BlackBerry Court Case Heading To Endgame -- Three Possible Scenarios For RIM Stock (RIMM, PALM)

|
Includes: BB, PALM

Tomorrow (Fri.) morning an important hearing will take place in the Research in Motion - NTP patent battle. Following the lawyers' arguments on the question of an injunction against the BlackBerry maker's key business, Judge James Spencer will issue a ruling. His ruling could come as early as tomorrow afternoon, but probably not until next week.

In a note to clients, Bear Stears analysts Andrew J. Neff, Bill Hand and Ted Chung presented three possible scenarios for RIMM and PALM (RIMM competitor) stockholders to look out for:

1. Injunction Granted (Negative for RIMM). If Judge Spenser grants an injunction against RIMM, its impact on RIMM varies depending on the restriction and scope of the injunction. Below is a list of potential outcomes and actions by RIMM.

A. Immediate enforcement of the injunction for all past and future infringing products -- the worst case for RIMM.

● RIMM settles with NTP under NTP’s terms (e.g., significantly above the $450 million negotiated in March 2005), or

● RIMM implements its workaround, requires existing customers to install the workaround for both the server and the handsets. This action may lead to potential customer loss since it’s not clear how easy it would be for enterprises to implement the workaround.

B. Immediate enforcement of the injunction for only the new users pending review of NTP’s plans to exclude government agencies

● RIMM settles with NTP (e.g., excess of $450 million negotiated in March 2005), or

● RIMM implements its workaround for new users only immediately, which requires existing customers to install the workaround for the server

C. Enforcement of the injunction with 30-days grace period for all customers

● RIMM settles with NTP (e.g., excess of $450 million negotiated in March 2005), or

● RIMM implements its workaround -- requires existing customers to install the workaround for both the server and the handsets


2. Grants the injunction but stays the enforcement pending resolution of the validity of NTP patents (Positive for RIMM).

● This decision will be viewed as a positive for RIMM since NTP patents could ruled invalid by the Federal Circuit Courts following the rejection by the US Patent Office.

● RIMM and NTP is likely to settle under a much lower financial amount than the $450 million agreement reached in March 2005.

3. Does not grant the injunction (Positive for RIMM). This is the best outcome for RIMM since RIMM can decide to wait for the outcome of validity of the NTP patents are determined, which could force NTP to settle at a much lower financial amount than the $450 million agreement reached in March 2005.

Stock impact: mixed for RIMM (negative if injunction is issued, positive if it is not) and mixed for PALM (positive if injunction is issued as an alternative solution, negative if not)

RIMM 1-yr chart: