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This contains a very disturbing question about RIM’s accounting practices. Jean-Louis is being careful to insulate himself from lawsuits by phrasing his suggest

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.

guyzero 15y ago
It would be sad to see another Canadian tech giant brought down by accounting issues.
- latch 15y ago
  When the dust settles, you don't really think that the problem with RIM, or Nortel, are "accounting issues", do you? I spent 30 years in Ontario. RIM and Nortel confirm my own thoughts on the matter: the talent pool in Ontario (possibly Canada) isn't even close to making local tech companies globally competitive.
  - jarek 15y ago
    The pay isn't close to making a competitive talent pool happen either. Chicken, egg...
    - ultrasaurus 15y ago
      I'm from Waterloo (RIM's hometown) so I'm biased, but there is a significant flow of Ontarians to Silicon Valley, Redmond and NY whereas there's no corresponding flow from the US to Ontario. So I'm tempted to call it a shortage of jobs rather than people.
      - jmj4 15y ago
        Also from Waterloo, but I think you got this mixed up. There is an outflow of talent because there are only few exciting, innovative places to work in Waterloo. So sure, you can call it a shortage of jobs, but really the culprit is a lack of innovative/entrepreneurial/managerial expertise. Things are changing for the better, but slowly. Also, it's goina be pretty hard to convince someone from Silicon Valley, NY (or even Redmond) to move to Southern Ontario, let alone Waterloo, unless your doing some really cool, or you can pay them a lot. Obviously people who go to school here are much more likely to stay, but even then, most of them would take a job in California if they had the chance.
  - guyzero 15y ago
    Nortel's accounting problems were extremely bad by any standards and made a mediocre situation terminal. Nortel had the possibility to be at least as successful as Ericsson (which isn't saying much, but). I hope RIM isn't full of Nortel's old accounting people.
  - pagekalisedown 15y ago
    I know next to nothing about Ontario, but don't they have at least a few great universities? I know there's Waterloo and U of Toronto. Are they not big enough to provide a good pool of talent?
    - jarek 15y ago
      Yes. Whoever blames the employees here is hiding their head in the sand. Same with blaming the climate or "entrepreneurial spirit" or whatever. There are good schools and talented people. As with any place there are the great and the mediocre. Offer the great $100k out of school and reasonably interesting work like they can get in Seattle or Mountain View and you will find that it is quite easy to get globally competitive talent.
  - guyzero 15y ago
    As an Ontario boy working in Silicon Valley, there are really very few local Californians working in tech here. Talent goes where the jobs are; companies go where the talent is. If you want to discovery why one place ends up being a magnet over another place I know some profs at Waterloo who do research on exactly this question. Anyone looking for a PhD?
nohat 15y ago
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.
- martingordon 15y ago
  Their inventory went from $618M to $943M to $1,372M in Q1/Q2/Q3 2011 (while sticking around the $650M mark the two quarters prior), so it is entirely possible that they did grossly overestimate demand. Maybe each of their CEOs placed Playbooks orders without the other knowing?
- raganwald 15y ago
  I agree it’s guesswork. Are they writing 2.4 million tablets down to zero? 4.8 million tablets down to $99? Is either number ridiculous? The other possibility he questions is whether they reported as sales shipments that were not really sales. As he points out, there are upcoming opportunities to clarify these numbers, and I think that part of the purpose of the article is to goad analysts into throwing some hardball questions at RIM.
ChuckMcM 15y ago
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.

guyzero 15y ago

It would be sad to see another Canadian tech giant brought down by accounting issues.

latch 15y ago
When the dust settles, you don't really think that the problem with RIM, or Nortel, are "accounting issues", do you? I spent 30 years in Ontario. RIM and Nortel confirm my own thoughts on the matter: the talent pool in Ontario (possibly Canada) isn't even close to making local tech companies globally competitive.
- jarek 15y ago
  The pay isn't close to making a competitive talent pool happen either. Chicken, egg...
  - ultrasaurus 15y ago
    I'm from Waterloo (RIM's hometown) so I'm biased, but there is a significant flow of Ontarians to Silicon Valley, Redmond and NY whereas there's no corresponding flow from the US to Ontario. So I'm tempted to call it a shortage of jobs rather than people.
    - jmj4 15y ago
      Also from Waterloo, but I think you got this mixed up. There is an outflow of talent because there are only few exciting, innovative places to work in Waterloo. So sure, you can call it a shortage of jobs, but really the culprit is a lack of innovative/entrepreneurial/managerial expertise. Things are changing for the better, but slowly. Also, it's goina be pretty hard to convince someone from Silicon Valley, NY (or even Redmond) to move to Southern Ontario, let alone Waterloo, unless your doing some really cool, or you can pay them a lot. Obviously people who go to school here are much more likely to stay, but even then, most of them would take a job in California if they had the chance.
- guyzero 15y ago
  Nortel's accounting problems were extremely bad by any standards and made a mediocre situation terminal. Nortel had the possibility to be at least as successful as Ericsson (which isn't saying much, but). I hope RIM isn't full of Nortel's old accounting people.
- pagekalisedown 15y ago
  I know next to nothing about Ontario, but don't they have at least a few great universities? I know there's Waterloo and U of Toronto. Are they not big enough to provide a good pool of talent?
  - jarek 15y ago
    Yes. Whoever blames the employees here is hiding their head in the sand. Same with blaming the climate or "entrepreneurial spirit" or whatever. There are good schools and talented people. As with any place there are the great and the mediocre. Offer the great $100k out of school and reasonably interesting work like they can get in Seattle or Mountain View and you will find that it is quite easy to get globally competitive talent.
- guyzero 15y ago
  As an Ontario boy working in Silicon Valley, there are really very few local Californians working in tech here. Talent goes where the jobs are; companies go where the talent is. If you want to discovery why one place ends up being a magnet over another place I know some profs at Waterloo who do research on exactly this question. Anyone looking for a PhD?

nohat 15y ago

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.

martingordon 15y ago
Their inventory went from $618M to $943M to $1,372M in Q1/Q2/Q3 2011 (while sticking around the $650M mark the two quarters prior), so it is entirely possible that they did grossly overestimate demand. Maybe each of their CEOs placed Playbooks orders without the other knowing?
raganwald 15y ago
I agree it’s guesswork. Are they writing 2.4 million tablets down to zero? 4.8 million tablets down to $99? Is either number ridiculous? The other possibility he questions is whether they reported as sales shipments that were not really sales. As he points out, there are upcoming opportunities to clarify these numbers, and I think that part of the purpose of the article is to goad analysts into throwing some hardball questions at RIM.

ChuckMcM 15y ago

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.