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Holzer Holzer & Fistel Investigating RIM for Securities Violations

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I am no finance guru but even I noticed that something fishy was going on when RIM made their “Updated Q1 Guidance” announcement at the end of April. They had just set their guidance at the end of March and all of a sudden in the end of April they had “Updated Guidance.” That would make sense if something unexpected happened but RIM stated the reason was:

This shortfall is primarily due to shipment volumes of BlackBerry smartphones that are now expected to be at the lower end of the range of 13.5-14.5 million forecasted in March and a shift in the expected mix of devices shipped towards handsets with lower average selling prices.

It could be they lost a large order from a customer? The second part of the reason is something RIM knew for months now so its not really something new. Now we learn that Holzer Holzer & Fistel LLC and investigating RIM with a focus “on whether a series of statements made between December 16, 2010 and April 28, 2011, inclusive, regarding RIM’s business, its prospects and its operations were materially false and misleading at the time they were made.”

They even clarify to say:

Specifically, the investigation focuses on, among other things, whether the Company knew but failed to adequately disclose that it was experiencing problems associated with an aging product line which were negatively impacting RIM’s business and margins.

It seems like RIM cannot go a month without getting sued for one reason or another. I asked a few analyst friends of mine why RIM even made that “Updated Q1 Guidance” announcement and I still don’t have a good answer. Anybody have some thoughts?

28 total comments on this postSubmit your comment!
  1. Judging by that last bit of phrasing, one might suspect them of having read too many comments at BGR 😉

  2. Ronen, your first sentence suggests that RIM did something wrong. I’m not certain that has been proven yet.

    Indeed, RIM does have an aging product line in smartphones, but the company has been pushing ahead with the PlayBook and the next generation OS that will be on the new smartphones to come next month or so.

    While I’m not pleased with the delays on those next gen smartphones, I am happy to see that they’re turning the corner with some great products on the immediate horizon.

    • I am not suggesting that RIM did something wrong. I am just saying it sounds fishy since I cannot come up with any good explanation. Can you think of any reason why they would all of a sudden wake up a month later and realized their products are suddenly old? It just doesn’t make sense…

      • Perhaps they did not anticipate the impact that this would have on their future earnings since much of the world outside North America was scooping up Curves and Bolds. The margins on those were diminishing faster than anticipated as the newer Bolds did not have the staying power they perhaps anticipated. Neither did the Curve 3G, Pearl 3G, or Style.

        For us, it looks like an obvious oversight, but I think RIM’s business practises have been sound in the past. I’d give them the benefit of the doubt.

        This is a company in transition from an older OS platform to a new QNX based OS; from a smartphone company to a mobile computing powerhouse.

        • True but how did they all of a sudden have a clearer guidance exactly a month later? Did they suddenly learn how to anticipate? I also don’t understand why they had to issue the guidance. That is the part that I find truly odd. Why did they go out of their way to correct an assumption. I am no finance major but its the first time I had ever heard of it happening.

  3. Well only one phone was announced at BBW maybe they figured out that they could not finish the phones on time. Technical issues arise all the time and it could be that even if not true they could judt say that.

    • Definitely could be that. I know the other devices were delayed slightly but carriers already have them for testing.

    • Sadly true! I don’t know if they were just taking it easy by taking precautions on the new OS and Bold Touch platforms. Perhaps they did not have enough folks testing the Storm 3 and Torch 2 yet, but they could have at least announced those devices.

      I can see now that the company has recognized the need to ship out a new Bold fast, so their focus is on the 9900 as well as improvements to the PlayBook.

  4. All I know is I got F@#$@ over buying there stock before Blackberry world event… and they drop this news for no reason? Why, if they are still maintaining the year end guidance? What they did was just ruined any positive momentum the stock had and now we need to remove one of the CEO… can you guess which one?

  5. I don’t think they did it for fun. The strategy for buying RIM stock is buy and hold. It’s crazy to buy short term now any little negative comment sends the stock tumbling and for no reason except people think the stock will tumble. If there is good news the stock will not rise since no one believes it.

  6. What I really don’t understand is what’s so great about Android or Even Apple? Can anyone answer that question. Besides the Apps that RIM will eventually get… But truly deep down inside what is so good about Apple, and why is everybody defend that company that honestly lies to people “Apple”! As far as I am concerned QNX is the best OS, and nothing can touch it! I am Pro RIM and nothing can change that! Patience will cure all things dealing with that over the next year. I hope they don’t have to sell because of these stupid Analyst’s and Lawsuits!

  7. P.S. RIM has never lied. They simply updated their guidance to what their channel checks are, and considering there has been no new phones including the Storm 3 which should have been out in the early year. They simply know that the competition is tough, so they are revising their smartphone guideline, or they would have been laughed at harder than they are currently laughed at from stupid Apple Lovers when iPhones drop calls and can’t do flash or DST or New Years Time or even configure an outgoing mail server!

    • I am not saying RIM is lying. I think they have a competitive product and I cannot wait to get my hands on a 9900 of my own. On the other hand why would they have to update guidance based on facts they knew the month before… It just seems odd.

      • I wouldn’t take it personally… The did this to Palm before HP acquired them and listening to the conference calls, and it seems that they are wanting their products out but not wanting to screw it up with carriers. Take a look at the Playbook, and how AT&T doesn’t even have the bridge application yet. They have to work with these carriers and really bring some competition back in. It seems like they will be working with the carriers for new products for back to school deals coming up. I don’t see any lies in between any lines, and it seems that some stock holders are mad over the whole ordeal. As a stock holder, I’m not furious. I want them in it to win it, and if that means a little time, I’m not going anywhere!

        • I totally agree I am not taking this personally I just thought they got hammered for making this “guidance” without really explaining why. I don’t own their stock so I cannot speak as a stockholder but it seems like RIM is a long term investment until they beat back the rampant speculation.

          • I just don’t get how everybody has turned on RIM in just almost a split second. I mean Windows Phone has been dead forever, but the talk isn’t there as bad as RIM. What’s going on? Has everybody got spinning Apple’s in their heads or what? IOS or Android would never make it in Medical Equipment, High Speed Trains or Nuclear Reactors. The Negativity is overdone, and really old. It needs to stop, and I’m hoping that RIM can pry through all the BS that everybody is laying out and prove all those iAnalyst’s Wrong!

  8. Michael S you should definitely join us here on berry review. I can see you are a strong RIM supporter. I agree that the negativity over RIM is overdone, but I think RIM has done some things that don’t help there cause. They for example gave some really unfinished units to known Apple lovers for a review.

    Also they have been very slow to update their phones. Other than thr Torch which one can argue was only half an update since the Torch 2 was really what the Torch should have been.

    I think we really have to look at it this way. iPhone came out and Google saw the challenge and bought Android and have done what they could with it. Without QNX I think RIM would be dead. What I hope we are seeing is the rebirth of RIM. I personally find it very frustrating as I think you do, but I do think that once RIM executes RIM will get positive reviews. I think there are many apple.lovers out there but most will be fair to RIM.

    What’s so good about apple? The user interface looks nice, and they have cool apps. Thats about it. I’m glad the playbook can compete on the UI and I hope apps soon, but I’m disappointed we have to wait another year before we see it on phones.

    I do think if RIM executes you will see a big turn against apple for their lack of security and doing things like trackimg customers. People will say “if I can get the same stuff elsewhere why put up with it”

    • It is frustrating to not have QNX on smartphones, and it should be early next year. I also have to take into consideration along with the rest of us that RIM isn’t the size of Apple or even Google yet. I work at AT&T and we have limited support for Apple and Android devices, and so I twitch every time I get one of those calls. I’m biased towards RIM because they train us and very well on their products. RIM is not only going to perfect the UI but the inner works of what an OS should be and what it is capable of! I can’t wait for RIM to throw Apple under the bus though and put the 7 inch Playbooks in cars, cause we all know that Apple said the 7 inches were DOA. Lol! I’ll be around trust me.

      • I absolutely agree with you. Unfortunately, these days people have been brainwashed into believing having the most apps (Iphone, Ipad) or the best specs (Android) means you have the best smart phone. But, I believe RIMM is catching up on both departments. Once the QNX arrives, which you correctly stated is best OS on the market, RIMM will definitely move ahead of the compete
        tion.

  9. Shocker that their handset revenue is down, considering they haven’t put out a new device in 6+ months. Don’t get me wrong, I’m a huge Blackberry/Playbook/RIM fan.. I’m just frustrated that they pulled resources away from their core business (handsets) to focus on the Playbook and now phones like the 9900 (which I’ve been waiting for to upgrade my Bold 9000) aren’t even out in the market yet.. and might not be until late Q3 or Q4 this year. Going 9 months without putting out a new handset should be unacceptable from anyones point of view (investors, consumers, RIM’s Board, RIM’s management team).

    • Without the Playbook, we wouldn’t be steps closer to QNX on phones which I think everybody wants. Management realized that they couldn’t make it without QNX so in order to get it to phones faster they had to put their resources into it. They said it was a matter of repackaging for phones. It was something that needed to be done and no one can dispute that.

  10. @Michael S – I agree with your comments about QNX, but I disagree that the development of the Playbook had to come at the expense of the delays in the new handsets. I don’t know the corporate structure at RIM, but I’m guessing they have both hardware and software teams.. so the QNX development should only have been minimally impacted….if at all.

  11. As I understand it, a company like RIM *must* issue updated guidance when their projections change materially. If that’s true, it’s clear that they learned something new since the earlier guidance was issued, or they dug deeper and/or obtained new information, or they simply hadn’t finished a complex analysis at the earlier date.

    If you assume they follow these sorts of legally required procedures with respect to guidance, then you can also assume with good reason that the earlier guidance was not deliberately misleading, even if it was later found to have been inaccurate. There’s no reason to think they misled deliberately.

    What really annoys me is why this bothersome law firm gets any press for this… the headlines make it sound like the SEC is involved, yet it’s really no different than me saying “HH&F senior partners under investigation for conspiracy to defraud” when it’s really just me that’s started that investigation. Yeah, just now, I just started it. Now let’s see if the fools at BGR lead off with that equally deceptive headline tomorrow. :-)

    • Well damn… If I knew less about QNX being the best OS and more about law, I could have figured that out. If I ever get in trouble by the law, can I get in touch with you?

      • @Michael, not quite sure what your point is there. I don’t see smileys, so I would assume you’re serious, but I suspect it’s just some poorly expressed sarcasm instead. If it helps, note that I was attempting to address some of Ronen’s puzzlement, not responding to anything you said.

  12. @Michael, okay, so let me see if I’ve got this straight. You think you know more about QNX than I or others here (or why would you have said that?), and you think what I said was obvious to all? You’re probably wrong on both counts, though maybe you’re just a genius or something like that. (Sarcasm doesn’t get smileys… it’s smileys or sarcasm… but you need to get the sarcasm right or it just gets misinterpreted.)

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