RIM Earnings Actually a Loss on GAAP Basis (RIMM)

Research-in-Motion Ltd. (NASDAQ: RIMM) has now released its earnings after expectations had been tempered ahead of the report.  The smartphone maker issued earnings of $0.80 EPS and a drop of 19% in sales from the prior quarter to $4.2 billion in revenues.  Thomson Reuters had a consensus projection of $0.81 EPS and $4.54 billion in sales.

All in all, things could have been worse.  Still, the strategy and some changes may turn off some investors.

The company ended the quarter $2.1 billion in cash, cash equivalents, short-term and long-term investments at the end of the quarter with a gain of about $610 million.  Cash flow from operations was about $1.1 billion.  While the non-GAAP earnings barely missed expectations, it is worth noting that the GAP loss was $125 million or -$0.24 EPS.

Smartphone shipments were down 21% to 11.1 million units for the quarter and the CEO noted that the company ended the quarter with a growing base of more than 77 million subscribers.  Here is where the company is going to lose even more fans from the research world: RIM is going to discontinue providing specific quantitative guidance.  The company also noted that the BlackBerry 10 platform is on track for the latter part of calendar 2012.

While RIM is no longer offering guidance, the quarter ahead is expected to be and Thomson Reuters sees targets of $0.66 EPS on $4.26 billion in revenues.  The company is talking about significant pressures and challenging environments in the coming quarters.

PRE-EARNINGS COLOR:  Options traders appeared to be braced for a move of about $1.30 in either direction when analyzing the monthly options rather than the weekly options. The chart mattered more than most might have thought because the expected move was either going to challenge the 50-day moving average on the upside or challenge new multi-year lows on the downside.  As a reminder, RIMM has one massive short interest as the March 15 settlement date was 60.3 million shares short versus 59.2 million shares short on February 29 and versus 55.9 million shares short on February 15.  In fact, RIM’s short interest is the largest we have seen.

RIM shares managed to close up 0.4% at $13.73 against a 52-week trading range of $12.45 to $57.32 but the stock was halted ahead of the news.

Our advice to RIM’s new management: “Please do not wait so long to report earnings for 40 minutes after the close.  Your company is not that important any longer.”

JON C. OGG