RIM faces securities fraud lawsuit

An Atlanta-based law firm accused Research In Motion (NASDAQ:RIMM) of violating U.S. securities laws for failing to let shareholders know about problems the company was experiencing with its BlackBerry product line.

"The investigation focuses on whether a series of statements made between December 16, 2010 and April 28, 2011, inclusive, regarding RIM's business, its prospects and its operations were materially false and misleading at the time they were made," the law firm Holzer Holzer & Fistel said in a statement Monday. "Specifically, the investigation focuses on, among other things, whether the company knew but failed to adequately disclose that it was experiencing problems associated with an aging product line which were negatively impacting RIM's business and margins."

A RIM spokeswoman declined to comment, citing company policy of not commenting on potential litigation.

On April 28, RIM cut its earnings forecast for its fiscal first quarter, and said it expects smartphone sales to be at the lower end of its projected forecast for the quarter. The company said at the time it expected shipment volumes of BlackBerry smartphones to be at the lower end of the range of 13.5-14.5 million it had set out the previous month. Further, the BlackBerry maker said it expected to ship more devices with lower average selling prices than previously expected.

Holzer Holzer & Fistel launched a similar inquiry in March into statements made by Palm executives before the company was purchased last year by Hewlett-Packard for $1.2 billion.

The potential lawsuit is the latest black eye for RIM, which took a hit Tuesday from Wunderlich Securities analyst Matthew Robison, who cut his target for RIM's shares. Robison said in a research note that his firm no longer anticipates RIM "recovering to participate in the mainstream of smartphone industry growth."

One bright spot though for RIM is that sales of its PlayBook tablet appear to be doing well. A recent research note from RBC Capital Markets said RIM may have sold 250,000 PlayBooks in its first month of availability, and sales could hit 500,000 by the time RIM's fiscal first quarter ends May 28. Additionally, Best Buy said sales of the tablet exceeded expectations. 

For more:
- see this release
- see this Financial Post article
- see this Forbes article

Related Articles:
RIM's PlayBook failing to make inroads at AT&T, Verizon
RIM co-CEO Lazaridis defends company's strategy, PlayBook
RIM slashes forecast on weaker BlackBerry smartphone sales
RIM chiefs counter PlayBook tablet criticism ahead of launch
RIM's BlackBerry PlayBook to run Android apps

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