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RIM Tastes New High

Bill Snyder

Research In Motion(RIMM Quote) jumped nearly 20% Friday and was trading through a 52-week high a day after its third-quarter guidance blew past Wall Street's estimates.

RIMM's second quarter was also above expectations. In early Friday trading, the stock was soaring $17.20 to $103.26, putting it well above its best close of the past year at $90.53.

The Canada-based company reported a profit of $140.8 million, or 74 cents a share, up from last year's profit of $111.1 million, or 58 cents a share. Sales were up 34.4% to $658.5 million.

Excluding $4.3 million attributed to the cost of employee stock options, RIMM posted a profit of 77 cents a share.

Analysts polled by Thomson First Call were looking for a profit of 71 cents, including the cost of options, on revenue of $644.3 million.

The news completely overshadowed an earlier announcement that the maker of the popular BlackBerry email device has begun a voluntary probe of its stock-option practices and will restate years of earnings.

But it was the surprisingly robust guidance for the third quarter that propelled the stock. RIMM forecast a profit of 88 cents to 95 cents a share, including the cost of stock options, on sales ranging from $780 million to $820 million.

Wall Street was expecting a profit of 78 cents a share (on the same basis) on revenue of $700 million.

To view Robert Martorana's video take on RIMM results, click here.

The company said that orders by clients who were upgrading their handheld devices was the reason for much of the upside. The company added, however, that the increasing percentage of hardware revenue will eventually take a toll on margins.

Even so, higher-margin subscriptions remain strong; in the just-reported quarter, the company signed up 705,000 new subscribers, pushing the total to 6.2 million.

RIMM's announcement of the options probe apparently delayed release of the earnings report for more than an hour. The company's audit committee, with the aid of outside accountants, is still examining past practices but has already determined that "errors were made."

The mistakes will force a restatement of earnings from fiscal 1998 to the present but will likely not have a material effect on the company's operating numbers.

Earnings will be hit by a total of $25 million to $45 million, the company said.

To view Robert Martorana's video take on RIMM results, click here.