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Fri, Dec 23, 2005 - Page 12 News List

RIM's Q3 unaffected by lawsuit

PATENT DISPUTE Despite an ongoing case that could shut down most of the firm's BlackBerry service in the US, profits rose by 33 percent in the third quarter


The legal uncertainty surrounding the BlackBerry e-mail service had no financial impact on its Canadian maker, Research In Motion (RIM), in the third quarter.

The company reported on Wednesday that profit rose 33 percent, to US$120.1 million, while revenue grew 53 percent, to US$560.6 million compared with a year earlier.

But growing customer uncertainty stemming from a patent infringement lawsuit that might lead to a shutdown of most BlackBerry service in the US caused RIM to lower its expectations for growth. It now expects to attract 700,000 to 750,000 new BlackBerry users in the current quarter, down from an earlier estimate of up to 825,000.

James Balsillie, RIM's chairman and co-chief executive, said a recent notification by the US Patent and Trademark Office that it expected to reject five patents held by NTP, the intellectual property company that started the court case, seemed to be calming users and potential buyers.

"What I've received from customers is, definitely, there was some concern and they were very, very comforted" by the patent office decision, Balsillie told analysts on a conference call.

The company's strong performance in the last quarter also offset concerns among some analysts about the impact of the litigation.

"It appears to be that their business is chugging along very well in spite of what must be the biggest publicity nightmare a company can face," said Peter Misek, a technology analyst at Canaccord Capital in Toronto.

Misek added that he thought RIM was more pessimistic than many investors about the court case's potential impact on sales.

RIM's dispute with NTP is being heard in two forums.

At the request of the company, which is based on Waterloo, Ontario, the patent office in the US is reviewing five wireless e-mail patents controlled by NTP. In preliminary decisions, it has rejected all of the holding company's claims.

Legal problems

* Third quarter profits rose 33 percent to US$120.1 million compared with the year earlier

* But the company lowered its forecasts for growth in BlackBerry users, and now expects to attract 700,000 to 750,000 new users in the current quarter, down from a prior estimate of up to 825,000

* The company said that customers appear to have been reassured by a US patent office notification that said it expects to reject five patents held by NTP, the firm that is suing RIM for infringement

A separate patent infringement lawsuit by NTP against RIM is now back at a trial court after the Canadian company was unsuccessful in appealing a decision against it.

Judge James Spencer, of US District Court in Richmond, Virginia, is considering a request by NTP to shut down BlackBerry service in the US for everyone but government and emergency workers.

Although RIM has reduced its expectations for new subscribers, the company did not alter its guidance about its financial performance during the quarter. Balsillie said that lower-than-expected operating costs should offset any reduction in the company's rate of growth.

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