RIM Faces Lawsuit As Analysts Query PlayBook Sales


Playbook sales are apparently not meeting analyst forecasts as RIM itself faces an investor lawsuit

Questions are being raised about actual sales of the Playbook, with analysts saying the late-launching tablet is not meeting sales forecasts.

Wedbush Securities analyst Scott Sutherland wrote in a research note 25 May that according to his “checks,” RIM may only sell 450,000 units in its quarter ending this month, Barron’s reported.

As a result, Sutherland cut his revenue estimate for the company from $5.2 billion (£3.2bn) to $5.1 billion (£3.1bn) and lowered his full fiscal year estimate for PlayBook sales from 3 million units to 2.3 million.

Ageing Portfolio

He reportedly also called the BlackBerry handsets currently on shelves a bit “long in the tooth” – a situation not likely to change soon, according to analysts with investment banking group Jefferies.

“We believe the majority of OS 7 devices have been delayed from August to October as integration, polishing, and carrier certification are taking longer than expected (e.g., in a recent interview FT’s CEO noted regular bugs with RIM devices and quality problems with RIM’s next-gen devices),” states a multi-author 27 May research note. “We believe this is causing delays in other product launches, notably the 3G/4G PlayBook and QNX based handsets, which are now more likely in the [second half of 2012] vs. guidance of early [2012].”

The Jefferies analysts added that RIM management will have to either “accept lower margins or lower unit sales.”

Allegedly unrealistic expectations from RIM management are also the source of a new lawsuit against the company, Reuters reported 27 May, adding that RIM officials believe the case is without merit and it plans to “vigorously defend” itself.

The suit claims that RIM knew that product delays and lukewarm launches would hurt earnings, but kept this from investors.

“Specifically, the company failed to inform investors that its ageing product line and inability to introduce new products to the market was negatively impacting the company’s business and margins,” the suit states, according to the report.

The claims cover a period from December 2010 through April, when the company lowered forecasts for its upcoming quarter.

Eggs and Baskets

“Earnings per share for the first quarter are expected to be in the range of $1.47-$1.55 (£0.89 to £0.95) per share diluted,” RIM announced 24 March. “This guidance reflects a mix shift in handset towards lower ASP products in the first quarter and an increased level of investment in Research & Development and Sales and Marketing related to our tablet and platform initiatives.”

During an earnings call that same day, to share the results of the company’s fiscal 2011 fourth quarter, RIM co-CEO Jim Balsillie justified – to stick with the analogy – all the eggs in the PlayBook basket.

“We’re investing in opening up a new category, bringing in a new platform. This is no time for half measures,” he said on the call. “This is a time of enormous investment and transition.”

While RIM wouldn’t offer guidance on its PlayBook shipment expectations, RIM Vice President of Investor Relations Adele Ebbs told an analyst who pressed, “We said, like, 20,000 retail outlets. They’re not going to have like one or two devices. So I think you can kind of see it’s not going to be in the tens of thousands.”

Balsillie quickly added, “Many of our corporate clients have approached us about each wanting tens of thousands of PlayBooks.”

RIM’s wanting handset lineup also isn’t doing it any favours with US carriers, who according to the Jefferies note want to support three main ecosystems – Apple’s iOS, Android and a third that’s still to be determined.

“Unfortunately for RIM,” said the Jefferies note, “Windows is now being considered.”

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