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BlackBerry maker RIM cuts estimates after weak PlayBook sales

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Blackberry Playbook
Research in Motion has today warned that it would fall short of its financial targets for the third quarter of 2011, after taking a big hit on writing down the value of its struggling PlayBook tablet.

In an attempt to drive up sales of the PlayBook, RIM last month started offering the product at a knockdown price, forcing the firm to swallow a $360m (£230m) after-tax writedown.

BlackBerry was late to the tablet market with the seven-inch screen Playbook, and the device's starting price of $499, the same as Apple's larger-screen iPad 2, made it a tough sell for retailers.

The PlayBook's price was cut to around $299 last month and RIM has since announced a Christmas promotion that will reduce that further to $199 at participating retailers.

Even at the discounted price consumers remain unconvinced by the PlayBook, as RIM only shifted 150,000 tablets in the third quarter ending November 26, down from 200,000 in the second quarter. That was also well down on Apple's 11m iPads sold in the same period.

RIM shares fell 3.7% to $17.90 in early morning trading in New York. For the year, the firm's stock has slumped about 65% after it lost ground to rival smartphone makers such as Apple and Google Android, as well as suffered a major global service outage.

In October, RIM was left humbled after the previously imperious reliability record of BlackBerry was left in tatters following a global blackout of internet, email and BlackBerry Messenger services.

Alongside the $360m PlayBook provision, RIM has also suffered a $50 million charge for the outage. The firm now expects revenue in the third-quarter to be "slightly lower" than the $5.3 billion to $5.6 billion it earlier forecast. The company also said that it does not expect to meet its earnings target for the year.

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

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

RIM, which will publish its full quarterly results on December 15, said that it shipped around 14.1m BlackBerry smartphones in third quarter, in line with its previous forecast of between 13.5m and 14.5m.

The company's co-chief executive Mike Lazaridis expressed his belief that the PlayBook price promotion will eventually bear fruit, particularly with the upcoming release of the PlayBook 2.0 operating system.

"RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy," said Lazaridis.

"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.

"Early results from recent PlayBook promotions indicate a significant increase in demand across most channels. We look forward to continuing to grow the installed base of PlayBook users and to attracting more and more developers to expand the volume of applications, content and services that leverage the power of the industry leading QNX-based platform."

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