Could the delayed BlackBerry lead to lawsuits?
Shares fall, a quarterly loss, and now another delay in the latest line of BlackBerrys -- where will it lead?
In June, Research In Motion suffered its worst month to date.
First, a $518 million quarterly loss. Second, its lowest share price since the company's peak in 2008. And last, a delay for the forthcoming line of BlackBerry models and an updated operating system that may make or break RIM's future.
Considering this, with RIM's annual meeting scheduled this week, CEO Thorsten Heins may not be looked upon with friendly eyes by investors.
Displeasure, and investors brooding over their dwindling stake, may not be the only thing to occupying shareholders' minds at the meeting. The New York Times reports that investing parties and security law experts may take the issue of the BlackBerry 10 delay further, and transform worry over invested capital into lawsuits.
Combatting opinions of analysts who forecast RIM's future as nothing more than a "death spiral," Heins said in a radio interview last week that "there's nothing wrong with the company as it exists right now."
The perhaps overly optimistic remarks of Heins have not helped alleviate these concerns.
If the delay of the BlackBerry 10 coincides with documented statements and quotes from RIM's management, there may cause for relevant parties to consider company misrepresentation a possibility.
Venture capitalist Jean-Louis Gassee, former president of Apple's products division, agrees with this idea. He told the Times:
They're going to get sued and they should get sued because I think a closer look at the record is likely to unearth knowing and willful misrepresentation. When the C.E.O. says there's nothing wrong with the company as it is, it's not cautious, it doesn't make sense.
But can this lead to misrepresentation, and therefore a stack of court orders laid at the technology giant's door? In a recent statement, RIM rejected the idea that it had misled investors:
RIM is well aware of its disclosure obligations under applicable securities laws and is committed to providing a high level of transparency, as evidenced by RIM's decision to issue an interim business update on May 29, 2012, to alert shareholders that it expected to report an operating loss.
This leads to the crux of the matter: securities laws differ in separate countries. RIM is based in Canada, and its stock is traded across the United States. In both, however, generally any sudden developments or changes are notifiable to investing parties -- and the delay in the BlackBerry 10 is such a change.
With so much riding on the success of the product, it is no wonder Canadian and U.S. law specialists feel that that this development -- which is likely to further impact the company's financial health -- could be grounds for a visit to the courtroom.
If investors decide to bear arms and take a class action suit against RIM, they would be required to prove that RIM's management knew a delay was a strong possibility at the time Heins was promising on-time delivery. Over the course of this year, including at a May 1 conference where a BlackBerry 10 prototype was unveiled, Heins said:
Every day I get questions about the progress on BlackBerry 10. I appreciate all of the interest on our next-generation platform and I promise, I promise to you that the whole company is laser-focused on delivering on time and exceeding your expectation. We're making good progress, and I'm committed to sharing the progress with everyone right up until the launch later this year.
Repeated, documented assurances by Heins and other RIM executives are the first piece of the puzzle. The next is to discover what changed, exactly, between the start of May and the end of June, and when Heins decided the delay of the BlackBerry 10 was necessary. If lawsuits appear on the horizon, then the delay of the smartphone and OS may have additional waves of repercussion for Research in Motion.
RIM was unavailable for comment at the time of writing.