Research In Motion, squeezed by Apple’s iPhone and Android smartphones, is facing a class-action lawsuit in the United States alleging that investors were mislead about the BlackBerry maker’s financial position.
The suit claims investors were misled by RIM between Dec. 16 and April 28, saying certain executives made materially false and misleading statements about the company’s financial condition and business prospects.
“RIM believes that the allegations are without merit,” the Waterloo, Ont., company said in a statement.
The Canadian tech company said the lawsuit, filed in the U.S. District Court for the Southern District of New York, is seeking unspecified damages.
The company’s stock, which had been above $63 in early December and near $69 in mid-February, closed down 10 cents at $42.60 in trading Friday on the Toronto Stock Exchange.
The lawsuit comes as RIM (TSX:RIM) faces more competition from Apple Inc. (NASDAQ:AAPL) and Google’s Android operating system in the highly competitive smartphone market and fledgling computer tablet market.
The Android operating system in smartphones from HTC, Samsung and Motorola has lifted their sales to the detriment of the BlackBerry.
In late April, RIM cut its financial guidance for both earnings per share and revenue for its first quarter of fiscal 2012 with its stock dropping more than 10 per cent after the announcement.
RIM said shipments of smartphones in its first quarter would likely be lower than initially expected as the company transitions to a new generation of BlackBerrys, which are not expected on the market until 2012. But RIM has said it will introduce two new BlackBerry Bold models with updated operating systems later this year.
The BlackBerry maker also anticipates a lower average selling price for its older BlackBerrys in the quarter.
William Blair & Company analyst Anil Doradla said he couldn’t comment on the lawsuit but noted the challenges that Research In Motion is facing in the smartphone market.
“We can talk about growth of their new products, but these new products are just not there yet and they haven’t been able to execute on time,” Doradla said from Chicago.
“Execution has not been their forte over the last year or so.”
RIM launched the BlackBerry Torch, with both a touch screen and pullout keyboard and an improved operating system, to tepid reviews last summer.
Doradla said RIM takes quite a long time to deliver new products to the market because it’s responsible for both the device’s hardware and software.
“This business changes pretty quickly. Every month, the dynamics change.”
Analyst Matthew Robison of Wunderlich Securities said RIM should aim to be the “best-in-class” smartphone for business users with devices that also give these clients features that consumers would use.
“That’s a market niche that may not grow as fast as the broader smartphone market,” Robison said from San Francisco.
Robison said there may still be increased spending by RIM on research and development that could result in lower revenue growth so that “there may be a period where earnings are not as robust.”
He added that RIM isn’t keeping up with less discriminating consumers attracted to smartphones with Google’s Android operating system.
The new generation of BlackBerrys will have the same operating system that’s in its PlayBook tablet, expected to make the phones more powerful and even more like a mobile computer.
RIM’s PlayBook tablet debuted to mostly negative reviews in April and the company has been criticized for being too slow to react to the young and highly competitive tablet market where Apple has a stranglehold with its iPad device.
For its first quarter, RIM has said it now expects fully diluted earnings per share to be in the range of US$1.30 to $1.37 for the first quarter of its 2012 fiscal year, which ends May 28. That’s lower than the range of $1.47 to $1.55 previously forecast.
Revenue is expected to be slightly below the range of US$5.2 billion to US$5.6 billion.