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RIM faces suit over claims it misled investors

Share in Research In Motion Ltd. dropped 50 cents or more than 1 per cent in early trading Friday after the BlackBerry maker said a class-action lawsuit had been filed against the company in the United States, alleging it misled investors.

The Waterloo, Ont.-based maker of the BlackBerry smart phone and PlayBook tablet device said the suit claims RIM's leadership made materially false and misleading statements about its financial condition and business prospects.

The suit the claims investors were misled over about a four-month period between Dec. 16 and April 28.

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RIM shares opened down in trading on the Toronto Stock Exchange at $42.20.

RIM said the lawsuit, filed in the U.S. District Court for the Southern District of New York, is seeking unspecified damages.

The Canadian company said it believes the allegations are without merit and says it will vigorously defend itself.

The lawsuit comes as RIM faces increased competition from Apple Inc. and the Android operating system in the highly competitive smart phone market and fledgling tablet market.

In late April, the company cut its financial guidance for both earnings per share and revenue, saying that shipments of smart phones would likely be lower than initially expected as RIM transitions to a new generation of BlackBerrys not expected on the market until 2012.

The company also anticipates a lower average selling price for its older BlackBerrys.

William Blair & Co. analyst Anil Doradla said he couldn't comment on the lawsuit but noted the challenges that RIM is facing in the smart phone market.

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"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," Mr. Doradla said from Chicago.

"Execution has not been their forte over the last year or so," he added.

RIM launched the BlackBerry Torch, with both a touch screen and pullout keyboard and an improved operating system, to tepid reviews.

Mr. 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."

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.

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RIM's PlayBook tablet debuted to little fanfare 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.

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