RIM Investigated for Securities Violations

by Jordan Richardson on May 24, 2011

A law firm based out of Atlanta is investigating whether Waterloo’s Research In Motion misled shareholders by failing to inform them of “known problems” with respect to the release cycle of devices to be released in the BlackBerry line-up of products.

Holzer Holzer & Fistel, LLC wants to know if RIM made statements that were “materially false and misleading” between December 16, 2010 and April 28, 2011. “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,” the firm said in a statement.

Holzer Holzer & Fistel is the same firm that investigated Palm Inc. back in March over some statements the company made prior to its purchase by HP.

Basically this whole thing stems on whether or not RIM knew that they’d have difficulty pushing its product line. There’s some evidence to suggest that they did, what with an “updated” financial guidance statement released at the end of April that “updated” the company’s financial guidance from the end of March. The update said, in part, that “RIM now expects fully diluted earnings per share for Q1 to be in the range of $1.30-$1.37, lower than the range of $1.47-$1.55 previously forecasted by RIM on March 24, 2011.”

Essentially RIM was warning Wall Street that the profit outlook was down because fewer BlackBerry units than expected were shipping out.

Now the change in forecast could be due to a number of things, but many are suggesting that there’s something strange about the sudden change in internal views. While the possibility of technical issues on the inside could have led to the adjusted figures, the investigation hinges on whether or not RIM knew about those issues and didn’t adequately warn its shareholders of the fact.

Holzer Holzer & Fistel have not filed any formal court documents over this just yet. It is in the stages of preliminary investigation and may well not have enough juice to move on. If it does, RIM could have a fight on its hands as the courts try to determine what the company knew and what the company didn’t know about the state of its products.

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Written by: Jordan Richardson. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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