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Monday morning, mobile phone firm Motorola (MOT) found itself on the lips of lawyers and judges. The first reason is that a lawsuit commenced in the U.S. District Court for the Northern District of Illinois on behalf of MOT stock purchasers who made their purchase from December 6, 2007 through January 22, 2008.
The lawsuit alleges that Motorola and "certain of its officers and directors" violated federal securities laws by "intentionally and knowingly misstating the 2007 fourth quarter earnings projections and sales demands for the RAZR2 during the 2007 holiday shopping season." The suit states that Motorola's RAZR2 did not attract buyers thanks to its $299 price tag and the fact that it had not improved enough from the RAZR. Nevertheless, Motorola made positive statements all while losing "significant market share" to its competition. The defendants claim that Motorola senior execs knew that Motorola was not on track to hit their profit forecast of 12 cents to 14 cents per share, and would like a bit of compensation.
In addition to this lawsuit, Motorola decided to get in on the filing action, filing a complaint with the International Trade Commission (ITC) against Research in Motion Limited (RIMM). Motorola believes that RIM smartphones illegally use key aspects of Motorola's technology. This complaint spawns from two years of legal dispute over RIM's use of Motorola's "wireless proprietary technology," which has gone nowhere in the courts. Many companies are turning to the ITC because it's perceived as more efficient than the court system. I guess we shall see. While the ITC may be faster than the courts, it cannot award monetary damages. The ITC can ban products shipped into the U.S., which would be very damaging for RIM.
If RIM did use some of Motorola's technology, it could result in a very interesting ruling, since these two companies are major rivals and have been fighting like cats and dogs lately. One thing is certain, RIM definitely does not want to copy Motorola's technical performance. MOT has lost key potential support from its 50-week moving average, a trendline that has resisted any advances of MOT's in the past and could now resume the resistive role again. RIMM is struggling as well, but the equity is worth far more than MOT.
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