There’s a Lot at Stake at Research In Motion

Things are starting to look somewhat bleak at Research In Motion Limited (NASDAQ/RIMM) — the maker of the widely loved “BlackBerry” PDA. For those of you who may be unaware, Research In Motion is fighting an ongoing patent infringement battle with NTP, which it had lost earlier and was initially told to pay $450 million. The company agreed to the penalty, but then NTP said it was not a done deal. Now NTP is in the midst of fighting for more in the appeals court.

 Research In Motion is very concerned, as the penalty could be substantially higher than the original $450-million award. In fact, the litigation impacts all of Research In Motion’s BlackBerry sales in the United States, which currently account for about 70% of total sales. Hence there is plenty at stake.

 So that is the fight in the courts, but Research In Motion is also showing some weakness in its subscriber numbers, a recurring source of revenue that is very important to the company.

 Last week, the company said it expects subscriber additions for the Q3 to come in at about 8% below the prior forecast of 680,000 to 710,000 given in September. Research In Motion attributed the shortfall on the delay of two new BlackBerry products that were expected to help ramp up subscriber interest in the BlackBerry e- mail service. Given this, Research In Motion went ahead and reduced its Q4 subscriber additions estimate by about 3%.

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 Now, the company’s reasons for the shortfalls may be legitimate, but you really have to wonder if competition from rivals such as Palm is partly to blame. I have, in the past, discussed the situation with Research In Motion in relation to its rivals. Perhaps it is beginning to impact Research In Motion. It may just be an aberration in the Q3 and Q4, as the company assures, but you definitely want to follow the next few quarters and see if the company is telling the truth. The Q3 will be reported on December 21, 2005. Let’s hope the results represent an early holiday gift!