Yesterday a U.S. district judge denied a request by BlackBerry maker Research In Motion (ticker: RIMM) to enforce the terms of a disputed $450 million settlement reached earlier this year with NTP (view court ruling --.pdf). This was a significant setback for RIM, whose stock tumbled about 7% after being halted for the announcement.
This makes it far more likely that RIM and NTP will settle at a much higher figure -- upwards to $1 billion. Note that RIM's gross profit for all of fiscal 2005 was $714 million, but that the company has about $1.9 billion in cash and equivalents to work with.
Responses from analysts:
- Iain Grant (Seaboard Group): 'It's just a game of poker now. I think NTP is saying, "Make us rich. And by the way, $450 million isn't enough." Otherwise, they would have cashed the cheque and said, "Thank you." '
- S&P Equity Research: 'We think Research in Motion's cash of about $1.9 billion would enable it to raise its settlement offer, or deploy a software workaround on the four patents in question to provide BlackBerry service in the U.S.'
- James Hurst (Winston & Strawn LLP): 'I'd be quite surprised if the parties didn't reach a settlement [before an injunction].'
- Kona Shio (Conscius Capital Partners): 'It is up to NTP now... They can ask for a lot. What can RIM do at this point? RIM is facing an injunction.'
- UBS: 'A sustained disruption in U.S. sales ... seems unlikely. We see potential upside to the shares over 12 months on that basis.'