updated 11:15 am EDT, Fri May 27, 2011
RIM rejects class action claims it misled public
RIM on Friday braced itself for a "purported" class action lawsuit leveled against it by Holzer Holzer & Fistel. Following an investigation started by the law firm early in the week, the BlackBerry maker claimed that assertions it misled investors on the health of its phone business were "without merit." HH&F had argued that the company was hiding the impact of an "aging product line" in statements between December 10 of last year and April 28, when it warned of low BlackBerry sales.
Law firms regularly announce these sorts of investigations at key financial events, such as after a proposed corporate merger. They seldom go beyond the exploratory stage as many are just publicity grabs to put the firm in the public eye and show existing clients that it's actively pursuing cases. A lawsuit against RIM would suggest HH&F was not only prepared to go to trial but had reason enough to suspect it could win at court.
RIM has been declining rapidly in market share over the past several months as its once secure spot in smartphones has been eroded both by Android and by the iPhone. It managed to stay at the low end of guidance for its winter quarter but has now been unable to keep up with Apple for two consecutive quarters, with the gap now due to grow even wider when RIM reports its spring results on June 16. RIM has continued to grow but at a far slower pace than phones based on the platforms of its North American competitors.
While it's uncertain whether or not RIM had been masking its expected performance until the April 28 alert, it's widely accepted that the company's old BlackBerry line has become more and more of a problem. Most of RIM's sales now lean on its cheapest phones, including the BlackBerry Curve 3G and the older-still Curve 8500 series. Its growth primarily comes from outside North America and frequently from prepaid customers using the BlackBerry for texting.
In Canada and the US, where high-end smartphones are more common, most have abandoned phones like the Torch and Storm in favor of faster, more advanced Android and iPhone hardware. A turnaround is only due to come mid-year with the Bold 9900 and other BlackBerry 7 devices catching up in performance and features.