Research In Motion is discontinuing one version of its struggling PlayBook tablet, as the company sets off on a summer of deep cuts and cataclysmic overhaul.
RIM will no longer produce the cheapest version of the PlayBook, which comes with 16 gigabytes of memory and retails for about $200. The company will continue to produce the 32-gigabyte and 64-gigabyte models, which sell for $250 and $300, respectively.
"We continue to remain committed to the tablet space and the 32 GB and 64 GB models of the BlackBerry PlayBook continue to be available from our distributors and retailers around the world," the company said in a statement.
The 16-gigabyte version of RIM's tablet will still be available for a while longer, but the company will not re-stock retailer shelves once the already-produced PlayBooks run out.
The move comes as Canada's best-known tech company goes through a brutal transition with its core business model. Late last month, the company announced it will likely post an operating loss when it announces its quarterly earnings at the end of June. In addition, RIM has hired a stable of bankers to help it assess strategic options – a sign that part or all of the company may be up for sale in the near future.
Earlier this month, RIM's share price dropped into the single-digit range for the first time in almost nine years. Currently, RIM shares trade for about $10.80 on the Toronto Stock Exchange, or roughly the same price they traded at in the winter of 2003.
Released in April of last year, the PlayBook at first appeared to mark a positive step into the consumer tablet market for RIM. However after decent initial sales numbers, the company began to post very weak PlayBook shipments. That's in large part because a significant portion of the initial large number of tablets RIM shipped to retailers never moved off store shelves, causing a buildup of unsold inventory.
In an attempt to ease that buildup, RIM began slashing prices on its tablets, hoping to keep volume high even if it meant gutting margins.
But the discontinuation of the lowest-priced version of the PlayBook likely means the company no longer feels that selling the tablet at such small margins is worth it.
"Someone at RIM probably calculated that the margins at the 16-gigabyte model's $199 price point were unacceptably thin, and that killing the lowball model would push buyers up to the 32-gigabyte tier without alienating too many of them in the process," said independent technology analyst Carmi Levy.
"It's a classic revenue/demand optimization exercise, and removing that third device from the supply chain will further clean things up as RIM prepares for whatever comes next."