On April 14, 2006, The Wall Street Journal carried an article headlined ‘‘Research in Motion Skeptics Pipe Up.” The article concerned Research in Motion Ltd. (RIM), the manufacturer of the BlackBerry. One week earlier, RIM had disappointed investors with a weaker-than-expected revenue forecast for the current quarter. In the one-week period following the revenue announcement, RIM’s share price declined 9.5 percent.

The Wall Street Journal article expressed new concerns about RIM’s financial performance. RIM generates revenue two ways:

1. 70 percent of its revenue comes from sales of the BlackBerry device; and, 

2. 30 percent of its revenue comes from the sale of subscriptions to the wireless network that supports the BlackBerry.

Of concern to Wall Street analysts was the fact that a widening gap was beginning to build between the number of new BlackBerry network subscribers and the number of BlackBerry devices shipped to retailers. In the latest reporting period, RIM reportedly shipped 1.12 million BlackBerries, while new network subscribers totaled only 625,000, a difference of about 495,000. According to the company, the “gap” between units shipped and new network subscribers for the prior three quarters, respectively, was 475,000, 335,000, and 248,000.

Discuss whether RIM is engaging in “channel stuffing.” (Note: Channel stuffing refers to the practice of shipping unwanted and unsolicited goods to retailers, usually with a guarantee to allow the return of any unsold goods.) Why is channel stuffing of concern to analysts and investors?