RIMM Incurs a Hefty Charge
Problems for BlackBerry-maker Research In Motion Ltd.,(RIMM) continue to mount after the Canadian company was ordered to pay a $147.2 million fine to New Jersey-based technology firm Mformation Technologies for patent infringement.
It all began in 2008, when Mformation Technologies, which is renowned for providing Mobile device management software solutions to its clients, dragged Research In Motion to the U.S. District Court for the Northern District of California for infringing its patents.
Mformation asserted that Research In Motion used its unlicensed technology in BlackBerry Enterprise Server, which the the Waterloo, Ontario based handset manufacturer had picked up during a meeting related to this technology with Mformation.
Research In Motion was found guilty by the court and was asked to pay a royalty of $8 for each of the 18.4 million units, hence amounting to a total of $147.2 million.
A large number of legal cases regarding patent infringement are already pending against Research In Motion, which we believe will not only affect the company’s normal workflow but will also adversely impact its margin going forward.
Recently, Research In Motion Ltd. reported poor financial results for the first quarter of fiscal 2013 where both its top and bottom line missed the Zacks Consensus Estimate. Moreover, its smartphone and Playbook tablet device sales fell by 40.9% and 48%, respectively, from the previous year quarter. Stiff competition from Apple Inc’.s (:APPL) iPhones and Google Inc’.s (GOOG) Android-based devices has resulted in such grim results.
The company has also delayed the launch of its upcoming BlackBerry 10-based smartphones and followed it with a job cut of at least 5,000 employees. Taking into consideration all these headwinds, we believe the company’s future looks bleak.
Research In Motion shares currently retain a Zacks #4 Rank, which translates into a short-term Sell rating. Longer term, we are maintaining our Neutral recommendation on the stock
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