RIM Completes Another Share Repurchase Program and Cannot Restart Until Summer

Research In Motion (RIMM) reported earnings December 16, 2010. The general reaction to the report has been muted with the stock trading down 1.7% since the market close before the report. I have followed RIMM’s stock repurchasing activity for a while now, but I neglected to note earlier that RIMM announced the (aggressive) completion of another large share repurchase program:

“On June 24, 2010, the Company’s Board of Directors authorized a share repurchase program to purchase for cancellation up to approximately 31 million common shares (the ‘2011 Repurchase Program’). In the third quarter of fiscal 2011, the Company repurchased 2.9 million common shares at a cost of $133.2 million pursuant to the 2011 Repurchase Program. Since the inception of the 2011 Repurchase Program, the Company has repurchased a total of 31.3 million common shares for an aggregate cost of $1.67 billion, resulting in the effective completion of the 2011 Repurchase Program. All common shares repurchased by the Company pursuant to the 2011 Repurchase program have been cancelled…
…The 31.3 million common shares purchased under the 2011 Repurchase Program together with the 18.2 million common shares purchased by the Company under the 2010 Repurchase Program, represent approximately 10% of the Company’s public float of common shares.”

Given the third quarter’s purchases cost an average price of $46/share, it appears RIMM was quite active in buying shares directly above the 17-month lows printed at the end of August ($43). The overall cost of the repurchase program was $53. While the cost basis is roughly the same as it was after the last report, the rally from the bottom has finally put RIMM in-the-money on its repurchased shares.

The stock now hovers right on critical technical support where the 50 and 200-day moving averages (DMAs) have converged (see chart below). As before, I am assuming that if the stock swoons yet again, RIMM will, yet again, announce a fresh repurchase program. Cash continues to swell on the balance sheet – at the last report, all forms of cash rose $446M from the previous quarter to $2.47B (cash and cash-equivalents are $1.44B) – so there is plenty of room to create another repurchase program. Time is RIMM’s main limitation given the company has reached a legal limit in repurchasing shares in a 12-month window:

“This completes the maximum allowable percentage of shares outstanding that RIM is allowed to repurchase under its share repurchase program within a 12-month period under applicable securities laws and the next window to launch a new share repurchase program to purchase up to another 10% of RIM’s public float could begin in mid July 2011.” (Seeking Alpha transcripts for the earnings conference call).

*Chart created using TeleChart:

(Note: I purchased RIMM in anticipation of this support more or less holding)

Be careful out there!

Full disclosure: long RIMM shares and calls