RIM, From Lower Guidance to Job Cuts to Share Buybacks (RIMM)

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Oh boy… A share buyback plan and a “cost optimization plan.”  Can you just feel the excitement?  Research in Motion Ltd. (NASDAQ: RIMM) has reported its earnings at $1.33 EPS on $4.91 billion in sales.  The formal earnings estimates were $1.32 EPS and $5.15 billion in revenues from Thomson Reuters.  The company also says that is shipped 5000,000 of its PlayBook tablet PCs.  Sales were down 12% from $5.6 billion sequentially and up 16% from a year earlier.

As far as guidance,  RIM sees $4.2 billion to $4.8 billion billion in sales, but estimates are $5.46 billion.  Earnings for the full year are now expected to be between $5.25 to $6.00 EPS, but Thomson Reuters estimates are $6.29 EPS.  Some will say that RIM’s estimates are still too high.  Now the stock trades at 6-times expected earnings.

The company noted that its year is off to a challenging start and the slowdown is continuing into Q2.  The company also said that new product launch will be delayed into late-August.

RIM ended with about $2.9 billion in cash and equivalents as of May 28, 2011, compared to $2.7 billion at the end of the previous quarter, and cash flow from operations in its first quarter was approximately $1 billion.

If you are not excited yet, more excitement may be from cost cuts and a buyback plan…

The company will begin a program “to streamline operations across the organization.”  That is a headcount reduction as it tries to accelerate new products.  The company’s Board of Directors has also approved a share repurchase program to purchase up to 5% of RIM’s outstanding common shares after July 10, 2011 and the plan will remain in place for either up to 12-months or until the buyback plan is either completed or terminated.

UPDATE: Shares are down in the after-hours by over 15% at $29.80 as of 5:05 PM EST. After closing at $35.33, its (prior) 52-week trading range is $34.67 to $70.54.  In some ways, this is about as disappointing for the Canadians as the hockey finals.  The difference is that the bad news was expected at RIM.

Now here is the real question to ask… Do you trust RIM’s earnings guidance for the year?

JON C. OGG