PlayBook shipments dropped in half for Research In Motion during its second quarter, which also saw revenue continue to plummet.
RIM shipped just 200,000 PlayBooks in the second quarter, down from 500,000 last quarter, when it started selling the tablets.
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Revenue was $4.2 billion, hitting the low end of the company's expectation and down 10 percent from the same quarter last year. Analysts polled by Thomson Financial expected $4.47 billion.
RIM's net income was $329 million, or $0.63 per share. Adjusted net income was $419 million, or $0.80 per share. Analysts were expecting better: Those polled by Thomson predicted $0.87 per share.
RIM shipped 10.6 million smartphones during the second quarter. In June, RIM warned that the second quarter might be weak because of delays in shipping new phones. The delays meant RIM would miss the back-to-school sales period, negatively impacting sales, it said at the time.
Executives who spoke during a conference call to discuss the results put a positive spin on phone sales, however. The company only began launching phones running the new BlackBerry 7 software within the past few weeks, and so far it's the "largest and most successful launch in our history," Mike Lazaridis, co-CEO of RIM, said during the call.
BlackBerry 7 is based on the company's existing OS, but it is designed to serve as a transition to a new operating system that RIM is developing based on technology from QNX, a company it acquired.
"BlackBerry 7 has a lot of runway," said Jim Balsillie, co-CEO of RIM. "We believe it can carry us through a transition to QNX-based smartphones."
Still, he acknowledged that "getting to this point has been choppy." In the previous quarter, RIM shipped 13.2 million BlackBerry phones.
RIM expects the bulk of phones next year to be based on BlackBerry 7, with QNX phones representing a subset of high-end devices.
At the company's annual developer conference in October, RIM plans to unveil its new development platform for QNX and launch phones for developers.
At the event, it will also demonstrate an updated version of software for the PlayBook. The executives acknowledged that sales of the PlayBook have been well below what they'd like. RIM has previously discussed adding new features and capabilities, but today the company said it plans to roll them all together into one large new release.
That release will include native applications for email, calendar and contacts--omissions that many people criticized in the initial release of the PlayBook. Users will be able to use the clients to view corporate email delivered from a BlackBerry Enterprise Server as well as other email services, Lazaridis said. RIM had previously said that native email would come in late summer.
The release will also include the promised software that will let users run Android applications on the tablet. RIM first announced it would offer such a player in March and has said it would become available in late summer.
Users will also get new consumer applications, including a video store that will include 10,000 movies. Since the PlayBook comes with HD video output ports, users will be able to view the movies from their tablets on their TVs.
RIM hopes that the software updates, combined with new programs it plans to launch in hopes of driving sell-through in both enterprise and consumer channels, will spur sales of the PlayBook into the coming months.
The company expects revenue for its third quarter, ending Nov. 26, to be in the range of $5.3 billion to $5.6 billion. It hopes to ship between 13.5 million and 14.5 million smartphones but did not say how many tablets it expects to ship. For the year, earnings per share should hit the low end of its previous guidance of $5.25 to $6.00, RIM said.
RIM hasn't managed to keep up with advances in smartphones and has lost market share to both Apple and Android phones. It had high expectations for its PlayBook tablet, but that device has been criticized in part for lacking crucial software like an email client and for offering few applications.