This contains a very disturbing question about RIM’s accounting practices. Jean-Louis is being careful to insulate himself from lawsuits by phrasing his suggestion as a question, but the implication is that either he is mistaken about what RIM have claimed or that their numbers—especially previous revenues—don’t add up.
If RIM has been super-aggressive about their numbers in the past, this could be the crack in the dam that leads to a complete collapse. A one-mighty company with declining prospects that engages in questionable accounting practices to delay the revelation of exactly how poorly they are doing...
This is an oft-repeated tale in the public markets, and it always transitions from drama through horror to pathos.
The big question is whether it is actually unreasonable for them to have 2.4 or 4.8 million in inventory. As he points out 700k isn't that much - not really enough to compensate for the proposed difference between reasonable and unreasonable excess inventory. Without much knowledge, I doubt that over estimating demand by a factor of ~4 is unreasonable.
Well if we assume 5M tablets made, and Kindle cost is estimated at $205 then selling out Playbooks in a firesale at $99 (known price point where even pets will buy an Android tablet) you get 5M (total) - (7. sold) = 4.3 * $106 per tablet loss = $455M (solving for X would give you $113 loss per tablet or $485M.
I've talked with Quanta before and I don't think they would have taken on the project without a 5M commitment, hence my guess at the number of playbooks made.
On the plus side for Canadian startups: It looks like there will be a glut of highly-competent engineers on the market in the next year or two as RIM sheds staff. Waterloo is looking like a lucrative place to launch a startup.
I don't want to compare RIM employees to Nortel employees, but...I was in Ottawa through most of Nortel's disaster, and "glut of highly-competent engineers" it was not.
Surely employees play a significant role in how insanely horrible RIM products are compared to the competition.
I am not sure where the scandal is here. Playbooks were selling for $499 in Q1 and Q2, and that was for the basic model. Now they get marked down to $199, so the $485M writedown represents about 1.5-1.6 million Playbooks written down by $300 a piece.
This is an inventory writedown so probably RIM ordered from the manufacturer way more Playbooks than they actually ended up selling (no news here) and whatever inventory was in the "warehouses" so to speak got written down.
Part of the "scandal" the article mentions is the possibility that a portions of RIM's recorded revenue does not quality as such, since it could have been for Playbook's that could be returned to RIM.
"Still, RIM only reported a total of 700,000 tablets “sold” for the Q1 and Q2, they can’t have all been returned and massive returns would have been disclosed previously, one hopes."
Reading the reviews about the lack of basic functionality, like email, it's possible they could almost all be returned.
The bigger question is, and it's been posed here for more than a year, is why is the same leadership there? That this is now just being discussed in analyst assessments in mind boggling.
It's also possible that the 2.4-4.8 million figure makes sense in MBA land. 2.4 million could have been the minimum order number to get the per-unit build cost down to ~$200 which would have provided enough head room for whatever the going rate is for one of these things. I've seen crazier justifications for ridiculous business strategies put forth.
[+] [-] raganwald|14 years ago|reply
If RIM has been super-aggressive about their numbers in the past, this could be the crack in the dam that leads to a complete collapse. A one-mighty company with declining prospects that engages in questionable accounting practices to delay the revelation of exactly how poorly they are doing...
This is an oft-repeated tale in the public markets, and it always transitions from drama through horror to pathos.
[+] [-] nohat|14 years ago|reply
[+] [-] ChuckMcM|14 years ago|reply
I've talked with Quanta before and I don't think they would have taken on the project without a 5M commitment, hence my guess at the number of playbooks made.
[+] [-] guyzero|14 years ago|reply
[+] [-] redthrowaway|14 years ago|reply
[+] [-] latch|14 years ago|reply
Surely employees play a significant role in how insanely horrible RIM products are compared to the competition.
[+] [-] wavephorm|14 years ago|reply
http://www.techvibes.com/blog/facebook-expanding-its-canadia...
[+] [-] kabdib|14 years ago|reply
[+] [-] purephase|14 years ago|reply
[+] [-] tici_88|14 years ago|reply
This is an inventory writedown so probably RIM ordered from the manufacturer way more Playbooks than they actually ended up selling (no news here) and whatever inventory was in the "warehouses" so to speak got written down.
[+] [-] wmf|14 years ago|reply
The scandal is that any company would have over one year of inventory in the modern just-in-time manufacturing age.
[+] [-] jammur|14 years ago|reply
[+] [-] bane|14 years ago|reply
Reading the reviews about the lack of basic functionality, like email, it's possible they could almost all be returned.
The bigger question is, and it's been posed here for more than a year, is why is the same leadership there? That this is now just being discussed in analyst assessments in mind boggling.
It's also possible that the 2.4-4.8 million figure makes sense in MBA land. 2.4 million could have been the minimum order number to get the per-unit build cost down to ~$200 which would have provided enough head room for whatever the going rate is for one of these things. I've seen crazier justifications for ridiculous business strategies put forth.
[+] [-] losethos|14 years ago|reply
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