RIM Cuts PlayBook Price as Tablet Battle 2012 Begins

By CIOinsight  |  Posted 01-03-2012 Print
RIM has slashed the price of its PlayBook tablet. After anemic sales and a big write-down in 2011, RIM likely hopes the PlayBook will finally gain traction.

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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