| | 07-28-2011, 07:17 PM Thread Author #1
Will RIM suffer the same class-action fate as Motorola?
Jonathan Ratner Jul 27, 2011 – 9:40 AM ET | Last Updated: Jul 27, 2011 9:50 AM ET
Motorola Solutions Inc. failed in an attempt to dismiss a class-action lawsuit led by two Michigan pension funds, claiming the mobile phone maker hid key information about its ability to keep up with competitors such as Nokia and Samsung.
On Tuesday, U.S. District Judge Amy St. Eve in Chicago said there is a “genuine dispute” as to whether the company misled shareholders.
This decision is raising concern that Research In Motion Ltd. may suffer a similar fate. In May 2011, the BlackBerry maker was hit with a lawsuit in the District Court for the Southern District of New York, which alleges RIM made “materially false and misleading statements regarding the Company’s financial condition and business prospects” between December 16, 2010 and April 28, 2011.
The company revised its first quarter 2012 guidance lower on April 28, 2011, less than four weeks after issuing the prior guidance, according to Sameet Kanade, analyst at Northern Securities. He noted that RIM further reduced its fiscal 2012 guidance again on June 16, 2011.
“We highlight that the disappointing results during the last 2-3 quarters are in stark contrast to management’s bullish assertions,” Mr. Kanade told clients.
Recent announcements related to cost reductions and management changes, combined with further losses in smartphone market share and a lack of meaningful penetration in the tablet market, suggest expectations for the potential success of the QNX-based devices may be too bullish, he said.
“The MSI related announcement further complicates matters, in our opinion, as we cannot rule out a similar ruling in the RIM case,” the analyst said. “We believe a potential negative ruling may cause further deterioration in fundamentals.”
Meanwhile, UBS analyst Phillip Huang cut his price target on RIM shares to US$30 from US$41.
Mr. Huang said the stock may look cheap relative to analyst estimates, but he continues to lack visibility into normalized earnings power and continues to foresee challenges for RIM in the platform wars against Android and iOS (Apple), and conceivably Microsoft in 2012.
“While the introduction of new BB7 devices could reverse some of the negative momentum, a more meaningful transition is likely to occur with QNX in 2012 though execution risk is high and success likelihood unclear,” he added.
Will RIM suffer the same class-action fate as Motorola? | FP Tech Desk | Financial Post
More info on lawsuit here:
Motorola bid to dismiss 3G phones lawsuit fails - BlackBerry Forums at CrackBerry.com