These are stories Report on Business is following Thursday, Jan. 31, 2013.
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RIM tumbles again
Shares of Research In Motion Ltd. continue to tumble in pre-market action this morning, continuing yesterday’s rout that shaved 12 per cent off their value.
RIM shares have declined sharply since running up above $18 earlier this month. Yesterday, they closed in Toronto at $13.86, and are down about 6 per cent in pre-market in New York so far today.
As The Globe and Mail’s Iain Marlow and Omar El Akkad report, the embattled Waterloo, Ont.-based smartphone maker unveiled its new BlackBerry 10 models yesterday to rave reviews that suggest RIM has a winner.
The company is reinventing itself with new offerings meant to put it back in the game alongside Apple Inc., Samsung Electronics Co. and Google Inc., whose iPhone, Galaxy and Android-system models have sparked fierce competition.
RIM is changing its name to BlackBerry, and its stock symbols to BBRY on Nasdaq and BB on the Toronto exchange.
While yesterday’s global launch was long awaited, and by all accounts was successful, investors began to drive down RIM shares just after chief executive officer Thorsten Heins began speaking in New York, announcing that the first BlackBerry Z10 touchscreen models will be available in Britain beginning today and Canada in early February, but in the United States not until March. They will be followed by a keyboard version.
That U.S. date prompted some analysts, such as those at Raymond James, to slightly change their shipments, and thus earnings, projections for the quarter.
“BlackBerry has demonstrated truly unique software innovation within BB10, including hub, balance, its virtual keyboard, and heavy use of multitasking,” Raymond James said.
“However, convincing the many BlackBerry users who have abandoned the platform for iOS and Android over the last few years to return will be a difficult challenge as Microsoft and Nokia can surely attest to,” it said in its research note, referring to the Apple and Google operating systems.
“Early tech media reviews are mixed, with essentially universal love for the virtual keyboard, praise for the differentiated user interface and multi-tasking capabilities, but concerns about missing a number of key apps (Pandora, Netflix, etc.), battery life, and general concern about the dramatic change it will be for traditional BB users,” the report added.
Analyst Peter Misek of Jefferies & Co., whose reports have moved RIM stock in the past, said yesterday's launch "gets them back in the game."
The biggest sore spot appears to be the longer-than-expected wait in the United States.
“The biggest disappointment was the delay in the U.S., that it will take so long before the devices get going there,” Eric Jackson of Ironfire Capital LLC in New York told Reuters.
“I’m still confident that a lot of the subscriber base are going to want the upgrade to BlackBerry 10,” he added.
“It’s a very strong improvement over what they currently have. This is not going to cause mass defections from iOS and Android, but it doesn’t have to be a success for RIM. You’ve got to start somewhere.”
Mr. Misek, whose price target on RIM shares is $19.50 (U.S.) and whose rating is "buy," had expected the March launch in the U.S., despite what others believed, and "we would be buyers especially on this weakness ahead of much higher [May and August quarters] estimates."
Analyst Kris Thompson of National Bank Financial was particularly downbeat, holding to his $10 stock price target and “underperform” rating.
“The launch failed to generate much buzz other than the appointment of songwriter and performer Alicia Keys as BlackBerry’s new Global Creative Director,” he said.
“The product launch included no material secrets. Skype and WhatsApp have committed to provide BB10 apps, but no timeline was announced. BB10 OS is expected to be available on the PlayBook, but no timeline was announced. The virtual Z10 will not be available in the United States until March. The qwerty Q10 will not be available anywhere until April, which is very, very disappointing. Estimates might come down on the launch delays. We would avoid the stock until $10 and until we’ve had time to assess the product.”
GDP expands
Canada’s economy picked up in November, ending a months-long cold streak.
Gross domestic product grew by 0.3 per cent in November, Statistics Canada said today, a better showing than October’s 0.1 per cent. In fact, it was the best showing in months.
That growth was driven by the manufacturing, mining and energy sectors.
Canada’s factories, in particular, turned in a good showing as manufacturing output climbed 0.7 per cent, compared to October’s 0.9-per-cent slump.
Both wholesale and retail trade picked up. In retailing, which notched a 0.6-per-cent gain, cars and car parts were the main drivers, but iPhone 5 frenzy may have played a role, as well.
The arts, entertainment and recreation sector slipped, no doubt affected at least somewhat by the NHL lockout.
Even with November’s rebound, the fourth quarter is still believed to have expanded at an annual pace of about 1 per cent to 1.5 per cent.
Markets lower
Global markets are largely down so far this morning, still stung by yesterday’s surprise reading of how the U.S. economy closed out 2012.
Tokyo’s Nikkei gained 0.2 per cent, but Hong Kong’s Hang Seng lost 0.4 per cent.
In Europe, London’s FTSE 100, Germany’s DAX and the Paris CAC 40 were down by between 0.4 per cent and 0.8 per cent by about 8 a.m. ET.
Dow Jones industrial average and S&P 500 futures were little changed.
“U.S. markets are entering an interesting couple of days,” said sales trader Will Hedden of IG in London.
“With the Dow making a grab for 14,000 and not quite making it, the 'de-militarizing' GDP miss of yesterday diverted attention away from a positive ADP private payrolls number which bodes well for tomorrow’s first non-farms payroll report of the year,” he said.
He was referring to the fact that the fourth-quarter economic contraction of 0.1 per cent highlighted the hit from a plunge in government spending, notably on defence, and a private reading that suggests labour market gains.
“The GDP figure did give us a little insight into the implications of going over the fiscal cliff would have (and still could have) been, as massive defence spending was a pivotal part of the terms.”
Potash profit sinks
It’s a good thing that Potash Corp. of Saskatchewan announced a 33-per-cent dividend hike yesterday, because today’s fourth-quarter earnings aren’t much to write home about.
As The Globe and Mail’s Pav Jordan reports, the potash giant’s quarterly profit fell shy of analysts’ estimates as demand slipped in Asia and the company was hurt by a $41-million (U.S.) provision related to a legal settlement in the United States.
Potash earned $421-million, or 48 cents a share, in the quarter, below projections of 57 cents and well down from the $683-million or 78 cents earned a year earlier.
“Our fourth-quarter results were adversely affected by weaker performance in all three nutrients as global fertilizer markets paused in the absence of significant immediate needs and amid lack of direction, particularly in phosphate and potash,” chief executive officer Bill Doyle said in a.
Air travel up
Economic uncertainty didn’t keep customers from flying in 2012, The Globe and Mail's Bertrand Marotte writes today.
Air passenger traffic last year increased by 5.3 per cent, driven by growing demand in emerging markets, according to the International Air Transport Association.
“Passenger demand grew strongly in 2012 despite the economic bad news that dominated much of the last 12 months," said Tony Tyler, IATA's director general.
"This demonstrates just how integral global air travel is for today’s connected world."
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