No Surprise: RIM PlayBook Sales Plummet Along with Margins

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Danish Siddiqui / Reuters

A conference attendee examines the BlackBerry PlayBook during its launch in Mumbai.

When your flagship tablet drops to less than half its initial sale price six months after launch, warning, you might want to reach for the airsickness bag. Turbulence seems to plague Research in Motion’s BlackBerry PlayBook tablet, which debuted in April for $500, then plummeted last month to as little as $200 a pop as retailers worked to move backed up inventory.

That drop as well as the company’s glut of unsold PlayBooks has cost RIM big: The company says it’ll take a $485 million charge against its third quarter revenues, part of which includes a $50 million charge for a nearly three-day global network outage in mid-October.

(MORE: RIM BlackBerry PlayBook and Smartphone Sales Tank)

The PlayBook sold about 500,000 units in its first sales quarter, but plummeted to 250,000 during its second, falling to just 150,000 during its third. Despite the troublesome trend, RIM says it remains committed to the PlayBook, admitting that it has a high level of PlayBook inventory and that it “now believes that an increase in promotional activity is required to drive sell-through to end customers.”

The good news, says RIM: The aggressive price-cut last month is driving sales back up:

“Since the launch of the new promotions across consumer and enterprise channels in the United States and Canada late in the third quarter, the Company has seen a significant increase in demand for the PlayBook,” wrote RIM in a statement.

Back in September a National Bank Financial analyst called the PlayBook “nothing short of a disaster.”

“Our view is the company is garnering lower profitability on its service revenue, which is the monthly infrastructure fee charged to carriers based on the number of active BlackBerry subscribers,” said a National Bank analyst at the time, downgrading RIM’s stock from “sector perform” to a stinging “underperform.”

Even then, RIM co-CEOs Mike Lazaridis and Jim Balsillie remained upbeat. In a conference call after RIM’s earnings results were released, Balsillie highlighted a PlayBook software update dubbed “PlayBook 2.0,” and Lazaridis claimed the company would be back in the black by the third quarter and going forward.

So much for “back in the black,” and that v2.0 software remains MIA (RIM says it’s coming in February), but at least the company recognizes it’s in serious tablet trouble, and that aggressive pricing’s the only remedy, if indeed saving the PlayBook is possible–where RIM might have enjoyed an edge over Apple’s iPad 2 at its $200 promotional price, Amazon’s Android-based Kindle Fire tablet is selling in droves at the same price point.

MORE: IDC: iPad 2, PlayBook Gobbled Android Market Share Last Quarter

Matt Peckham is a reporter at TIME. Find him on Twitter at @mattpeckham or on Facebook. You can also continue the discussion on TIME’s Facebook page and on Twitter at @TIME.