Barrons downgrades RIM, upgrades Palm

[Alexander Turcic]

In light of RIM's familiar pattern of patent disputes, Barrons Magazine downgraded the Blackberry maker today and predicted a positive momentum for the direct competitor Palm.

We are downgrading Research in Motion given the new patent dispute and evidence Palm continues to garner share at Research in Motion's expense. We note the earlier remarks of Research in Motion management that the NTP lawsuit was not impacting business in light of the subsequent sharp miss for the last reported quarter. Mobile software player Visto filed suit against Research in Motion Monday for an infringement on Visto's patents for synchronization of mobile e-mail messages. After the close, Research in Motion issued a press release saying Visto's patents were invalid because of prior art. Research in Motion further asserted it may counter sue against Visto for infringing on Research in Motion's patents. We do not expect the dispute to be heard in court until late 2007. In our opinion the outcome of the lawsuit is highly unpredictable, but we can predict with a fair amount of certainty that it will be distracting to Research in Motion's management.

Meanwhile, Jim Balsillie, co-CEO of RIM, rejected the patent suit, saying that Visto is using a "brazen strategy" which would not distract his company from rolling out a raft of new products and partnerships this year.