Responses to the BlackBerry Patent Settlement: Relief, But Too Late? (RIMM)

Mar. 6.06 | About: BlackBerry Ltd. (BBRY)

BlackBerry manufacturer Research in Motion settled its four year patent dispute with Virginia-based NTP on Friday. According to the agreement, RIM paid NTP $612.5 million for a "full and final settlement" of all claims. RIMM stock jumped 19% after hours Friday on the news.

In parallel with the announcement, RIMM cut its Q4 new subscriber adds forecast for the third time since September 28 to 620-630,000. September predictions had Q4 subscriber adds at 825,000. Here are some of the responses to the news:

Sell Side Analysts:

Jeff Kvaal and Tim Luke, Lehman Brothers: 'While the preannouncement is clearly not a favorable result for RIM, we would submit that the removal of the injunctive risk and the ability of the company to move past the litigation by far outweighs any negative impact from the litigation on near-term business trends. While our checks have suggested that customers have been looking into alternative strategies in the event of a potential injunction, we do not believe the litigation led to material competitive displacement. We also note that our checks have indicated continued strength in replacement demand spurred by the 8700 (in both the domestic and international markets).' Kvaal and Luke have an Overweight rating on the stock.

John Bucher, Harris Nesbitt Corp: 'If this puts this entire NTP legal matter and all the liabilities associated with it to rest for $613 million, that's going to be seen positively by the market.' Bucher has a Neutral rating on the stock.

Ben Bollin, FTN Midwest Research: Estimated that Blackberry's market share could drop to 50% by 2010 stemming from competitive reasons. Bollin has a Buy rating on the stock.

Press:

Charles Cooper, CNET: 'RIM can turn the page now and get on with its business. But what's the larger message for technology developers? RIM does everything right and still winds up paying ransom. The clear subtext is to make sure you hire the best lawyers money can buy. Otherwise you may wind up paying through the nose--or even worse.'

Matthew Ingram, Globe and Mail: 'If nothing else, putting an end to the NTP case allows RIM to focus all its energies on remaining the market leader in the handheld e-mail market -- and it needs all the energy it can get, as competition grows. Microsoft has released a new upgrade for its e-mail server software with BlackBerry-like functionality, Palm is offering similar services for its new Treo handheld devices -- of which it sold almost as many in the most recent quarter as RIM sold BlackBerrys -- and Finland's Nokia is rolling out BlackBerry-style "push" e-mail features to its phones in the next year or so.'

Mark Heinzl, Wall Street Journal: 'Defenders of the system say stiff measures are needed to protect the rights of inventors and encourage innovation. But many technology executives argue that injunction provisions under U.S. law are outdated and enable patent-holding firms to extract prohibitive payments from others seeking to bring useful products to market.'

Bloggers:

Mike Maznick, Techdirt Wireless: 'The overall deal may have made business sense in the end for RIM, but it's highlighted in very real terms what a travesty the patent system has become these days. The company that does nothing gets rich and the company that innovated is slowed down.'

Mark Evans: 'The question that has to be asked if how this dispute ever got this far. Did RIM simply mis-read NTP? Did NTP show more staying power than a little patent-holding company was ever expected to have? Another thing to consider is why this battle carried on for almost a year after a $450-million settlement blew up last year? Was another year of legal turbulence really worth $162.5-million for RIM?'

Xplanazine: 'For a mere $612.5 million, RIM can continue its service without threat of future lawsuits. On the flip side, because it chose to drag on the negotiations, the whole world is now aware that Blackberry is not the only option for push e-mail services on handhelds.'

Russell Shaw, ZDnet: 'Even leaving out the effect of uncertainty on lost revenue, simple math shows that a $612.5 million hole would require only a 4.6% stock price hike to produce a market cap gain that would exceed the money paid to NTP.'