Research In Motion Drops on Charge, Downgrade

Research In Motion(RIMM) shares tumbled Friday, hit by a downgrade from RBC Capital and news that the company plans a new quarterly charge.

The Canada-based maker of the Blackberry e-mail device said it plans to take a new charge of $7 million to $8 million in its fourth quarter, due to expenses related to a patent-infringement lawsuit.

Meanwhile, RBC Capital downgraded its rating on Research In Motion to underperform from sector perform, and cut its price target to $10 from $12.

"While there is no certainty that a ruling will be found against or in favor of RIMM, we believe this may continue to be a negative overhang on the stock," said UBS Warburg wireless equipment analyst Jeffrey Schlesinger, who maintained his neutral rating on the stock. "While legal disputes regarding patents are common for technology companies, we consider such disputes to be especially important for companies that license their technology, such as RIMM."

The company's American depositary receipts were down 33 cents, or 2.6%, at $12.39 in morning trading.

Research In Motion is in the midst of negotiating a patent-infringement suit filed in 2001 by NTP.

"We believe RIM would like to reach an agreement with NTP in the current mediation talks," said Raymond James analyst Gary Baker in a note to clients Friday. But, he added, "The price that RIM may be willing to agree to settle on with NTP may be higher than we originally expected, given that the size of potential damages is growing." Raymond James expects to do investment-banking business with RIM.

Research In Motion reiterated its fiscal fourth-quarter guidance, saying the charge was largely factored into its forecasts. It expects to lose 9 cents to 14 cents a share on sales of $80 million to $90 million for the fourth quarter ending April 3. The company ended the prior quarter with $531 million in cash.

The latest charge puts the company's total charges for the quarter at $40.7 million.

Excluding charges, Wall Street analysts expect the company to report a loss of 12 cents a share on revenue of $84.06 million.

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