RIM Shows That Less-Bad Earnings Rule

Research In Motion Ltd. (NASDAQ: RIMM) is out with its earnings report and what we have here is a “less-bad” report than what was expected. The loss is $235 million, or -$0.45 EPS or -$0.27 EPS on an adjusted basis on sales of $2.9 billion. Thomson Reuters had estimates of -$0.46 EPS on sales of about $2.5 billion. That is down from $0.80 EPS a year ago.

RIM said it shipped 7.4 million units in the quarter and its cash and cash equivalents came to $2.3 billion at the end of the quarter. Gross margin was 26% and it said cash flow from operations was about $432 million. Service revenue is now about 35% of its total sales and software and other revenue is about 5%, leaving about 60% for hardware sales.

We would note that Goldman Sachs recently increased its estimates slightly even if the gains are largely due to emerging markets. Our take is that the new BlackBerry O/S is now more and more of a late 2013 story.

RIM is surging in the after-hours session but we would caution that much of the gain has to be inspired by short covering as there were more than 82 million shares short as of mid-September.

The stock closed up 2% at $7.15 and the after-hours surge has shares up 13% at $8.07 in active trading.

We would caution that without formal guidance and without more clarity on the BlackBerry 10 O/S release data that this is likely an incomplete story.

JON C. OGG