Market reacts to Visto lawsuit

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Shares of Palm Inc. got a boost in midday trading yesterday after an analyst speculated that the company could grow market share due to RIM’s new patent infringement lawsuit with Visto. Shares of Palm rose 15 cents to $23.09. Caris & Co. analyst Susan Kalla reiterated her “Buy” rating on Palm and lifted fourth-quarter earnings estimates for the company to 23 cents per share, up from 21 cents per share. She said:

We believe Palm will continue to gain share in fiscal fourth-quarter (May) on the back of RIM, which has been dogged by patent disputes that have embroiled management and terrified service providers. Palm’s share for the May quarter may be 32 percent, up from 23 percent a year ago. RIM’s market share for the quarter may be 50 percent, down from about 58 percent a year ago.

However, analysts from Standard and Poor’s gave RIM a 5-star “Strong Buy” rating due to confidance in RIM’s ability to weather another patent lawsuit, stating:

Visto has filed against numerous technology firms related to patent issues, which eases some of our concern about Research in Motion’s legal risks and potential monetary liability. As Visto has to address several patents suits ahead of the one against the company, Research in Motion would not expect any material court proceedings in Visto’s litigation until mid-2007. With the analyst meeting two weeks away, we see any share price weakness as an enhanced buying opportunity.

After a swift drop in share price yesterday following the announcement, RIM rebounded in the late afternoon to close at $74.44.