Blackberry 2012 Annual Report Download - page 184

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
to rapid changes in technology and customer demand. The Company performs an assessment of inventory during each reporting
period, which includes a review of, among other factors, demand requirements, component part purchase commitments of the
Company and certain key suppliers, product life cycle and development plans, component cost trends, product pricing and quality
issues. If customer demand subsequently differs from the Company’s forecasts, requirements for inventory write-offs that differ from
the Company’s estimates could become necessary. If management believes that demand no longer allows the Company to sell
inventories above cost or at all, such inventory is written down to net realizable value or excess inventory is written off.
P
layBook Inventory Provision
On December 2, 2011, the Company announced that it would record a pre-tax PlayBook Inventory Provision in the third quarter of
fiscal 2012 of approximately $485 million, approximately $356 million after tax. The charge was predominantly non-cash. As
previously disclosed, RIM had a high level of BlackBerry PlayBook inventory. The Company believed that an increase in
promotional activity was required to drive sell-through to end customers. This was due to several factors, including recent shifts in the
competitive dynamics of the tablet market and a delay in the release of the BlackBerry PlayBook OS 2.0 software. As a result, RIM
recorded the PlayBook Inventory Provision in the third quarter of fiscal 2012 that reflected the current market environment and
allowed it to expand upon the aggressive level of promotional activity recently employed by the Company in order to drive
BlackBerry PlayBook tablet adoption.
Based on the positive response to the promotions in select markets, RIM believes this strategy will accelerate adoption of its QNX-
based platform by consumers and enterprises, as well as help to drive the development of a vibrant application ecosystem in advance
of its next generation of BlackBerry 10 smartphones. RIM sold into the channels approximately 1.3 million BlackBerry PlayBook
tablets in fiscal 2012 and sell-through to end customers were estimated at approximately 1.1 million units. Since the launch of the
new promotions across consumer and enterprise channels in the United States and Canada late in the third quarter of fiscal 2012, the
Company has seen a significant increase in demand for the BlackBerry PlayBook tablet.
The Company also recorded an accrual for estimated fees and vendor inventory liabilities related to non-cancelable purchase
commitments with contract manufacturers and suppliers for quantities in excess of future demand forecasts.
14