Research in Motion has given the financial community more reason to pounce on the stock of the struggling BlackBerry maker after the Canadian company announced that it won't meet its third-quarter revenue guidance, partly reflecting lackluster sales of its PlayBook tablet computer.
The Waterloo, Ontario-based maker of mobile devices on Friday announced a $485 million charge – predominantly non-cash – related to the value of its PlayBook tablets. RIM said it "has a high level of BlackBerry PlayBook inventory" and "now believes that an increase in promotional activity is required to drive sell-through to end customers."
"This is due to several factors, including recent shifts in the competitive dynamics of the tablet market and a delay in the release of the PlayBook OS 2.0 software," the company explained in a press release.
RIM had been hoping that its PlayBook would revive its standing as a venerated tech giant, but weaker-than-anticipated sales of the enterprise-oriented tablet have added to the woes of a company whose BlackBerry share in the smartphone market has been rapidly declining.
The company also revealed that it anticipated its adjusted third-quarter revenue – excluding a $50 million charge related to a network outage that left millions of BlackBerry subscribers without service for days – to be slightly below previous guidance of $5.3-$5.6 billion and that it no longer expects to meet its full year earnings guidance of $5.25-$6 adjusted EPS.
Reacting to the news, at least four brokerage firms cut their price targets on RIM's U.S.-based stock, Reuters reported.
In a note Sunday, CIBC analysts slashed their price target on the stock to $25 from $55 and renewed widespread speculation that RIM could merge with another company.
"We also believe there is a possibility for M&A with another firm finding RIM's Blackberry Internet Service (BIS) and Blackberry Enterprise Service (BES) business model attractive," the analysts wrote. "Our International research confirms that retail subscribers should continue to grow through 2012 in a number of major markets including the U.K., Spain, India, Turkey, Mexico, South Africa, and Nigeria and that BIS fees are expected to be relatively stable in the foreseeable future."
RIM plans to report its results for the third quarter of fiscal 2012 on Dec. 15 after the markets close.
Shares of the BlackBerry maker were trading at $16.98 as of 12:30 ET, down substantially from a 52-week high of $70.54.
The company said it is still dedicated to its tablet computer.
“RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy," RIM Co-CEO Mike Lazaridis said in a statement. "Although a number of factors have led to the need for an inventory provision in the third quarter, we believe the PlayBook, which will be further enhanced with the upcoming PlayBook OS 2.0 software, is a compelling tablet for consumers that also offers unique security and manageability features for the enterprise."
