The real reason why BlackBerry settled

The real reason why BlackBerry settled

Summary: Late Friday, BlackBerry-maker Research In Motion and patent-holding company NTP announced they have settled their patent infringement dispute.Research In Motion is paying  NTP $612.

SHARE:
TOPICS: BlackBerry
6

blackberry.jpgLate Friday, BlackBerry-maker Research In Motion and patent-holding company NTP announced they have settled their patent infringement dispute.

Research In Motion is paying  NTP $612.5 million as a license fee, but it comes across more as payment for them to "go away."

To understand why BlackBerry did this deal rather than stay in fight, you have to cost out the relative cost of each option, and then use a return-on-investment model to apply that cost against the settlement.

As a result of uncertainties surrounding the dispute, RIM also cut its forecast for net subscriber additions in the current quarter that ends this weekend to 620,000 to 630,000 from its previous forecast of 700,000 to 750,000.

Averaging those two numbers means 100,000 fewer subscribers than hoped. Multiply that by four fiscal quarters. Given carrier revenue splits, that would equal around $35 million in losses per year.

Add to that the fact that 100,000 fewer subscribers would mean 100,000 or so fewer BlackBerry devices sold for the quarter, and 400,000 for the year. At, say $399 a clip,that's another $150 million or so.

Now we are crowding $200 million, but the main conjuring is still to come.

The real issues are stock price and enterprise contracts.

As my colleagues Tom Krazit and Anne Broache write today, Dennis Kavelman, RIM's chief financial officer, said RIM was feeling the effects of enterprise customers waiting for resolution in the case before expanding their current BlackBerry usage or upgrading to new hardware and software.

That's where the high-dollar ROI comes in.

Then let us look at the stock price. In after-hours trading, RIM stock gained 19 percent to $85.20 a share.

Before the hike, RIM had a $13.32 billion market cap.

Even leaving out the effect of uncertainty on lost revenue, simple math shows that a $612.5 million hole would require only a 4.6% stock price hike to produce a market cap gain that would exceed the money paid to NTP.

Oh,and did I mention lawyer billable time? RIM uses lots of outside counsel, and that adds up too. 

Topic: BlackBerry

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

6 comments
Log in or register to join the discussion
  • It's time to declare war

    These so called "patents" are a joke. Even the patent office agrees.

    But - the cost of running a Blackberry has just gone up for the users through no fault of their own. NTP is costing every current (and future) Blackberry owner a lot of money, and it's only fitting that NTP pay those costs.

    Therefore I recommend a class action lawsuit against NTP for 1 Billion (the amount RIM paid, Rim's lawyers fees, other costs to RIM, and other costs to the Blackberry users) and instruct the attornies to IMMEDIATELY as the judge to have the funds escrowed so that the funds are preserved.

    I myself am not a Blackberry owner, but I've follow the case closely. The above recommendation is based on the same principles you use when training a dog to use the paper and not the carpet to do his.her business.
    The Mad Hatter
    • I agree

      The entire technology sector is hamstrung by a minefield of bogus patents. In this case, NPT (probably a branch of a group of ambulance chasing tort lawyers) evidently bought an otherwise useless patent estate for the sole purpose of IP blackmail. I think the US should adopt the policy in force in many other places - if you don't use a patent (as the basis for a product, not extortion) you lose it.
      Pretorien
      • I don't think so...

        There were key differences between the NTP case and the bogus patent situation you described. That's why it got so far.

        This was not a case of "tort lawyers who bought an otherwise useless patent estate..." One of NTP's principals was the engineer who directly filed the original patent. It was only due to extreme miscalculation, misbehavior, and mismanagement by RIM that this case took so long and cost so much.

        The jury in the original case found that RIM deliberately and knowingly broke the patent laws. The judge actually increased the penalties as punative damages. RIM willingly played chicken using its users as hostages, gambling that the courts wouldn't turn off the services for key industries, government users, and emergency services. This is even after they lost their case, their appeals, and even a bid to take it to the Supreme Court.
        wolf_359
        • Agreed...also not about right or wrong.

          As far as the judge was concerned it wasn't a matter of whether or not the patents were valid. It was about whether or not eh patents were legal. At the time RIM was selling blackberries those scum-sucking parasites at NTP had paper saying they owned the patents. All trhe judge cared about was that a jury had found RIM in violation of the law. Courts do not decide right or wrong, or even fair of unfair. They decide law. It don't matter whether the law is right, wrong, moral or immoral.
          RIM was bound to lose because they were flaunting the law, just because they thought the patents were invalid. They were ignoring the law because they knew the law was stupid. The court couldn't let that go by. If people could just ignore stupid laws then the court would have no ability to enforce the laws. So RIM was screwed from the start.
          They should have been spending the money they spent on lawyers on lobbist, because the real way for them to have won was to get congress to fix our broken patent system. Until congess changes the law the courts will side with the scum-sucking bottom feeder patent collectors who patent every thing in sight, knowing full well that the patents would be invalid if anyone actually investigated them before they were issued.
          carlino
  • All your predictions SUCKED

    Read all your so called predictions the last two weeks and they all amounted to, zip, nada, nothing...
    No_Ax_to_Grind
  • lol, this comming from you - lol (NT)

    nt
    JasonL31