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business briefing

These are stories Report on Business is following Monday, May 6, 2013.

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Analyst sees big change coming at RIM
CanaccordGenuity believes Research In Motion Ltd. may yet divest pieces of the business, sell the company outright, or become just a "smaller niche supplier" as the launch of its new BlackBerry 10 models plays out.

Analyst Michael Walkley bases that call on what he says are store surveys showing slowing sales of the touchscreen Z10 BlackBerry models at major U.S. carriers, and the "limited supply" Q10 keyboard version.

"Given the weaker Z10 sales levels combined with more limited initial supply of the Q10 than our expectations, we are lowering our BB10 sell-in estimates for the May quarter from 3.3 million to 2.8 million units," he said in a new report.

"While we anticipate stronger near-term results for BlackBerry as higher margin BB10 smartphones sell into the channel, we do not believe BlackBerry can achieve sell-through market share levels to return to sustained profit levels."

The BB10 models have met with strong reviews, and chief executive officer Thorsten Heins has cited their strong showing.

In its latest quarter, posted at the end of March, RIM rebounded to a profit with sales of six million BlackBerrys, including one million of the new BB10s.

"With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today," Mr. Heins said as he unveiled the fourth-quarter results.

"Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers."

Canaccord's Mr. Walkley warns that the new devices face heightened "high-end" competition from the likes of Samsung's Galaxy S4 and the HTC One, and, thus, sales of Z10s could weaken further.

"Given our belief BB10 smartphones will struggle to gain sustainable traction in the highly competitive smartphone market, we believe BlackBerry may eventually sell assets, sell the entire company, or materially change its business model to a smaller niche supplier," Mr. Walkley said.

"Further, we believe BlackBerry will struggle to generate sustained positive earnings with its current business model and investors will mainly focus on a sum of the parts analysis."

That analysis values RIM, which has rebranded itself as BlackBerry, at about $4.9-billion (U.S.), and a price target on the stock of $9.

IMF slams Greece
The International Monetary fund today praised Greece for some of its economic measures, but slammed the government for failing on several fronts, notably in fighting tax evasion.

The IMF also noted that the country's achievements have been on the back of "unprecedented" bailout support from its international lenders, to the tune of €173-billion ($230-billion Canadian).

In the report on its consultations with Athens, the IMF warned that "insufficient structural reforms have meant that the adjustment has been achieved primarily through recessionary channels," and the pain in the embattled country has not been shared by all.

Its three key points:

1. "Very little progress has been made in tackling Greece's notorious tax evasion. The rich and self-employed are simply not paying their fair share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earnings a salary or a pension."

2. Labour reforms are pushing down wages, but prices have not dropped as quickly "because of a failure to liberalize closed professions and more generally open up to competition." This, too, has taken its toll on wage earners and those on fixed incomes.

3. Jobless levels are surging in the private sector, notably among youth, but "the over-staffed public sector has been spared, because of a taboo against dismissals."

The IMF called for decisive action, adding there is "no more room" for tax hikes and spending cuts.

"A strong recovery will need to be built primarily on deepening structural reforms," the IMF said.

"The focus should be on invigorating Greece's export and import competing industries," it added in the report.

"This will require a more determined and ambitious effort to reduce barriers to entry into various markets, including opaque and lengthy licensing procedures. Moreover, too many assets remain in state hands."

Onex in trade show deal
Onex Corp. is taking over a U.S. trade show operator in a $950-million (U.S.) cash deal, The Globe and Mail's Bertrand Marotte reports.

Toronto-based private equity firm Onex said today it has agreed to acquire Nielsen Expositions from its parent, an affiliate of Neilsen Holdings NV.

Nielsen Expositions is a major operator of business-to-business tradeshows in the United States in nine different markets, including general merchandise, sports, hospitality and retail design, jewelry and photography.

"Nielsen Expositions' strength in the U.S. business-to-business tradeshow industry is evidenced by its high renewal rates, long-standing exhibitor relationships, and the brand strength of the underlying shows," Onex managing director Kosty Gilis said in a statement.

CRTC hearing begins
Canada's broadcast regulator warned BCE Inc. and Astral Media Inc. today that they must prove their $3-billion merger is in the best interest of Canadians if they hope to have their deal approved, The Globe and Mail's Steve Ladurantaye reports.

"We will determine if this transaction would benefit Canadians, as well as the Canadian broadcasting system," said Jean Pierre Blais, chairman of the Canadian Radio-television and Telecommunications Commission.

Mr. Blais was speaking at the opening of a weeklong hearing into the deal, which is a modified version of a deal the commission rejected a year ago. The deal has been modified – the companies have struck deals to sell off some of their English-language television channels, such as Teletoon and Disney XD, to reduce their combined market share; BCE will sell 10 radio stations; and the company made a promise about keeping its head office in Montreal.

On central bank independence
Louis Rasminsky probably best summed up how central bank independence should work in a democracy.

"In a democratic country you couldn't have a situation, as I see it, where a part of government was not answerable to anyone except their own conscience," the third governor of the Bank of Canada once told me.

"On the other hand, it would be dangerous to have a system where monetary policy was a departmental concern and every shot would be called by the minister of finance or the deputy minister of finance representing the minister."

Mr. Rasminsky was referring to how the system should work when the central bank governor and the finance minister disagree, but the same concept applies to the issue playing out today: Finance Minister Jim Flaherty's surprise choice for the next governor.

To recap, Mr. Flaherty stunned Bay Street last week by choosing an outside candidate, Export Development Canada chief Stephen Poloz, to succeed Mark Carney as governor when the latter heads to the Bank of England this summer.

In doing so, Mr. Flaherty skipped over Tiff Macklem, the current senior deputy governor, who most believed would get the job.

As The Globe and Mail's Kevin Carmichael and Tavia Grant report, this has raised troubling questions among some as to whether the government is influencing monetary policy, which it's not supposed to do.

We don't know whether Mr. Flaherty ignored the recommendation of the selection committee of the central bank's board and went for his own choice because we don't know who the committee recommended.

What we do know is that Mr. Macklem was the obvious candidate on Bay Street, and that Mr. Poloz certainly has the credentials, though he's been away from the central bank for quite some time.

Mr. Poloz could be seen as favouring the Harper government's forceful trade push, given his expertise, but economists widely reject the suggestion that he could use his position to drive down the Canadian dollar to give ailing exporters a boost.

(True, he could talk about the loonie more, but he's not going to actually manipulate its value in the market. The Bank of Canada doesn't take that approach and the government has pledged not to do it.)

While central bank independence is sacrosanct, it doesn't mean the government doesn't get its say on who's at the helm.

Remember that Mr. Carney was a surprise choice for the job, and he went on to become the world's best central banker.

Or go back further to the case of John Crow, who wasn't reappointed in the mid-1990s after the Liberals decimated the Conservatives in the 1993 election in the wake of a devastating recession.

Mr. Crow had been driving publicly for zero inflation, and during his term unemployment spiked to about 12 per cent.

He could not reach an agreement with the new finance minister, Paul Martin, and, as a result, his senior deputy, Gordon Thiessen was chosen as his successor.

This was the government having its say, though it opted for an insider.

The system designed by Mr. Rasminsky – under which the finance minister must issue a directive to the governor in the case of a disagreement, and if it wants a shift in policy – is a good one in a democracy.

It ensures the government doesn't tinker for political purposes, while it's protected from a governor going rogue.

Central bank independence is indeed sacrosanct, but the suggestion that the government doesn't get a say in who is governor, or any lack of accountability, for that matter, has never been in question.

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