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RIM shares plunge Analysts are slashing their price targets on shares of Research In Motion Ltd. as the BlackBerry maker's stock plunges today on disappointing second-quarter results, opening down by more than 20 per cent.
National Bank Financial cut its price target on RIM shares to $20 from $35, CIBC to $55 from $65, 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 plunge in revenue and profit.
"While management confirmed our expectation of strong BB7 shipments in [the second quarter] we remain skeptical of guidance given rapid decline in older models sales and risk to sell-through rates with expected iPhone 5 launch," analysts Phillip Huang, Amitabh Passi and Christian Idicula of UBS said today.
"We continue to believe RIMM needs fundamental change in vision/strategy, and its transition to QNX must be near flawless to garner support from developers," they said in a report, referring to RIM by its U.S. stock symbol.
"While we prefer to remain on the sidelines and monitor sell-through of BB7 devices for potential near-term support for the stock, we continue to foresee eroding market share in longer term."
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.
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."
- 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."
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 $2-billion (U.S.) in rogue trades. Mr. Adoboli is the suspect in the case. No allegations have been proven.
The newspaper today quotes analysts saying that the banking giant is strong enough to take a hit - it has already said profits could be affected - but that the loss could kill the profits of its investment banking unit. Police charged him today with fraud.
Stocks climb Global stock markets are on the rise this morning, buoyed by what they believe is a better scenario for Europe as EU finance ministers gather in Wroclaw, Poland today. Yesterday's co-ordinated move by five of the world's major banks certainly helped lift spirits, as The Globe and Mail's Eric Reguly reports today.
I'm skeptical for two reasons. First, this is no way a long-term solution. Second, strong statements from German Chancellor Angela Merkel and French leader Nicolas Sarkozy, as well as whatever comes out of Poland today, are nothing new, and, indeed, are comments we've heard for months now. And I'm not alone.
"In moves eerily reminiscent of 2008 co-ordinated central bank action to turn on the liquidity taps in Europe may have averted a credit squeeze in the funding markets, but if anyone thinks it has eased the problems in the euro zone they could well be disappointed given it deals with the symptoms but not the underlying problems," said CMC Markets analyst Michael Hewson.
That's not to say the markets aren't looking up today. Tokyo's Nikkei climbed 2.3 per cent, and Hong Kong's Hang Seng 1.4 per cent. In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.5 per cent and 0.7 per cent by about 8:30 a.m. ET.
Dow Jones industrial average and S&P 500 futures, though, slipped.
"Global markets are largely consolidating recent gains after yesterday's bounce, on a paucity of new news today," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.
" Stocks and the euro got a big lift from the move by key central banks to provide US$ liquidity for European banks at least through the end of 2011," Mr. Porter said in a research note.
"While no help for the underlying sovereign risk situation, at the very least, the moves should reduce fears of a repeat of the 2008 credit freeze for the time being. The euro rose by more than a cent on the day, although it has eased overnight to just sit above $1.382 today, ahead of the European finance ministers' (and U.S. TS Geithner) meeting. The Canadian dollar joined in the rally, rising to US$1.017, after its brief dalliance below par at the start of the week. U.S. equity futures are pointing slightly lower, while RIM is the main focus in Canada - it was off as much as 19 per cent in after-hours trading on sub-expectations results."
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