Use access key #2 to skip to page content.
$115.04 -1.16 (-1.00%)
7/3/2008 1:00 PM

Research In Motion Limited (USA) (RIMM)

CAPS Rating:
**

The Company is a designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market.

View All Commentary (RIMM)

Recs

8

Avatar jwfoster (99.96) Submitted: 12/20/07 4:46 PM : Underperform Start Price: $45.19 RIMM Score: -180.61

They ship the phones to distributors and book the phone sale. This artificially inflates margins, overstates phone sales, and understates inventories since the "inventory" is held at distributors.

You also notice that the cash flows don't correspond to the "earnings" its because the sales are booked upon shipment and not sales.

It's a huge PONZI SCHEME and it WILL BLOW UP. But, for now all the LEMMINGS that run OPM have yet to figure it out.

That all being said. Thus far the idea has worked. Similar to Lucent's vendor financing causing massive "growth" on the back of its own liabilities. RIMM too is mortgaging its future.

Report this Post Replies: 5 | Reply

Avatar keithtarbi (20.89) Submitted: 1/10/08 4:32 PM

Recs: 0 | Rec This

This seems logical. Their cash flow will also be in trouble in the 2nd half of FY08

Report this Post Reply

Avatar Harold71 (83.51) Submitted: 1/10/08 7:49 PM

Recs: 0 | Rec This

If it not a real sale (i.e., if it's actually more like a consignment), then indeed the profit should not be in earnings. You are talking fraudulent accounting then, because actual GAAP does account for this. Accountants can be picky like that.


From http://www.dwmbeancounter.com/tutorial/theorybook.html
Realization Principle - Revenue Recognition

The revenue recognition principle requires companies to record revenue when it is realized or realizable and actually earned. In other words, at the time the goods are actually sold or the services are rendered.

When revenue is earned normally has no relationship to when the cash resulting from the earnings is actually received. This principle is the basis for accrual accounting.

Harold71, CPA

Report this Post Reply

Avatar aj350 (< 20) Submitted: 3/05/08 3:37 PM

Recs: 0 | Rec This

well there's no problem with this type of accounting, however its not inventories, its acct's receivable he should be concentrating on!

accts receivable have BALLOONED, and if sales should stagnate or anything RIMM's customers may get testy and request discounts/rebates on old merchandise.

Where does "problem sales" show up?? My guess is it would be under accrued liabilities and unrecognized losses (not 100% sure of this)

Thus far, all of these line items (accts receivable and accrued liabilities) have grown in tandem with sales, and doesn't seem to have become a problem yet...

Report this Post Reply

Avatar FrozenCanuck (91.79) Submitted: 5/20/08 12:37 PM

Recs: 2 | Rec This

Dude - with all due respect, you are nuts to call this a short due to the fact that they ship phones to distributors. Consider these facts:

1) RIM ships its phones to distributors and directly to carriers just like all of the major phone manufacturers (NOK, MOT, LG, Samsung, etc)

2) Measure quarterly sell-through of phones (activations) and you will see these guys are picking up a lot of market share

3) Cash flow for this company has grown impressively.

4) The growth they have experienced has a track record of many years. This is not some kind of quarterly wonder-stock.

Report this Post Reply

Avatar JustWokeUp (72.97) Submitted: 6/26/08 2:43 PM

Recs: 0 | Rec This

I don't question the greatness that is Blackberry, but we do need to watch this company cash flow and receivable turnovers.


I have seen many companies abuse their distributors, especially overseas distributors, as a dumping ground. They force their distributors to take a certain amount of units within a certain period of time by means of sales target - if any distributor cannot meet its sales target, that company is no longer privileged to be their distributor.


This would inflate revenue short term, but if their distributors cannot sell the phones fast enough to be in a position to force-buy more units needed for the sales target, eventually there will be too many Blackberries than one can eat, and everybody pukes.

Report this Post Reply

Featured Broker Partners