A jury decided Research In Motion Limited (RIM) should pay $147.2 million in its patent infringement dispute with Mformation. As the Blackberry maker’s business collapses, its investors remain exposed to the risk of additional lawsuit-related losses ahead.
Mformation sells software for managing systems containing a large number of wireless devices. The company said in a lawsuit filed in October 2008 that it shared sensitive information with RIM in 2002 while negotiating a possible partnership, but then RIM unexpectedly ended the discussions and allegedly built similar software features into its BlackBerry products. RIM said on Saturday that it had learned the previous day that a U.S. District Court for the Northern District of California jury decided to hold it liable for damages. RIM, which also maintained that the Mformation patent in question is invalid, is now evaluating its legal options.
RIM is likely to have more legal problems in the years ahead. GMI forecasts that the company has a 26.4% probability of class action litigation occurring within the next 12 months. This places them in the 1st percentile of all companies in North America, indicating higher risk than 99% of all rated companies in this region.
To be sure, RIM actually has a B rating on its corporate governance overall, thanks in part to attributes such as its having predominantly independent board supervision. Even so, the company’s sales have been shrinking as rivals such as Apple lure BlackBerry customers away with smartphones. GMI warned in June that RIM remains at risk of announcing unexpected earnings developments.
RIM’s weakening business has impacted the quality of its financial statements. For example, as the company’s market capitalization continued to decline, RIM recently decided to reassess its estimation of acquired assets. It ended up downwardly revising its earlier evaluation of goodwill by $335 million, or nearly 12% of total sales, for the three months ended June 2.
Meanwhile RIM is staking its future on its new BlackBerry 10, an operating system that enables developers to create apps. The company had said on May 1 that the new devices would launch in the latter part of 2012, but then around two months later changed tack and pushed the deadline back to the first three months of 2013.
As investors wake up to the risks they’re exposed to in RIM, the company’s stock price has shed nearly 52% of its value in the year to date to trade at around $7.01 per share on Monday.
In part due to such developments, RIM’s statements reflect an AGR of 3, indicating higher risk than 97% of comparable companies. The AGR had been much stronger up until June 2011, when it was a 41.
As the company’s travails continue, its future remains uncertain.