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Thursday, September 28, 2006

RIM's Good Job

Research-in-Motion (RIMM) is trading up some 15% in after-hours trading. The company beat its estimates handily and raised guidance. The stock closed at $86.06, down 0.16%, and is trading up to around $99.00 and $100.00 in after-hours.

The stock initially slid because there was a delay in the call announced, but the results are being viewed as far better than the restatement announcement.

QUARTER:
Revenue for the second quarter of fiscal 2007 was $658.5 million, compared to estimates of $648+ million. Revenues were up 7.4% from $613.1 million in the previous quarter and up 34.4% from $490.1 million in the same quarter of last year. It posted preliminary net GAAP EPS of $0.74 and pro forma was $0.77 vs. $0.71 estimates.

The revenue breakdown for the quarter was approximately 72% for handhelds, 19% for service, 6% for software, and 3% for other revenue. Approximately 705,000 BlackBerry subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 6.2 million.

GUIDANCE:
Revenue for the third quarter of fiscal 2007 ending December 2, 2006 is expected to be in the range of $780-$820 million. Subscriber account additions in the third quarter are expected to be approximately 800,000. GAAP earnings per share for the third quarter are expected to be in the range of 88-95 cents per share diluted. Adjusted earnings per share for the third quarter, which excludes regular stock option expense of approximately $4.5 million, are forecast to be in the range of 90-97 cents per share diluted. ESTIMATES are $0.78 EPS and $699+ million in revenues.

RESTATEMENT:
RIMM announced today that the Audit Committee of RIM's Board of Directors, comprised solely of independent directors, is completing a management-initiated, voluntary review of RIM's historical option granting practices. The Audit Committee has made a preliminary determination that GAAP accounting errors were made around the administration of certain historical stock options granted from fiscal 1998 to present, and has made a preliminary determination that a restatement of RIM's historical financial statements will be required to reflect this. Although the review is ongoing, it is currently expected that the potential effect of such restatement will be to increase the amount of non-cash charges associated with past option grants and thereby reduce the amount of the Company's previously reported GAAP earnings by an aggregate amount of approximately $25-45 million over the period since the Company's IPO in 1997. The Company has voluntarily informed the SEC and the OSC about its internal review of its stock option grants. The Company does not at present anticipate a material adjustment to current or future fiscal years' operating results, including the preliminary Q2 operating results reported today in its separate earnings press release, and RIM has defined enhanced procedures and controls to address issues of this nature. All figures in U.S. dollars.

Jon C. Ogg
September 28, 2006
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