Balsillie steps down as RIM chairman
Company also restating results

Original article here ---> Balsillie steps down as RIM chairman

Emily Mathieu, Financial Post
Published: Monday, March 05, 2007

TORONTO -- Research In Motion Ltd. announced on Monday that accounting errors related to stock options grants will result in the Waterloo-based company taking a hit of about US$250-million on previous earnings.

RIM will be restating company financial statements for fiscal 2004, 2005 and 2006 and for the first quarter of fiscal 2007. The company will be revising its earnings according to Generally Accepted Accounting Principles (GAAP) up to the end of fiscal 2006.

The BlackBerry maker also said Jim Balsillie, the company co-chief executive officer and one of the primary administrators of the employee grants, would be stepping down from his role as chairman but would retain all other executive titles.

Speaking on behalf of the board and the senior management of RIM, we are treating this issue very seriously and have already made significant progress in rectifying this matter. We are also committed to evolving our processes to be consistent with our philosophy of achieving excellence throughout RIM’s operations,” said RIM’s Co-CEO Mike Lazaridis and Mr. Balsillie in a joint statement.

The company also said Dennis Kavelman will be moving from his position as chief financial officer to become the company’s chief operating officer, administration and operations.

Brian Bidulka, currently vice-president, corporate controller at RIM, has been appointed as the company’s chief accounting officer and will serve as RIM’s senior financial officer. Mr. Bidulka, will also be responsible for administering RIM’s stock option program until someone new is hired and assumes responsibility for the program.

RIM is a U.S. listed company which means it’s subject to the rules outlined in the Sarbanes-Oxley Act a U.S. federal law established in 2002, post Enron, which forced companies to revise their accounting and reporting practices. There is no official legislation in Canada to match Sarbanes-Oxley but public companies on both sides of the border have been feeling the squeeze as investigations, whether active or planne, related to accounting practices continue to make headline news.

In November 2006 shares of Dell Inc., the world’s second-largest personal computer maker, dropped about 2.5% after the U.S. Securities and Exchange Commission (SEC) announced that a 15-month-old review of the company’s accounting practices would be turning into a formal investigation.

SEC has also investigated activities at Royal Group Technologies Ltd., which has its head office in Ontario, which was facing regulatory and criminal probes by the Ontario Securities Commission and the RCMP during the summer.

Samuel Wilson an analyst with JMP Securities said if RIM’s stock takes a hit today it’s unlikely to be directly related to the revisions, which have become something of an accepted event following the enactment of Sarbanes-Oxley.

“Futures are ugly as the day is long,” said Mr. Wilson noting that just after 9 a.m. futures were trading at about 15 points below fair value. “All the European exchanges are down, so the market is going to open ugly. Seeing as RIM is more of high flyer stock it will get hit a little harder.

Despite the revision RIM’s future reports, based on JMP research on in store sales, are looking up, he said.

“I think they are going to report a good February quarter and the Pearl is selling like hotcakes.”

RIM had announced in September that the company would be voluntarily reviewing stock options grants following an internal review which took place under the direction of direction of a committee comprised of RIM’s board of directors including Mr. Kavelma in August. The committee reviewed about 3,231 grants of stock options to acquire common shares that were made between Dec. 1996 and Aug. 2006 to 2,034 employees and RIM’s directors, the company said in a release.

The committee also reviewed stock based awards granted prior to the adoption of RIM’s Dec. 4, 1996 stock option plan, the company said.

Mr. Lazaridis, and chief operating officers, Don Morrison and Larry Conlee, were also involved in the granting of options, in the cases of Mr. Morrison and Mr. Conlee those grants were limited to their direct employees.

According to the company statement, RIM “established the grant date of awards with reference to a historical or future low price in a month or in a range of dates.” “In limited instances, the company repriced options subsequent to the option grant as the stock price decreased. In many instances, options were granted prior to finalizing the awards.”

Ernst & Young LLP conducted the audit and on Sept. 28, 2006. The United States Securities and Exchange Commission (SEC) and the Ontario Securities Commission have been informed of the results.

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