  Speaking of applications, there are really no interesting apps for the Playbook since the developer community has already moved onto developing apps for more popular iOS and Android devices.

$RIMM also made a critical error by pricing the tablet so high:  $500 for a tablet that is smaller than the iPad 2 and less functional?  No thanks.

High price-points, lack of apps, and a poor user-interface ensured that the Blackberry Playbook was pretty much toast from the start.

Sales of the Playbook have steadily plummeted since hitting the market, which has sparked a series of aggressive price reductions from $RIMM.

With better tablets out in the market (iPad 2 / Galaxy Tab) and Amazon introducing their own $200 Kindle Fire tablet, the situation has gone from bad to worse in a hurry for $RIMM.

On Friday, $RIMM announced they will be incurring a $485M charge in Q3 to write-off losses on the Playbook failed venture..

Just how bad is it?

$RIMM’s estimate seems to imply that the company is holding up to 5,000,000 Playbooks that they’ll have to sell at fire-sale prices.  The company has worked out promotions with retailers like BestBuy to knock $200 off the price of each tablet, yet they are still having trouble generating sales.

Since it costs ~$205 to manufacturer a Blackberry Playbook, selling the tablet at $200 would actually generate a $5 loss per unit.

This Playbook writedown saga is the latest development in a steady stream of bad news for the Ontario-based Research in Motion, whose smartphones have steadily lost ground to Apple’s iPhone and Google’s Android franchises.

For a company who continues to lose to their rivals, the Blackberry Playbook was a huge mistake that the company couldn’t afford to make.  As $RIMM continues to burn cash and hemorrhage market share to Apple and Google, investors need to stay very far away from this company.

Some mistakes are easy to rebound from, but it will take a miracle if $RIMM can right the ship after this Playbook disaster.  Not only did $RIMM fail with the Playbook from a product standpoint, but they dug themselves a much deeper financial hole than they were already in.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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