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RIM at $16: BlackBerry maker needs a new play book

These are stories Report on Business is following Thursday, Dec. 15. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Markets await RIM results It's not the biggest vote of confidence in Research In Motion Ltd. , but note Laszlo Birinyi's comments and what he says about its products and brands.

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"It is a long shot, but it is an idea which no one has considered," the founder of Birinyi Associates told Bloomberg Television yesterday as he suggested investors consider putting money into shares of the BlackBerry maker.

"They still have some patents, they still have a product, they still have a brand. Every once in a while you want to go out there and take a shot."

Well, they are cheap, down more than 70 per cent this year.

Markets are watching closely for RIM's third-quarter results after markets close today. The Waterloo, Ont.-based telecommunications giant has already warned investors bad news is coming, saying it would take a hit of $485-million (U.S.) related to inventory of its PlayBook, and a further $50-million related to the BlackBerry outage earlier this year, and that it is committed to the tablet.

Excluding those two, RIM has projected adjusted earnings per share in the "low to mid point' of the $1.20 to $1.40 it had forecast earlier. It also warned it expects to ship fewer BlackBerry devices in the fourth quarter than it did in the third. Thursday's report should capture sales of the company's new BlackBerry 7 devices.

Many analysts have slashed their price targets for RIM's shares, and have warned that the company must act amid a declining market share and intense competition from the likes of the iPhone from Apple Inc. and the Android system from Google Inc. .

UBS Securities Canada analyst Phillip Huang, for example, issued a report this week declaring that the "status quo may no longer be good enough" and that the stakes "have never been higher."

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RIM's board needs to take "bold" action that include a change in leadership, a change in strategy or, ultimately, a sale. Here are his points, in which he refers to the company by its U.S. stock symbol:

Option 1: "We believe the board should seriously consider injecting new leadership into the company that is less emotionally vested and likely to be potentially more objective in making some difficult decisions."

Option 2: "We believe a fundamental shift is required and that RIMM should contemplate migrating to being a device/platform agnostic software company, opening up its application suite (e-mail, secure browser, calendar etc.) to other platforms (Android, iOS). RIMM had high hopes for its QNX (recently renamed BlackBerry 10) Playbook tablet and BB7 devices; both of which appear to have been a disappointment."

Option 3: "An outright sale of the company is another potential option that we believe cannot be ruled out entirely, especially with the enterprise value being in the $5-billion to $10-billion range. In our opinion, any sale will be complicated and will likely require much restructuring on the part of any acquirer, during which time business could deteriorate further (substantially). We struggle to identify a logical buyer with compelling rationale, though recognize any number of large-cap tech firms could contemplate such a move given RIMM's entrenched enterprise base, patents in messaging, push email, and enterprise security, and net cash position of $1.5-billion. Some acquirers may be interested in the whole company while others may contemplate pieces of the business."

As The Globe and Mail's Iain Marlow reported this week, the bad news is out and RIM could always surprise investors this evening.

An update for the PlayBook is scheduled for February, and, Mr. Marlow noted, RIM is a must-have in some markets like Indonesia.

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Canaccord close to deal Canada's Canaccord Financial has struck a $400-million deal to acquire Collins Stewart Hawkpoint, a move that will boost its presence in both Britain and the United States, Streetwise columnist Boyd Erman reports.

Canaccord is Canada's biggest independent brokerage, and Collins Stewart one of the largest in Britain.

Canaccord has been expanding globally, with recent additions in China and Australia. The firm has been looking for an acquisition in the United Kingdom for months.

Canaccord is offering 96 pence a share in cash and stock.

Jobless claims fall A fresh reading today on claims for jobless benefits in the United States is a welcome sign - indeed, the best showing in years - though no one should imagine that the nation isn't still struggling under what Federal Reserve chairman Ben Bernanke calls the "national crisis" of unemployment.

Still, the numbers show what has been a brighter trend, and suggest that the U.S. jobs market is picking up.

Initial claims for jobless benefits fell last week to 366,000, according to the U.S. Labor Department, continuing a streak below the key 400,000 mark. More importantly, the four-week average also fell, to 387,750. The weekly reading is the lowest since the spring of 2008, and the four-weak average the best since the summer of that year.

Continuing claims were just about flat.

The U.S. jobs markets is struggling to rebound from the depths of the recession, and just this week the Fed projected that the unemployment will remain high. Having said that, today's reading is, as Andrew Grantham of CIBC World Markets put it, "below anything recorded since the downfall of Lehman Bros." in mid-September of 2008.

"The Labor Department stated that there were no special factors behind the drop, and so the decline will be viewed as further indication of improvement in labor market conditions," he said.

There were several numbers from the United States today, all of which paint a brighter picture. Industrial production, however, slipped in November.

"Judging by this morning's U.S. economic data, yes Virginia, there is a Santa Claus," said senior economist Jennifer Lee of BMO Nesbitt Burns.

"Very encouraging numbers from jobless claims (big drop), manufacturing activity (nice bounce in the Empire State survey), moderate rise in prices (at the producer level), and a narrower current account gap."

Numbers weak Fresh readings of the manufacturing sectors in Europe and China signal troubled times, particularly in the euro zone.

In China, a purchasing managers index for December increased to 49 from 47.7, but held below the 50 mark that separates contraction from expansion.

"The rebound in the headline index may ease concerns of an imminent hard-landing," said Mark Williams and Qinwei Wang of Capital Economics in London.

"Nonetheless, this sub-50 reading is still the second-worst since March 2009. Manufacturing remains weak."

In the euro zone, the numbers were actually better than expected, with manufacturing at 46.9 and the services sector at 48.3. But they remain "well into contractionary territory," warned Adam Cole, the global chief of foreign exchange strategy at RBC in London.

Note that it's the fifth month in a row that the manufacturing sector has contracted in the monetary union, which is expected to suffer another recession, if it's not already in one. For services, it's the fourth month of contraction.

Czechs wait on euro Crippled by recession, the Czech Republic isn't rushing into the arms of the euro zone.

Its central bank and finance ministry said today it's recommending against setting a date to adopt the currency now shared by 17 countries. The Czech Republic doesn't meet the criteria, and won't in 2012, they said. And, at any rate, the debt crisis has pushed up the potential costs of joining in.

"The situation in recent years has been strongly affected by the global financial and economic crisis," the Czech National Bank and ministry of finance said.

"The Czech economy has thus temporarily stopped catching up with the euro area economic level," they said in a statement.

"On the other hand, though, it is showing signs of increased alignment with the euro area over the business cycle. As a consequence of the global crisis, the economies of the the euro area and other EU countries, including the Czech Republic, have gone into recession and recorded a considerable deterioration in public finance followed by a phase of gradual economic recovery and consolidation of public budgets."

Finning sees strong demand Canada's Finning International Inc. says it's looking forward to strong demand, but its announcement today still disappointed investors.

Finning, the world's biggest Caterpillar equipment dealer, today projected revenue growth of about 5 per cent next year, and 10 per cent in each of 2013 and 2014. It also forecast "strong" growth in earnings per share next year.

The company, which is holding an annual briefing for investors in Toronto today, said conditions in its Canadian and South American businesses is expected to be "robust," and that the outlook in Britain and Ireland is "positive" despite the troubles in Europe.

The company's outlook also indicates strength in the mining sector, which took a hit yesterday and is so key to Canada's overall outlook.

"We are entering 2012 with a sizeable backlog and a clear growth strategy," chief executive officer Mike Waites said in a statement.

"The continued strong demand for our products and services gives us confidence in our top-line growth projections through 2014. Particularly in mining, we continue to see solid business opportunities driven by strong commodity prices."

Still, Desjardins analyst Benoit Poirier that he expects analysts to cut their outlook for the company in 2012, though "the longer term outlook remains bullish."

In particular, he noted that Caterpillar Inc. has forecast revenue growth of 10 per cent to 20 per cent next year, so Finning's guidance for 2012 appears "soft."

Business ticker

In Economy Lab Consumers in Quebec are less likely to shop online that those in any other province, Frances Woolley writes.

In International Business The last into the slump, the world's shipping industry could be the last out, The Financial Times reports.

In Globe Careers When Marci O'Connor was laid off from her job in mid-November, the first place she turned was Facebook. Within two days of telling her friends, she found a job, Dan Shawbel writes.

In today's Report on Business

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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