Is RIM’s Hardware Division in the Red?

As if Research In Motion’s immediate future wasn’t already bleak enough, today comes more ugly news. RIM’s latest regulatory filing implies that its flagship hardware division may be losing money.

The document reveals that in RIM’s February 2012 fiscal year, gross margins on hardware fell to 20 percent from 36 percent on a GAAP basis, and to 25 percent on a non-GAAP basis. And, according to Jefferies analyst Peter Misek, if you factor operating costs and inventory charges into those numbers, hardware-operating margins slip into negative territory: -8 percent on a GAAP basis; -3 percent on a non-GAAP basis, or -4 percent on an adjusted non-GAAP basis.

Nasty numbers, all of them. So which is the most accurate?

Misek believes it’s the adjusted non-GAAP number, which excludes restructuring, litigation and goodwill-impairment charges, but includes the $752 million in inventory write-offs RIM took for the quarter. Some might argue that including those write-offs skews the numbers here a bit, but Misek points out that RIM has written off inventory in the last two quarters, and is likely to do so again in the next.

So, whether it was 8 percent, 3 percent or 4 percent, RIM’s hardware division probably spent more than it made. Indeed, that may well have been one of the drivers of the “comprehensive review of strategic opportunities” CEO Thorsten Heins announced after the company reported abysmal fourth-quarter earnings. But that review isn’t likely to do much for the hardware business for some time. If hardware is in the red, then it’s probably going to remain there for a while longer — at least until the debut of RIM’s BlackBerry 10 devices. And that’s not scheduled to happen until late in the year.