RIM Cuts PlayBook Price as Tablet Battle 2012 Begins
The New Reality for Customer Engagement
Research In Motion has slashed the prices for its PlayBook tablet, offering all three models for $299 through the beginning of February.
For those purchasing direct from RIM, that represents a discount of $400 for the 64GB version, $300 for the 32GB, and $200 for the 16GB. It comes in the wake of recent price-cuts by retailers like Best Buy, which sparked temporary runs on the 7-inch device.
Although RIM executives routinely tout the PlayBook's importance within the company's broader strategy, the tablet has faced an uphill battle for adoption in a marketplace dominated by Apple's iPad and crowded with a seemingly unending tide of Google Android touch screens. In December, RIM announced that it would take a $485 million charge against its PlayBook inventory, or $360 million after applicable taxes.
In a Dec. 2 statement, RIM cited competitive dynamics of the tablet market and the delay of a significant PlayBook software upgrade as reasons behind the write-down. "The Company now believes that an increase in promotional activity is required to drive sell-through to end customers," the statement added. RIM will record a provision that reflects the current market environment and allows it to expand upon the aggressive level of promotional activity.
As demonstrated by Best Buy, a reduced price will induce customers to purchase the PlayBook in greater numbers than usual. The retailer managed to sell out of its stock after it dropped the tablet s price to $199 and $299, respectively, for the 16GB and 32GB versions.
However, it s questionable whether a lowered price point can give RIM its needed margins on the product--much less prevent each unit from selling at a loss. Earlier in 2011, a tear-down by analysis firm IHS estimated the materials cost of the 16GB PlayBook at around $271. If that number proves accurate, than RIM s current $299 price point is truly margin-killing.
The PlayBook's major software update, now scheduled for February, will include integrated email in addition to a host of other, much-requested features.
Overall, RIM heads into 2012 seeking a comeback. Indeed, during the company's Dec. 15 earnings call, co-CEOs Jim Balsillie and Mike Lazaridis emphasized that an internal turnaround is underway. A major part of that plan centers on an upcoming series of smartphones running a QNX-based operating system named BlackBerry 10. RIM executives have emphasized these devices supposed ability to compete toe-to-toe against BlackBerry's highest-end rivals, although they have yet to share an exact release date beyond the latter half of 2012.
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