RIM beats estimates
Shares of Research In Motion Ltd. surged in after-hours trading today on better-than-expected second-quarter results.
RIM stock was up by some 12 per cent after the BlackBerry maker chalked up its third loss in a row, but one that was less than analysts had expected. Shipments fell.
Here are some key numbers:
- Revenue dropped to $2.9-billion (U.S.) from $4.8-billion a year earlier, but climbed from the first quarter and was above projections of $2.5-billion.
- RIM slumped to a loss of $235-million, or 45 cents a share, from the profit of $329-million, or 63 cents, a year earlier, but the showing was better than expected.
- Revenue was made up of 60 per cent hardware, 35 per cent services and 5 per cent software and other items.
- RIM shipped some 7.4 million BlackBerrys and 130,000 PlayBook tablet computers.
- Cash rose to $2.3-billion.
- The number of global subscribers rose to 80 million.
"Despite the significant changes we are implementing across the organization, our second-quarter results demonstrate that RIM is progressing on its financial and operational commitments during this major transition," chief executive officer Thorsten Heins said in a statement.
"Make no mistake about it, we understand that we have much more work to do, but we are making the organizational changes to drive improvements across the company, our employees are committed and motivated, and BlackBerry 10 is on track to launch in the first calendar quarter of 2013."
He was referring to the new BB10 devices so key to the company's future.
Free trade and free currencies
Amid all the talk of currency wars, CIBC World Markets is calling for Canadian trade negotiators to discuss not only tariffs and other traditional barriers, but also "free currencies."
Economists Avery Shenfeld and Emanuella Enenajor discuss currency intervention in a report released today. They don't call it manipulation, and they don't use politically inflammatory language. But they do note that countries "playing by the rules" are grappling with currencies that are stronger than warranted.
That includes Canada, whose exporters have been hurt, which in turn has "handcuffed the Bank of Canada into providing excessive stimulus for interest-sensitive housing and consumption."
Remember that Canada's trade deficit is now at a record.
Mr. Shenfeld and Ms. Enenajor took an in-depth, and interesting, look at the issue, which they tied to the 25-year anniversary of Canada-U.S. free trade talks and Ottawa's desire to push its trade agenda.
"While Canada recently opted to delay a formal deal on tariffs and other barriers with China, the issue of trade will remain front and centre in relations with Asia's largest economy," they wrote.
"But the bigger picture goes beyond just tariffs and regulatory barriers, centering on currency and other policies that affect the balance of trade between Canada and China, and other emerging market economies."
I'll stress here that CIBC did not take China to task, which would, of course, have been politically sensitive amid mounting trade tensions. Certainly others have done it.
The CIBC economists also noted that Beijing has allowed the yuan to rise against the U.S. dollar.
"Looking beyond China, other emerging markets, oil exporters and selected developing economies, have been actively intervening to keep their currencies weaker than free markets would take them," they said.
"The degree of that intervention is largely mirrored in the growth of [foreign exchange] reserves accumulated as the central bank sells its own currency."
Indeed, at one point, they said, China's reserves hit 50 per cent of gross domestic product, while those of other emerging nations got to about 30 per cent of GDP.
"These are far larger levels than needed to defend against currency volatility," Mr. Shenfeld and Ms. Enenajor said.
"While initially the target was to weaken their own currencies against the U.S. dollar, and to a lesser extent, the euro, shifts within these large pools of assets are having a significant impact on other currencies, including the [Canadian dollar]."
The CIBC economists also gave a nod to the Federal Reserve's latest asset-buying program, known as QE3 to mark the third round of quantitative easing.
That's a policy that weighs on the greenback.
Many major countries are managing their currencies, Mr. Shenfeld wrote in his introduction. Not just China, but Japan, Switzerland, Brazil and others.
There's an argument, too, that quantitative easing is a "tactic" to soften the U.S. currency.
"The result is that those who are playing by the rules and leaving their currencies unfettered are seeing them push stronger than trade fundamentals alone would justify," Mr. Shenfeld, CIBC's chief economist.
"IMF estimates put the [Canadian dollar] among the most overvalued on that score … That can, in part, be tied to a portfolio shift by large foreign exchange reserve funds out of U.S. dollars, some of which has found a haven in triple-A-rated Canadian government bonds."
So as Ottawa moves forward, "free trade, but free currencies as well."
U.S. economy suffers setbacks
The latest economic readings from the United States today are, well, a downer.
First, economic growth for the second quarter has now been revised down to just 1.3 per cent, from the initial reading of 1.7 per cent. The U.S. Commerce Department took a knife to the measure after a second look at consumer spending and trade, among other things.
On top of that, the latest report on big-ticket sales showed durable goods orders plunging by more than 13 per cent in August, marking the fastest decline in about three years, though largely because of the aircraft industry. That suggests industry continues to struggle.
If there was any bright spot in today's reports, it came in claims for jobless benefits. According to the Labor Department, initial claims for benefits fell last week by 26,000. What's notable is that the current level is now the lowest since July.
- Kevin Carmichael's Economy Lab: Why the 'R' word just won't go away in U.S.
- U.S. economic growth cut to 1.3 per cent in second quarter
- U.S. durable goods orders see worst drop since recession
- U.S. jobless claims fall to two-month low
Spain in austerity budget
Spain faces another deep round of social spending cuts as it tries to reduce its budget deficit by €40-billion in 2013, The Globe and Mail's Eric Reguly reports.
The spending cuts could trigger another social backlash in a country that is reeling from Europe's highest jobless rate – 25 per cent – and falling incomes. But it appears that Madrid is gambling that spending cuts will be resisted less than wholesale tax hikes.
The Financial Times is reporting that the fresh austerity package, which may pave the way to financial assistance from the European bailout fund and the European Central Bank, consists of 58 per cent spending cuts and 42 per cent tax hikes.
Spain's budget minister, Cristobal Montoro, said at a press conference in Madrid that he expects a "soft recession" in 2013, based on a forecast for a contraction of 0.5 per cent, though some economists think the recession could be much deeper as the austerity measures remove stimulus from the economy.
- More social spending cuts as Spain looks to slash deficit
- Greece: Coalition heads reach 'basic agreement' on austerity package
Auto talks wrap up
The major Detroit-based auto makers have now wrapped up contract talks with the Canadian Auto Workers union, buying four years of labour peace.
As The Globe and Mail's Greg Keenan reports, the new deals hold labour costs low enough to win new jobs and investments.
The final piece was put in place late yesterday when Chrysler Group LLC reached a tentative deal that matches the key parts of labour pacts struck earlier between the union and Ford Motor Co. and General Motors Co.
GM pledged investments in its Canadian operations of $675-million, while Ford promised 650 jobs and Chrysler committed to maintaining current employment levels.
Yes, we're paying through the nose at the gas station. And, yes, our debts are out of hand, as the Bank of Canada keeps reminding us.
But take some solace in the latest report from Statistics Canada, which shows annual wage growth topping 4 per cent, well above the rate of inflation of 1.2 per cent.
Average weekly earnings rose 1.1 per cent in July, Statistics Canada said today, bringing the annual pace to 4.1 per cent.
"The 4.1-per-cent increase during the 12 months to July reflects a number of factors, including wage growth, changes in the composition of employment, as well as average hours worked per week," the federal agency said.
Earnings were up in every province, led by Saskatchewan and with Quebec at the bottom.