These are stories Report on Business is following Friday, Sept. 16. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
RIM shares plunge The mad rush to get out of shares of Research In Motion Ltd. has eased since this morning, though the stock remains crushed, down by about 20 per cent.
Before yesterday's disappointing second-quarter results - and don't lose sight of the fact that it's still a hugely profitable company - some analysts had expected somewhat better times for RIM shares, but today several slashed their price targets.
National Bank Financial cut its price target on RIM shares to $20 from $35, CIBC to $55 from $65, UBS to $26 from $32, Raymond James Ltd. to $27 from $54, and CanaccordGenuity to $28 from $35, after RIM posted a plunge in profit and revenue late yesterday.
The Waterloo, Ont.-based tech company is struggling against the likes of the iPhone from Apple Inc. and the Android system from Google Inc. , though it said its new BB OS 7 smart phones are doing well. There weren't enough of them in the second quarter, though, to stave off a drop in revenue and profit, and a subsequent plunge in its stock price.
As The Globe and Mail's Omar El Akkad reports, RIM revenue fell to $4.2-billion (U.S.) in the quarter, down 10 per cent from a year earlier. Profit fell to $439-million or 63 cents a share from $797-million or $1.46. Investors were also disappointed by sales of the PlayBook tablet, which came in at 200,000, given that analysts had expected shipments in the area of 500,000.
RIM's Mike Lazaridis said the new BlackBerrys are seeing strong sales, but they were only out for the last couple of weeks in the second quarter. RIM also is overhauling the PlayBook.
Here are the views of some analysts:
"Management confirmed our expectation of strong BB7 shipments in [the second quarter] but we remain skeptical of guidance given rapid decline in older models sales and risk to sell-through rates with expected iPhone 5 launch. While we prefer to remain on the sidelines and monitor BB7 sell through rates for potential near-term support for the stock, we continue to foresee eroding market share for RIMM in the longer term." UBS
"RIM reported a lower-than-expected Q2 shipments, but in-line Q3 guidance. Guidance for [fiscal 2012 earnings per share]was slightly lowered. We believe RIM has been excessively punished as BB7 products are off to a good start, [subscribers]grew to 70 million (+3 million in Q2) and service revenue reached record levels." CIBC
"We believe RIM is losing share so much faster than expected. Service revenue per sub is at risk of material decay, which is another risk to [fiscal 2013 earnings per share] We are lowering our F2013 EPS to $3.02 from $4.33. We expect the stock to fall under $20 a share." National Bank Financial
"While RIM management remains bullish on its prospects for the Playbook and new BlackBerry 7 smart phones, we maintain our more cautious view as we believe RIM is underestimating the increasingly competitive smartphone environment. We believe RIM’s lack of a competitive ecosystem is contributing to gross margin pressure for its hardware products, and we anticipate further margin pressure in F2013." CanaccordGenuity
"The strong 2Q sell-through, and other management comments about strong OS7 sales and upcoming promotional campaigns, should have provided enough confidence for a strong unit 3Q guide." Raymond James
Flaherty slams U.S Canada's Finance Minister Jim Flaherty says U.S. authorities are spreading “unnecessary stress and fear” among law-abiding Canadians in their aggressive pursuit of offshore tax cheats.
In his harshest comments yet on the simmering cross-border tax fight, The Globe and Mail's Barrie McKenna reports today, Mr. Flaherty complained that a U.S. Internal Revenue Service crackdown is targeting “large numbers” of dual American-Canadians living in Canada who have unwittingly run afoul of tax filing rules.
Unlike most countries, the United States requires all of its citizens to file annual tax returns with the IRS, regardless of where they live and work. There are roughly 1 million Canadian-American citizens living in Canada.
Glass houses U.S. Treasury Secretary Timothy Geithner wants Europe to do more to solve its debt crisis, but, to his credit, he stressed today that he's not trying to lecture the leaders of the embattled euro zone.
Mr. Geithner was attending a meeting of EU finance ministers in Wroclaw, Poland, where officials are trying to come up with solutions for the ever escalating debt crisis. He noted that the United States is not "in a particularly strong position" to tell the Europeans what to do, and that "our politics are terrible."
European leaders are deeply divided over how to fight the debt crisis, despite their pledges that they stand or fall together as they discuss the prospects for Greece, and bailouts, among other matters. And a proposal for a euro-wide bond is likely going nowhere given German opposition.
"The Finnish PM has reiterated his demand for Greek collateral but his FinMin says 'I don’t see that we can find a solution tonight,'" said Elsa Lignos, senior currency strategist at RBC in London.
"The Belgian FinMin, when asked if Geithner is in town to listen or to talk, says 'I’d like to hear how the United States will reduce its deficit,'" Ms. Lignos said in a research note today.
"And when asked on eurobonds, German FinMin Schaeuble says 'it is completely clear that we must solve our problems on the basis of existing treaties. Treaty changes take time.' An optimist could say he sounds less fundamentally opposed than his Chancellor did yesterday. Finally sources suggest that Europeans are readier than the IMF to sign off on Greece’s next disbursement."
Indeed, the finance ministers said today they would wait until October to decide on more loans to Greece. It's awaiting an €8-billion instalment. Without that money, Athens could be forced to default.
- Euro zone to decide on Greek loan in October
- Geithner to EU: U.S. is not trying to lecture you
- Central banks move to stave off global debt crisis
Merkel in a bind Angela Merkel is in a tough spot.
She has publicly supported Greece and the euro zone time and time again, and her party has lost just as many local elections as Germans grow increasingly tired of being what they see as an ATM for the 17-member monetary union.
So watch the Berlin election over the weekend, as the Pirate Party gains in popularity and threatens to defaat the German chancellor's coalition party, raising more questions about Germany's appetite for further bailouts and the size of the euro bailout fund, known as the EFSF.
"This is expected to be the seventh straight loss for Merkel's CDU, and her coalition partner who is also her foreign affairs minister may be done in with this one," said Derek Holt and Karen Cordes Woods of Scotia Capital.
"That could spark renewed concern into the Asian overnight session through the Monday North American open about a Merkel government unable to do anything further than the current Greek aid and EFSF package it is about to vote on, should a further need arise – a view bolstered by the recent German constitutional court ruling."
Beer and Oktoberfest For the Germans, there's always Oktoberfest. But even there, there may be some bitter feelings.
Oktoberfest's official website notes that the cost of beer will break through another "invisible barrier" this year, breaching €9 for a "Mass," the standard litre-mug. It will cost between €8.70 and €9.20, compared to last year's highest price of €8.90.
"The tent owners and breweries state that costs like erecting and maintaining the tents have gone up, just like the wages for the workers," the organization said.
"Critics, as every year, respond to that with the argument, that the breweries already make an immense profit from the beer tents at the Oktoberfest and that they could still do just fine without raising the beer price every year. An important thing to know is that the city of Munich doesn’t have much of a say when it comes to the beer price at the Oktoberfest. The breweries set a certain price, about which the city of Munich is then informed."
Drink water instead? That's going to cost about €7 a litre compared to last year's €6.8.
Debt and taxes Europe's leaders have taken to trying to tax the pants off everyone in their desperate attempts to raise revenue and trim their deficits. From so-called solidarity taxes in Greece and Italy, which don't appear to be doing much for solidarity given the widespread protests, to wealth taxes in other countries, these moves are among a host of others contained in austerity packages.
Today, for example, the European Commission said it will propose a set of common regulations for an EU-wide financial transaction tax, while Spain plans today to bring back plans for a wealth tax.
- Italian austerity: Threat to double tax on soccer players
- New property tax pushes weary Greeks to the edge
- Berlusconi wins vote on austerity plan
- Europe's austerity challenge: How to rein in debts without stifling growth
About that $2-billion ... It may be a good thing for Kweku Adoboli that he's still in police custody, so his colleagues can't get their hands on him.
The Financial Times reports today that thousands of UBS employees could see their bonuses wiped out this by losses of $2-billion (U.S.) in rogue trades. Mr. Adoboli is the suspect in the case. No allegations have been proven.
The newspaper today quotes analysts saying that the banking giant is strong enough to take a hit - it has already said profits could be affected - but that the loss could kill the profits of its investment banking unit. Police charged him today with fraud.
In Economy Lab It is long past time that the NDP – and Canadian progressives in general – made their peace with the GST/HST and appreciated its potential for reducing poverty and inequality, Stephen Gordon writes today.
In International Business Police in London have extended their interrogation of the man suspected of causing a $2 billion loss for Swiss bank UBS, The Associated Press reports from London.
In Globe Careers LinkedIn has a lot in common with an awesome cocktail party, but there are myths that need to be busted, writes Kathy Caprino of Forbes.
From today's Report on Business