Some of the best analysis on Research In Motion's (RIMM) recent quarterly results comes from Bill Fleckenstein. Since last Thursday, June 28th, shares of RIMM have surged nearly 50-bucks per share. Shares of RIMM had been trading in the low $60s nearly 12-months ago. Some pretty ingenious financial engineering coupled with an incredibly gullible stock market, has been worth a roughly 80-percent climb in its share price compared to its year ago value in just two days after the release of its latest earnings statement.
Bill Fleckenstein: "Back to Research in Motion: Revenues in the quarter grew sequentially by about $150 million (16%) to $1.08 billion, which was slightly higher than expected. Earnings of $1.17 were also higher than expected, and up from last quarter's 98 cents. They saw a slight benefit from (a) a lower tax rate, equaling 7 cents; and (b) operating expenses that turned out to be less than forecast, equaling 4 cents. (Subscriber adds were also a bit better than expected.) Margins, though, fell sequentially from 53.5% to 51.8% and down from 55.1% a year ago. However, when you look at the balance sheet, it essentially renders those earnings and revenue gains illusory. Receivables sequentially grew by $163 million. In addition, "other current assets" (usually some version of receivables, and often a sign of factoring receivables) grew by $45 million. So, the growth in receivables and "other current assets" was $208 million. Thus, when one compares that against the $150 million gain in revenues, one can see that it was purely a function of the large bulge in receivables. Further, that $208 million translates into just shy of 22 cents a share in earnings. Meaning, the $1.17 in reported earnings becomes closer to 95 cents (and 88 cents, if the tax rate had stayed as forecast for this quarter and next), vs. last quarter's 98 cents. Last but not least, in order for RIMM to keep its cash from dropping, its accounts payable jumped 46%. Likewise, accrued liabilities exploded."
Bill Fleckenstein: "Back to Research in Motion: Revenues in the quarter grew sequentially by about $150 million (16%) to $1.08 billion, which was slightly higher than expected. Earnings of $1.17 were also higher than expected, and up from last quarter's 98 cents. They saw a slight benefit from (a) a lower tax rate, equaling 7 cents; and (b) operating expenses that turned out to be less than forecast, equaling 4 cents. (Subscriber adds were also a bit better than expected.) Margins, though, fell sequentially from 53.5% to 51.8% and down from 55.1% a year ago. However, when you look at the balance sheet, it essentially renders those earnings and revenue gains illusory. Receivables sequentially grew by $163 million. In addition, "other current assets" (usually some version of receivables, and often a sign of factoring receivables) grew by $45 million. So, the growth in receivables and "other current assets" was $208 million. Thus, when one compares that against the $150 million gain in revenues, one can see that it was purely a function of the large bulge in receivables. Further, that $208 million translates into just shy of 22 cents a share in earnings. Meaning, the $1.17 in reported earnings becomes closer to 95 cents (and 88 cents, if the tax rate had stayed as forecast for this quarter and next), vs. last quarter's 98 cents. Last but not least, in order for RIMM to keep its cash from dropping, its accounts payable jumped 46%. Likewise, accrued liabilities exploded."
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