On a day when high oil prices and bad news from General Motors are weighing down on the market, Research In Motion
Research in Motion's (RIM) growth -- so phenomenal that the wireless messaging specialist compares sales to the previous quarter, not just to the year-ago comparable quarter -- is driven largely by sales of its handheld wireless BlackBerry devices. The technology behind the BlackBerry is critical to the company's success.
But back in 2000, NTP (a patent holding company) filed suit against RIM, claiming the BlackBerry technology was an infringement on NTP patents -- and since then, the courts have agreed. Pending appeals, RIM has been under a court order to set aside 8.5% of its BlackBerry sales for NTP.
Now, rather than have appeals drag out indefinitely, RIM has agreed to pay NTP $450 million ($137 million of which is already in escrow) to resolve all litigation. Research In Motion gains the right (now and in the future) to use and sublicense any and all of the NTP patents in question to anyone for products or services that interface, interact, or combine with RIM's products. It's a clean, one-time payment that RIM can easily pay from its $814 million cash hoard (per Q3 results of the 2004 fiscal year). Final details of the accord are expected when RIM announces its fiscal year-end results on April 5.
The excitement in RIM shares is easily explained. Recently, the company has issued numerous press releases touting deals with Yahoo!
Investors may balk at paying 60 times trailing earnings for RIM, when indirect competitor Nokia
RIM's business is booming. Settling this litigation has allowed investors to see a clear, unobstructed future, and they are bidding the stock up to reflect the rosy outlook for the company and its BlackBerry.