http://online.wsj.com/article_email/article_print/SB114142276287788965-lMyQj AxMDE2NDAxMzQwMjMyWj.html By MARK HEINZL and AMOL SHARMA March 4, 2006
Research In Motion Ltd., on the brink of a possible court-ordered shutdown of its widely used BlackBerry wireless email device, agreed to pay $612.5 million to settle its long-running legal battle with NTP Inc. [Jim Balsillie] The settlement, announced after markets closed on Friday, ended all court proceedings in the nearly five-year legal battle that saw a tiny patent-holding firm take on one of technology's hottest companies and threaten to disrupt service to BlackBerry users in the U.S. The announcement came a week after U.S. District Court Judge James R. Spencer rebuked the two sides for their running feud in his court in Richmond, Va. The judge's comments increased the heat on RIM, which in recent months also had been pressured by investors and BlackBerry users wondering what would happen in case of a court-ordered shutdown. In after-hours trading on the Nasdaq Stock Market, RIM shares jumped nearly 19% to $85.40, after closing the day at $71.92, up 53 cents. RIM shares have see-sawed in recent months amid the legal uncertainty. The settlement ended a tense period for users of the BlackBerry, a cultural phenomenon that in just a few years has turned more than three million Americans into thumb-typing email addicts, earning the gadget the nickname, "crackberry." Once strictly a showy tool for cutting-edge tech types and investment bankers, the handheld devices are these days wielded by people of all stripes, who can be seen tapping away at the handheld gadgets in airports, restaurants and other public places. In the event of a court-ordered shutdown, BlackBerry had promised to switch to a backup system that it said it had developed. But the system had been viewed skeptically by some users, who can now feel reassured that service will be uninterrupted. The settlement also removes uncertainty from consumers considering which handheld device to buy. But RIM, based in Waterloo, Ontario, could face more questions from investors. The case, which it aggressively fought for months, appears to have put heavy pressure on sales of BlackBerry in the U.S. Minutes after announcing the settlement, RIM disclosed that financial results for the fiscal quarter, which ends Saturday, have fallen below its expectations "due to the effects of the uncertainty caused by the NTP litigation on RIM's business in the quarter." The company said the number of new BlackBerry subscribers in the quarter is expected to be in the range of 620,000 to 630,000, below the 700,000 to 750,000 previously expected. "The main reason for the decrease is that uncertainty surrounding the NTP litigation caused corporate and retail customers in the U.S. to defer BlackBerry purchase commitments," RIM said. Revenue, meanwhile, is expected to be in the range of $550 million to $560 million, below the expected $590 million to $620 million and about flat with the previous quarter. Net income per share for the fiscal fourth quarter is expected to be in the range of 64 cents to 66 cents, excluding litigation-related provisions, RIM said, below the previously expected range of 76 cents to 81 cents. RIM's investors might take the settlement amount in stride, since many have long expected a settlement would cost RIM many hundreds of millions of dollars, or even more than $1 billion. For accounting purposes, RIM said it had previously accrued $450 million in connection with possible litigation with closely held NTP, of McLean, Va., and will record a further $162.5 million in the fiscal fourth quarter. RIM should have no trouble funding the settlement costs; the company reported $1.8 billion of cash and investments as of Nov. 26. 'Not a Good Feeling' Still, it's "not a good feeling to write this kind of check," said Jim Balsillie, RIM's chairman and co-chief executive, in a conference call with investors. There's "no question we took one for the team here." The news was greeted with relief by BlackBerry customers. "It will continue to be business as usual with regard to sales and service of BlackBerry devices," said spokesman Matt Sullivan of Sprint Nextel Corp., one of the service's wireless carriers. Another provider, T-Mobile USA, which has 750,000 BlackBerry customers, said in a statement: "We're pleased that the RIM/NTP dispute has been resolved, so that our customers can remain assured they will continue to benefit from the same, robust T-Mobile BlackBerry experience to which they are accustomed." Wireless carriers had been one of the forces propelling a settlement. Alltel Corp. said earlier this year that it had recommended RIM settle the case. Other wireless carriers had privately said they preferred a deal. Some officials in the wireless companies had concerns about the quality of RIM's workaround plan, fearing it would affect their customers negatively. The settlement also soothed BlackBerry users. "I don't have to worry about whether there will be an interruption," said Eugene Stein, chief knowledge and technology officer at New York law firm White & Case LLP, which relies heavily on BlackBerries. He said the firm, which has about 2,000 lawyers, can now proceed with upgrades and purchases without worrying. Leon Sterling, who runs a marketing-communications business in Albuquerque, N.M., said he had worried for months about his BlackBerry getting shut down. "If I hadn't been in a restaurant when I heard, I would have whooped" upon getting the settlement news on his BlackBerry, he said. "Felt my blood pressure going down." At Mercer Management Consulting, which has about 900 BlackBerry users, Chief Information Officer Sachin Mehta said he had thought about buying alternative email devices and software from Palm Inc., Good Technology Inc., and Nokia Corp., but decided to stick with BlackBerry. "We placed the right bet," he said late Friday. "I was pretty confident they would find a way to settle." NTP, a little-known company founded by a lawyer with patent expertise and a Chicago inventor, first sued Rim in 2001, claiming that BlackBerry infringed on its wireless email patents. RIM fought NTP for years with every legal tactic at its disposal. In particular, it succeeded in getting the U.S. Patent and Trademark Office to reexamine NTP's patents and take steps to overturn them. But NTP countered each of RIM's moves, promising to tie up the patent-office proceedings for years with appeals. With the settlement, RIM won't have the ability to resume legal efforts to win back its payment to NTP, said RIM's Mr. Balsillie in an interview. "I would have loved to have a deal that had contingent payments," tied to the final outcome of the patent-office rulings, he said, adding he would have been prepared to pay more to NTP under that scenario. In the end, he said, RIM agreed to settle because NTP agreed to terms that ensure RIM's business partners, including the wireless carriers that sell BlackBerry and provide service, wouldn't become entangled in the litigation, Mr. Balsillie said. Also, he said, the legal battle "was slowing down our sales." Settling was a "pragmatic" decision, he said. "It's not something you feel good about," he said, adding "there's an urgent need for patent reform." The settlement represents a big payoff for NTP. While the inventor who co-founded the company, Thomas Campana, is now dead, his family retains an interest in the firm, as does the lawyer, Donald Stout, and several of his colleagues. 'Peace Agreement' "It's a total peace agreement," said NTP lawyer Jim Wallace, "a one-shot deal and everybody goes their own way." RIM will now have to show that its BlackBerry subscriber momentum won't continue to lag behind expectations. During the legal battle, many BlackBerry users have taken a closer look at competing wireless email systems and devices, such as those of Palm, Microsoft and Nokia. Those companies have been aggressively marketing their offerings to enterprise customers, taking advantage of RIM's legal woes. For the most part, large corporate customers of BlackBerry were reluctant to pull the trigger and purchase alternative email technology. But most analysts had warned that RIM risked losing market share if its problems continued. In anticipation of a possible shutdown, White & Case had bought several Treos, Mr. Stein said. Some attorneys liked them so much they have asked to continue using them, he said. _______________________________________________ Infowarrior mailing list Infowarrior@attrition.org https://attrition.org/mailman/listinfo/infowarrior
