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RIM's Mike Lazaridis, left, and Jim Balsillie (Mike Cassese/Reuters)
RIM's Mike Lazaridis, left, and Jim Balsillie (Mike Cassese/Reuters)

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Split the Berry: Analyst says RIM should break into two Add to ...

These are stories Report on Business is following Tuesday, July 12. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Analyst proposes RIM split As shareholders of Research In Motion Ltd. prepare to meet tonight in its home base of Waterloo, Ont., an analyst at RBC Dominion Securities has some food for thought: Split the BlackBerry maker in two.

"RIM's organization, like its handsets, needs modernization," Mike Abramsky said today in a research report titled "Split the Berry.

"By acting now, splitting RIM into network and handset businesses may target opportunities and unlock significant shareholder value."

Citing the pressure from Apple Inc. , maker of the iPhone, and Google Inc. , whose Android system has been gaining market share, Mr. Abramsky said the BlackBerry maker's valuation in the market "reflects low sentiment regarding RIM's turnaround prospects."

But he stressed the "intrinsic value" of RIM's core "crackberry" at its 68-million loyal subscribers around the world.

"Splitting RIM's two distinct businesses - the BlackBerry and RIM Smart Devices - may allow each to more quickly expand and innovate, would separate each business from different market forces, and could make each more attractive to potential acquirers," Mr. Abramsky said.

"We estimate that breaking up RIM may equate to $50-56 a share in value, based on the service business valued at $37-40 a share and RIM's handset business at $13-16 a share ... With the shift to the post-PC world, RIM's two business - the service and handsets - increasingly operate within two different market structures with different market forces."

RIM has promised better times ahead.

Europe in turmoil The euro zone is in disarray today. Its finance ministers have again failed to ease market fears, politicians are pointing fingers, and there's open talk of an eventual breakup of the 17-member monetary union. Bond yields spiked again today, and credit default swaps soared, though markets bounced back somewhat after reports of the European Central Bank buying Italian bonds.

At the heart of the crisis is an absolute failure by Europe's leaders to come up with any answer to the 14-month-old troubles that began with Greece and spread like a virus through the periphery countries and now into the bigger economies.

"Continued policy paralysis and discord amongst EU leaders about how best to deal with the sovereign debt crisis continues to undermine the single currency," said CMC Markets analyst Michael Hewson.

"With Germany opposed to anything that could pass for a move towards a fiscal transfer union, efforts to head off an imminent crisis appear stymied," Mr. Hewson said today in a research note.

"Bond yields in Spanish and Italian 10 year paper have soared with Spanish yields pushing above 6 per cent for the first time since the inception of the euro, and Italian yields pushing above 5.7 per cent. This move higher in yields wasn't helped by reports that a Spanish regional government had a budget deficit more than twice as large as previously thought, raising new concerns over the true state of regional finances in other Spanish regions."

Finance ministers from the euro zone met yesterday, and released a statement last night promising to what's necessary to ease the crisis. That would include easier terms on loans and extended maturities, but the lack of real detail and timelines only added to the worries.

Today, Reuters reports, some investors are now betting that the euro zone will eventually collapse. Such comments have been heard before, of course.

It doesn't help that politicians are bickering among themselves.

"I am now convinced, after 14 months, that no matter what Greece does - and we have proven ready to live up to our responsibilities - if Europe does not make the right, collective, forceful decisions now, we risk new, and possibly global, market calamities due to a contagion of doubt that will could engulf our common union," Greece's Prime Minister George Papandreou said in an open letter to the chief of the euro zone. "Strong and visionary European leadership is needed."

Moody's cuts Ireland Ireland has joined the ranks of the basket cases whose sovereign debt is rated as junk.

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