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RIM shares sink on outlook as Apple climbs on iPad 2

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RIM stock sinks after earnings Shares of Research In Motion Ltd. are sinking today in pre-market action after the BlackBerry maker disappointed investors with its first-quarter outlook, despite a surge in fourth-quarter profit. Shares of Apple Inc. , on the other hand, are climbing as the iPad 2 goes global.

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As Globe and Mail technology writer Omar El Akkad reports today, RIM is embarking on a new chapter with the April 19 launch of its own tablet, the PlayBook. It also said yesterday the tablet will run Android applications, giving users access to 200,000 more apps.

But its forecasts for the first quarter suffered, RIM said, on higher marketing and R&D related to the PlayBook, and a general shift in the market toward lower-margin phones.

RIM earned $934-million (U.S.) or $1.78 a share in the fourth quarter, beating analysts' estimates, but its outlook for the current quarter fell shy at earnings per share of $1.47 and $1.55. For its 2012 fiscal year, though, RIM projected earnings per share will top $7.50.

For now, UBS analysts Phillip Huang, Amitabh Passi and Maynard Um said today, RIM is a "show-me story" in the run-up to the sale of the PlayBook and launch of other products.

"Much hinges on the success and ramp of new product launches in [the second and third quarters]and the success of the PlayBook," they said in a research note.

"On the latter, management sounds confident though we believe the jury is still out."

Still, amid the bloodying in the market, they kept their 12-month price target on RIM shares at $63.

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Raymond James Ltd. analyst Steven Li also held his price target at $77, and his rating at "outperform," but added that he was not impressed with the first-quarter projections and "we are not going to sugar-coat it."

As for the solid full-year forecast, he added, "while this strong guidance reflects management confidence with the engagements it has with multiple carriers, it does set the bar high."

As investors sour on RIM today, Apple is in the limelight, with lineups greeting the international sale of the second version of its iPad 2. That includes Canada.

Markets on rise Global stock markets are on the rise this morning, though jitters remain where Japan's crisis, the fighting in Libya, and the euro zone's troubles are concerned.

In Asia, Tokyo's Nikkei and Hong Kong's Hang Seng both climbed 1.1 per cent, while in Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up slightly by about 7 a.m. ET.

"Looking ahead to the U.S. open, at the moment we are expecting the Dow Jones to open up around 55 points higher," said IG Index sales trader Ben Critchley.

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"The U.S. is set to release the third estimate of the last quarter's GDP data today and, barring any shocks here, it all looks set to be a positive finish to the week."

Canada's 'halo' The manager of the world's biggest bond fund is very keen on Canada, and he sees any election "noise" as a possible buying opportunity.

"In a world that is awash in sovereign debt concerns, the halo around Canada is sustainable for a while," Pacific Investment Management Co.'s Ed Devlin told Bloomberg News in an interview.

"If we do get some kinds of backups because of political noise, it's probably a buying opportunity," he told the news agency.

An election won't dim this view of Canada, he added, because politicians are committed to deficit-reduction.

U.S. GDP revised up The U.S. economy is on slightly firmer ground than initially believed.

The U.S. Commerce Department today revised its reading of economic growth to an annualized pace of 3.1 per cent in the fourth quarter. That's up from an earlier estimate of 2.8 per cent.

"But the source of the revision was not that encouraging," said CIBC World Markets chief economist Avery Shenfeld.

"Real final sales, GDP excluding inventories, was left unchnaged, albeit at a very strong 6.7 per cent," he said in a research note.

"The upward revision came from a smaller drag from inventories. Still, inventory accumulation was extremely light in [the fourth quarter]even in the revised figures, which leaves room for restocking to contribute to [first-quarter]growth. Within the components of demand, the revisions pointed to a stronger gain in residential and non-residential buiness investment, offset by slightly weaker readings for consumption, government and net trade ... All told, there was not much for markets to chew on in these figures, with the focus more on [the first quarter]at this point."

EU approves package EU leaders today put the final touches on a crisis package - a bailout fund that would be in place in 2013 - as Portugal's borrowing costs reached new heights and the country continued to plunge toward seeking a bailout.

"Momentum was lost in the 9th inning when German Chancellor Angela Merkel appeared to succeed in limiting the capital injections for the post-2013 stabilization apparatus to €16-billion, down from the €40-billion discussed earlier in the week," Scotia Capital economists Derek Holt and Gorica Djeric said before the approval was announced.

"Yields on Portuguese 10s climbed further to the 7.79-per-cent mark overnight, well above what the government says is the unsustainable threshold of 7 per cent."

Added economist Benjamin Reitzes of BMO Nesbitt Burns: "German Chancellor Merkel seems intent on having the [European Stability Mechanism]run her way, as her party fights in state elections over the next two weeks.

Boyd Erman's Morning Meeting Ever-optimistic investment bankers expect only a short cooling in the pace of deal making due to the crisis in Japan and the uprisings in the Middle East, Streetwise columnist Boyd Erman writes.

In Economy Lab today

Financial reform is a never-ending effort, and the cycle that started with the crisis is far from completed, Nicolas Véron writes.

In Personal Finance today

Expert offers Home Cents blogger Shelley White some advice on which organic products are worth the money and tips for trimming her food bill.

Even in retirement, dying young can end up costing your family if you don't plan ahead, warns financial adviser Ted Rechtshaffen.

Preet Banerjee offers advice on how to maintain your asset allocation, and ultimately keep your portfolio in line with your risk tolerance.

From 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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