TORONTO (Reuters) - Jim Balsillie, the co-chief executive of BlackBerry maker Research In Motion Ltd., RIM.TORIMM.O stepped down as chairman on Monday as the company announced a $250-million earnings restatement relating to mistakes in how it granted stock options.
RIM said it found no intentional misconduct by executives, directors or other employees responsible for administering options grants. However, the restatement, which affects the period from fiscal 2004 to the first quarter of fiscal 2007, is much larger than the company initially estimated.
In September, RIM said a restatement relating to its internal voluntary review of how it had awarded options in the past could shave off $25 million to $45 million in earnings in the period since its initial public offering in 1997.
Less than a month later it said it had found additional mistakes and the amount would be substantially higher. It did not give a new dollar estimate.
Still, even the $250-million reduction to earnings announced on Monday is relatively small for Waterloo, Ontario-based RIM, which earned $176 million in the third quarter ended December 2 alone. Its options review covered more than 3,200 grants between late 1996 to August 2006.
Canaccord Adams analyst Peter Misek said he views the restatement as immaterial and called the issue “disruptive but ultimately good for company”.
Investors appeared to barely react to the restatement and Balsillie’s departure from the chairman’s seat, as RIM’s shares finished the day down $1.45, or 1.1 percent, at $134.52 on the Nasdaq market, giving up modest gains from earlier in the session. In Toronto, the shares fell C$1.43 to close at
RIM’s volatile share price often swings several percent up or down in a single session, even in the absence of news from the company.
The company said it would separate the roles of chairman and CEO and that Balsillie had stepped down voluntarily. He will remain as co-chief executive and director.
“The business has flourished and continues to flourish,” Balsillie said in an interview. “We’ve grown so darn fast and we’re trying to really more than catch up with our governance practices.”
He said he and co-CEO Mike Lazaridis have agreed to pay up to C$5 million each to help the company pay for the review.
“I think it’s also important to understand that 90 percent of this is a noncash charge,” he said.
RIM is one of more than 170 companies reviewing stock option grants. Others have been targeted as part of a broad investigation of grants by U.S. authorities.
Misek said RIM’s fundamentals are “awesome” and noted the company disclosed on Monday that in the fourth quarter ended March 3, it added 1 million BlackBerry subscriber accounts in a single quarter for the first time in its history.
RIM also announced it will add two more directors to its board for a total of nine, including Barbara Stymiest, the former chief executive of TSX Group Inc. X.TO, which operates the country's main stock exchanges.
As well, it made changes to a number of board committees and created an internal audit department. Chief Financial Officer Dennis Kavelman will also switch to a role as the company’s chief operating officer.
Research Capital analyst Nick Agostino said the company is acknowledging there were problems with past grants, but added RIM was proactive in launching its options review.
“I think what you’ve got to give these guys credit for is the fact that they’re ... self-policing,” he said. “Clearly, the moves that they’re making with regards to disengaging the co-CEO and chairman role certainly improve the overall corporate governance practices.”
Agostino said it remains to be seen whether the U.S. Securities and Exchange Commission will decide to move against RIM. The U.S. regulator, as well as regulators in Canada, have been in contact with RIM regarding its review.
(Additional reporting by Franklin Paul in New York)
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