RIM Delays Q2 Filing
Reporting strong quarterly results earlier this month, the Waterloo, Ontario-based maker of the popular BlackBerry device said it is launching an internal review of its past stock options grants, in the wake of the widening scandal surrounding the granting of options by technology companies. RIM co-CEO Jim Balsillie said the company expects the review to result in the reduction of past earnings by $25 million to $45 million. (See RIM Reports, to Review Options.)
Revenue and subscriber-growth numbers, he said, will not be affected by the stock-option review.
On Friday, RIM said a new "accounting error" relating to differences in accounting standards between Canada and the U.S. would push back the official filing of the company's second-quarter results. The error has to do with "net settlement," a mechanism whereby employees can use the value of stock options to exercise other options, rather than paying cash for the stock.
Dozens of technology companies, including heavyweights like Apple Inc. (Nasdaq: AAPL), have been forced to restate past results, or to launch investigations into whether they should do so, as a result of stock option backdating, by which the strike price on options granted to employees are timed to days when the shares were at low prices.
Some analysts have dismissed the potential effects on RIM's business, saying that strong performance in the market, and the company's proactive launching of an internal investigation, will minimize the fallout. Citigroup telecommunications equipment analyst Daryl Armstrong, however, said in a research note this morning that Friday's news could have a chilling effect and that predictions of future subscriber growth for the BlackBerry service are over-optimistic.
"One of the issues that we had around the shares and [that] prompted a more cautious view," wrote Armstrong, who has a Sell rating on RIM shares, "…was the risk for additional stock option related issues. This new disclosure provides some support to our level of concern."
RIM's stock price, which hit a one-year high on Oct. 10, was down more than 3 percent today as of 1:00 p.m. Eastern time.
— Richard Martin, Senior Editor, Unstrung