Research In Motion
will restate financial statements back to fiscal 2004 as a result of its stock options investigation, likely cutting previously reported earnings since then by about $250 million.
In addition, the Waterloo, Ontario-based company said Monday that Jim Balsillie will step down from his role of chairman and will remain co-CEO and a director. Chief Financial Officer Dennis Kavelman will change his role to be the company's chief operating officer for administration and operations.
Shares of RIM were recently off 88 cents, or 0.6%, to $135.09.
"This issue will hit and possibly overhang the stock, and the impact is worse than we had expected," wrote Mike Abramsky, an analyst with RBC Capital Markets. "However this appears to be a tragedy of errors, not of egregious acts and the fundamentals remain intact." RBC Capital Markets makes a market in RIM shares.
RIM appears to be piling in all bad news at once, which should help ahead of its quarterly results, wrote Abramsky, though investors are "likely to be nervous over the CFO stepping aside."
RIM started an investigation into its stock options review process in September. The company still
faces a lawsuit filed by a Canadian pension fund, the Ironworkers Ontario Pension Fund, over concerns that RIM's audit committee investigation of the options grant
may not have been truly independent.
Following that, two members of RIM's audit committee
stepped down in January. RIM said today those members will not seek re-election to RIM's board.
In addition to the restatement of $250 million, RIM also estimates an adjustment of about $8 million because of an increase in the company's tax expense related to the stock options. RIM said it currently does not anticipate a material adjustment to the current or future financial years' operating results.
Co-CEOs Jim Balsillie and Mike Lazardis have offered to contribute up to $4.2 million to help defray the review and restatement costs.
RIM's special committee did not find intentional misconduct by any director or officer but disclosed that "hindsight" was used to select grant dates with favorable pricing for recipients.
RIM also plans to make changes to its board, audit committee, compensation committee and nominating committee, and will expand the size of its board of directors from seven members to nine.
The company said it will not ask any employees to leave the company as a result of the review.