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Steps for RIM RBC Dominion Securities has cut its price target on shares of Research In Motion Ltd. after last week's quarterly results, advising the BlackBerry maker there are four key issues it needs to solve before investors "properly" value the company.
"We view recent Q2 results as symptomatic of RIM's failure to address these challenges, which are: 1) backwards-looking, uncompetitive products and software; 2) marketing and launch execution; 3) investor credibility/visibility; and 4) governance," said analysts Mike Abramsky and Paul Treiber.
Here's what they want to to see, according to their research note:
- Competitive products and software
- Better execution
- Better financial results
At this point, RBC expects earnings per share of $4.95 (U.S.) in fiscal 2012 and $5 the following year.
RIM was hit hard after it released second-quarter results showing a plunge in profit and revenue. While the release of new smart phones with an upgraded operating system appeared to get off to a strong start, it only came in the last few weeks of the quarter, which didn't help results but could point to better times ahead.
The company is in an increasingly competitive battle with Apple Inc. , whose new iPhone 5 is reportedly coming in early October, and Google Inc. , whose Android system has become hugely popular.
- RIM numbers disappoint again
- RIM's decline raises fears for Canadian innovation
- Streetwise: RIM has some breathing room, believe it or not
- iPhone 5 to be unveiled Oct. 4, reports say
HP shares jump on report Shares of Hewlett-Packard Co. jumped today on reports that the company is considering bringing in Meg Whitman, the former chief of eBay, as its new CEO. She would replace Léo Apotheker - he hasn't gone but the suggestion is that he soon could be.
Ms. Whitman sits on the HP board.
Awaiting the Fed Investors are eagerly awaiting this afternoon's decision by the Federal Reserve, which is widely expected to include some type of new stimulus as the recovery flags.
Markets increasingly expect to see the Fed unveil what is being dubbed "Operation Twist," a measure that was last used in the 1960s and is so called because its aim would be to "twist" interest rates and narrow the gap between short- and long-term bonds, selling the shorter and buying the longer, and hopefully stimulating borrowing by bringing down rates at the longer end of the spectrum.
"While not a slam dunk, many investors appear to be anticipating some move to 'twist,' or flatten, the yield curve, likely via an exchange of short-term issues for longer-term securities," said Sal Guatieri of BMO Nesbitt Burns.
"If this measure is employed, we would expect the Fed to pledge up to $300-billion in transactions over several months, largely by reinvesting maturing short-term securities into issues that mature beyond five years."
Several Republican leaders in the U.S. have taken the rare step of writing to Federal Reserve Chairman Ben Bernanke, warning that any further moves by the central bank could hurt the recovery, according to The Wall Street Journal.
Would such a move today by the Federal Open Market Committee, the central bank's policy-setting panel, help? Here are the views of some economists:
"Given the weakness of the incoming economic data, the Fed is now almost certain to do something, but exactly what is still not entirely clear. The proposal to lengthen the average duration of the Fed's asset holdings, dubbed Operation Twist, appears to be the front runner." Paul Ashworth, Capital Economics
"As our fixed income strategist noted yesterday, some studies have suggested that a $500-billion shift in the Fed's balance sheet is likely to push 10-year yields down by between 11 and 29 basis points and help flatten the yield curve. However, much of this has already been priced into markets, accordingly the risk of disappointment is significant. The announcement of operation twist would likely prove a minor [U.S. dollar] negative, but as long as U.S. monetary policy continues to loosen, the [U.S. dollar] is unlikely to sustain a significant rally on anything other than risk aversion." Camilla Sutton, Scotia Capital
"It's debatable how much impact this will have on the economy, especially with 10-year yields near 2 per cent. If the Fed opts to 'twist' again, we expect a move to the tune of about $300-billion deployed over several months. Other options include QE3. The Fed took a lot of flak for QE2, so they don't seem anxious to go down that road again until there's little choice. Changing the language on the commitment to keep rates low is another possibility, perhaps including a target for unemployment." Benjamin Reitzes, BMO Nesbitt Burns
"A new twist-type exercise would represent a small life preserver at best for an economy still seriously adrift. It might help in conjunction with other steps, but isn't likely to make a life or death difference on its own. Monetary policy is reaching its limits, constraining the Fed's ability to ride to the rescue again. Ironically, bond yields are likely to remain low, less because of anything the Fed can do, but owing to its inability to lift the economy back onto a solid recovery track." Peter Buchanan, CIBC World Markets
"Even if members of the Fed agree on a form of stimulus, they are sure to disagree about whether it can push the economy into a higher gear. When the Fed made a conditional commitment at its last meeting to keep interest rates low until at least 2013, an eye-popping three members of the Board dissented. Later, the meeting's minutes revealed an emerging rift within the Fed." Alistair Bentley, Toronto-Dominion Bank
"We continue to believe the Fed will opt to start with a passive 'twist' and announce a shift in the composition of reinvestment purchases in the statement. This runs at odds with current market expectations, which appear to be looking for an 'active twist.' An 'active' twist would look for sales in the 1.5- to 3-year sector, with purchases directed in the intermediate sectors (7 years, 10 years) of the curve. On the flipside, the possibility for outright [a third quantitative easing program] is not insignificant. The nightmare scenario for the markets would be if nothing is announced. For the history buffs, recall, the original 'Operation Twist' began in 1961 and was really an attempt to 'twist' the curve in order to raise shorter-term interest while lowering long-term rates to promote capital flows (i.e. to limit the flight of gold) and support the currency - it was largely seen as a failure." Mark Chandler, Ian Pollick, RBC Dominion Securities
(As The Globe and Mail's Kevin Carmichael noted in his look at Operation Twist earlier this week, the sounds of Chubby Checker's 1960s classic Let's Twist Again have been prominent in the run-up to today's decision. For the younger set, the Twist - it's a rock 'n' roll dance - became something of a craze in the early '60s, with many songs to go along with it.)
Inflation runs hotter Inflation in Canada is running at a faster pace than expected.
Consumer prices climbed 0.3 per cent in August, according to Statistics Canada today, bringing the overall annual rate to 3.1 per cent. That's faster than July's 2.7 per cent and on par with June's 3.1 per cent.
Even the core rate, which excludes volatile items and guides the Bank of Canada, was higher than expected, coming in at 1.9 per cent and up from 1.6 per cent in July. That underlying inflation was pushed up by increases in car insurance premiums, food prices at restaurants and higher costs for bakery goods and cereal.
The overall annual rate was again driven by prices for food and costs at the gas pump.
How much of a difference will this make to the Bank of Canada? It's certainly faster than the central bank would like, but Governor Mark Carney has more important things on his mind at this point, given the slowing U.S. economy, the European debt crisis, and the tremendous uncertainty in global markets.
"Despite the upside surprise to core inflation, the Bank of Canada appears in no rush to tighten given the economic and financial market headwinds that are currently blowing," said Robert Kavcic of BMO Nesbitt Burns.
Having said that, noted Emanuella Enenajor of CIBC World Markets, today's reading "reduces the odds" that the central bank will cut rates in the near term.
Greece cuts deeper Greece is slashing pensions, extending a tax hike on properting and giving 30,000 public sector workers a year to find new jobs, according to reports.
The measures are part of a deeper austerity package meant to help secure a further €8-billion in rescue money in talks with the European Union, European Central Bank and International Monetary Fund.
The Greek government has an interesting, and much more humane, program than other countries. The public servants affected are put in what's known as a "labour reserve." They'll get just 60 per cent of their normal pay but they'll have 12 months to find other jobs. With unemployment running so high, though, it's not clear whether they'll meet with success.
The measures come after what all involved say was progress in two days of talks between the government and its bailout friends.
But could it be that the optimism is misguided? They talked for two days, and said they would continue next week, all aimed at meeting commitments for Greece to get a further €8-billion in rescue money. If everything is on track, why not send a more confident message to markets that are hanging on every word?
"The statement by the EU that 'good progress' is being made, while obviously designed to inspire confidence, doesn't really do anything of the sort, and does suggest that significant differences remain," said CMC Markets analyst Michael Hewson.
"If the last few days are anything to go by this continued game of political brinksmanship looks likely to continue all the way into October, when Greece will eventually need the money to avoid a default."
- Greece set to unveil new austerity plan
- EU debt crisis raises banks' risk by $410-billion: IMF
- European bank outlook chilled by client jitters
- Europe's old friends start to pile on
- Why breaking up is so hard to do
Japan's exports rise Japan's economy continues to recover from the devastating earthquake and tsunami that ravaged the country in mid-March.
Japanese exports climbed in August by 2.8 per cent, the government said today, marking the first increase in six months and a clear sign that manufacturers are rebounding from the crisis that led to some shortages. Imports surged more than 19 per cent, for a trade deficit of ¥775-billion, which BMO Nesbitt Burns noted is an ¥800-billion "deterioration from last year.
While the economy is recovering, Japan's exporters are still hampered by a strong yen.
"The strong yen is clearly weighing on Japan's recovery and could limit the anticipated second half rebound in GDP growth," said BMO's Benjamin Reitzes.
In International Business Brewing giant SABMiller PLC agreed to buy Foster's Group Ltd. today for an increased price of $5.10 (Australian) per share valuing the Australian beer maker at $9.9-billion ($10.2-billion U.S.) to give SABMiller a leading position in the Australian beer market. David Jones of Reuters reports from London.
In Economy Lab In Canada's early years, prosperity was primarily determined by European demand for its natural resources. In the 20th century, the U.S. became the key market. Now it may be Asia's turn, Stephen Gordon writes.
In Globe Careers Having volunteer work on your résumé has the potential to make you more attractive to employers, a new survey suggests. The Globe and Mail's Wallace Immen reports.
From today's Report on Business