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BlackBerry’s Latest Delay Could Lead to Lawsuits‏

09 Jul

Thorsten Heins, chief executive of Research in Motion, presenting the BlackBerry 10 in May.

 

OTTAWA — A friendly crowd is unlikely to greet Thorsten Heins on  Tuesday, when he makes his first appearance as chief executive at the  annual meeting here of Research in Motion.

Shares in the BlackBerry maker have fallen by about 95 percent from  their peak in mid-2008.

 

And last month, not only did RIM post a $518  million quarterly loss, but it also surprised investors by announcing that a new line of phones critical to its future would again be delayed.

 

But the annual meeting may not be the only forum for shareholders to  vent their displeasure. Several securities law experts and some  investors say the delay in the BlackBerry 10, and overly optimistic  remarks as recently as last week by Mr. Heins since he took over the top job in January, may also make RIM the target of shareholder lawsuits.

 

“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,” said Jean-Louis Gassée, the former president of Apple’s products division and the founder of  the software maker Be, who is now a venture capitalist and blogger in  Palo Alto, Calif. “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.”

 

After disappointing shareholders in June, Mr. Heins gave a radio  interview last week, wrote opinion pieces for two Canadian newspapers  and took online questions from visitors to The Globe and Mail’s Web site. As part of a public  relations offensive, speaking with the Canadian Broadcasting  Corporation, he forecast a sunny future for Research in Motion by  saying, “There’s nothing wrong with the company as it exists right now” and denying that RIM was, as some investors believe, in a death spiral.

 

In a statement, RIM rejected any suggestion that the company 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,” the company said.

 

While securities laws vary in Canada, where RIM is based, and the United States, where its stock is also traded, companies are generally  required to report promptly any developments that may significantly  alter their financial state. The BlackBerry 10 delay is unquestionably  such a change, Canadian and American law experts said.

 

Any shareholder class action would also have to show that Mr. Heins or  others within RIM knew that a delay was likely or a strong possibility  when he was publicly boasting about the product’s progress and promising on-time delivery.

 

The legal experts said repeated statements earlier this year by Mr.  Heins and other senior RIM executives — that the BlackBerry 10 line of  phones would arrive in stores as planned by the end of this year — could support this claim.

 

For example, on May 1, at a conference for app developers in Orlando,  Fla., Mr. Heins unveiled an incomplete prototype BlackBerry 10 phone  and, along with other RIM employees, demonstrated features of its  operating system.

 

During the presentation, Mr. Heins repeatedly and enthusiastically told the audience that the new product would be out by the end of this year.

 

“Every day I get questions about the progress on BlackBerry 10,” he  said. “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.”

 

He added at another point, “We’re making good progress, and I’m  committed to sharing the progress with everyone right up until the  launch later this year.”

Similar sentiments were offered at other developer sessions by other RIM executives over the following weeks.

 

Exactly what changed between the beginning of May and the end of June is unclear. Nor is it apparent when Mr. Heins decided that the delay would be necessary.

 

During a conference call to discuss the earnings, Mr. Heins said the  volume of software that must be handled to integrate all of BlackBerry  10’s components “has proved to be more time-consuming than anticipated.”

 

Even without the delay, many financial analysts were concerned that the  BlackBerry 10 was already too late to market. The delay means that it  will be facing off against new and improved phones and operating systems from Apple, Microsoft and Google.

 

“There’s a high risk of litigation here,” said James D. Cox, a law professor at Duke. “The outcome of the litigation would be hard to predict.”

 

Richard McLaren, a law professor at the University of Western Ontario,  said that in Canada companies are required to immediately disclose major changes in their operations.

“When you’ve used language like ‘laser focused on coming in on time,’ you’ve really raised expectations,” he said.

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Posted by on July 9, 2012 in International News

 

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