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RIM stock sinks but new BlackBerry 'closes the gap'

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RIM unveils BlackBerry Torch Research In Motion Ltd. stock sank about 4 per cent in Toronto today after the company's eagerly awaited unveiling of a new touch screen BlackBerry with a slide-out keyboard. The stock sank despite an upbeat assessment from analysts, who noted that the launch closes the gap with RIM's competitors but painted it more of a catch-up move. The BlackBerry Torch also has a new operating system, the BlackBerry 6, and Web browser, all at boosting market share as RIM battles the likes of the iPhone from Apple Inc. and other new smart phones on the market. Here's what some analysts said:

  • "They finally caught up. They needed something sexy for the consumer. It didn't blow the doors off. But they're solidly on a level playing field." Maribel Lopez, Lopez Research, to Dow Jones Newswires
  • "It really closes the gap with Android and iPhone -- probably more Android, because Apple really offers something unique. But RIM really overhauled the user interface. I think they've regained their No. 2 position in terms of technology." Shaw Wu, Kaufman Brothers, to Reuters
  • "This gets them back in the game. It should slow the tide of people jumping ship." Ross Rubin, NPD Group, to Dow Jones Newswires
  • "The new OS catches up to the competition in many respects with an improved browser, touch interface, 5 [megapixel]camera, etc. However, the display resolution of 480x360 is not as high as those found on other competitive flagship smart phones (iPhone 960x640; Droid X 854x480) and, in our opinion, RIM still needs to improve its ecosystem." Phillip Huang, Maynard Um, UBS
  • "The fact that this device is going to be geared toward both enterprise and consumer, that will be a positive as people will feel that if they design for this device, they can hit two birds with one stone." Nick Agostino, Mackie Research Capital, to Reuters
  • "The Torch and OS6 put Research In Motion on firm competitive ground against Apple's iPhone and the Android devices, with a touch screen on par plus the BlackBerry keyboard. The key question is whether RIM can convince developers to prioritize this new platform above the competition." Charles Golvin, Forrester Research
  • "Developers want to go where the consumers are and consumers want to go where the developers are. RIM is going to have to tell a very compelling story to attract the first batch of developers." Michael Gartenberg, Altimeter Group, to Reuters

The launch withAT&T Inc. in the United States, comes after a weekend flurry of controversy surrounding security concerns in several countries, notably the threat by the United Arab Emirates to shut down BlackBerry service in October if RIM doesn't take the measures needed to allow authorities to monitor communications.

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In Dubai today, the UAE defended its decision, following the U.S. State Department's comments yesterday that it is disappointed by the move. "It is regrettable that after several years of discussions, BlackBerry is still not compliant with UAE regulatory requirements even as it complies with similar policies in other countries," Yousef al-Otaiba, the ambassador to Washington, was quoted as saying in local newspapers, according to Agence France Presse.

He said his country wants "exactly the same regulatory compliance" that RIM gives other governments.

RIM, not mentioning the UAE dispute directly, said in a statement today it has spent more than 10 years building a "very strong security architecture" and it wants to set the record straight:

"There is only one BlackBerry enterprise solution available to our customers around the world and it remains unchanged in all of the markets we operate in. RIM cooperates with all governments with a consistent standard and the same degree of respect. Any claims that we provide, or have ever provided, something unique to the government of one country that we have not offered to the governments of all countries, are unfounded."

What car thieves want most The 2007-2009 luxury Cadillac Escalade SUV, Ford F250 crew pickup, Infiniti G37 luxury car, and Dodge Charger with a HEMI engine rank at the top of the list for cars most stolen in the United States. Rates of theft for those vehicles run three to five times higher than the average for all vehicles, the Highway Loss Data Institute in Arlington, Va., said day. "Sedate family cars and fuel sippers aren't on the hot list," said Kim Hazelbaker, HLDI senior vice president. "Thieves are after chrome, horsepower, and HEMIs."

Highest losses:

  • Cadillac Escalade large SUV
  • Ford F-250 crew cab pickup
  • Infiniti G37 two-door luxury car
  • Dodge Charger (with HEMI engine) large car
  • Chevrolet Corvette Z06 sports car
  • Hummer H2 large SUV
  • Nissan Pathfinder/Armada large SUV
  • Chevrolet Avalanche 1500 truck
  • Chevrolet Silverado 1500 crew cab pickup
  • GMC Yukon large SUV

Lowest losses:

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  • Volvo S80 large car
  • Saturn VUE four-wheel-drive midsize SUV
  • Nissan Murano midsize SUV
  • Saturn VUE midsize SUV
  • Honda Pilot midsize SUV
  • Subaru Impreza small wagon
  • Toyota Prius small car
  • Mini Cooper subcompact
  • Toyota Tacoma small pickup
  • Toyota Sienna minivan

Overall theft losses, the organization noted, take into account not just the rate at which claims are filed, but also the size of the payments for claims. Most vehicles with the highest overall theft losses are SUVs and large pickups, it said. "The Escalade EXT 4-door 4-wheel-drive has the highest theft losses of all, with $146 in theft payments per insured vehicle year. This is more than 10 times the $14 average theft payments per year for all passenger vehicles."

Unemployment rates and economic growth Bank of Nova Scotia now projects that Canada's economy will expand by 3.3 per cent this year and 2.6 per cent in 2011, while unemployment averages 8 per cent this year and 7.7 per cent next. The bank raised its job growth projections for most provinces this year, but for Nova Scotia, New Brunswick and Alberta, though it expects a "significant" pickup in Alberta. In terms of the overall economy, central Canada has seen "solid employment and production gains" over the first six months of the year, while growth prospects for western Canada "have been tempered" somewhat.

"Flooding in Saskatchewan has caused extensive damage to the canola crop, and to a lesser extent, wheat," Scotiabank economists said in a report today. "Employment growth in Alberta remains sluggish, slowing the rebound in retail sales. In the post-Olympics period, British Columbia's economic propsects are being dampened by the softness in lumber shipments to the weak U.S. housing market."

Scotiabank's projection for provincial gains in real GDP:

  • British Columbia, 3.4 per cent in 2010, and 2.9 per cent in 2011.
  • Alberta, 3.6 per cent and 3.5 per cent.
  • Saskatchewan, 3.3 per cent and 3.4 per cent.
  • Manitoba, 3 per cent and 2.5 per cent
  • Ontario, 3.7 per cent and 2.3 per cent.
  • Quebec, 3 per cent and 2.3 per cent.
  • New Brunswick, 2.2 per cent and 2.3 per cent.
  • Nova Scotia, 2.1 per cent and 2.2 per cent.
  • PEI, 2 per cent and 2.2 per cent.
  • Newfoundland and Labrador, 3.2 per cent and 3 per cent.

On jobless rates at an annual average:

  • British Columbia, 7.4 per cent in 2010, and 7.2 per cent in 2011.
  • Alberta, 6.9 per cent and 6.6 per cent.
  • Saskatchewan, 4.8 per cent and 4.7 per cent.
  • Manitoba, 4.9 per cent and 4.9 per cent.
  • Ontario, 8.7 per cent and 8.4 per cent.
  • Quebec, 7.9 per cent and 7.7 per cent.
  • New Brunswick, 9 per cent and 8.9 per cent.
  • Nova Scotia, 9.1 per cent and 9 per cent.
  • PEI, 10.6 per cent and 10.4 per cent.
  • Newfoundland and Labrador, 14.2 per cent and 13.6 per cent.

TD cites fiscal headwinds Canada stacks up well in a fiscal comparison to its peers, and cutting the combined federal-provincial deficit in half over the next two years appears well within reach, Toronto-Dominion Bank economists say. But "the harder part will be getting to zero deficits from there," deputy chief economist Derek Burleton and senior economist Pascal Gauthier said in a report today.

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"On balance, government budget plans - which are based on private-sector forecasts - have generally assumed relatively lacklustre long-term economic and baseline revenue growth," they said. "What's more, debt-service costs are projected to rise steadly over the next five years. These forces have put the onus on longer-term budget plans to hold program spending growth to about 2 per cent on average post-[fiscal year]2011-12. Even then, the pace of deficit reduction slows dramatically."

They list three "gale-force headwinds" impeding longter-term planning:

  • Modest recovery, lower trend growth: Private sector forecasters are wary about the fiscal challenges of Canada's major trading partners, tougher financial rules, a strong dollar and continuing restructuring among manufacturers. There are also demographic pressure.
  • Faster age-related spending: Canada's aging population will continue to push up costs such in areas such as health care and seniors benefits, a particular issue for the provinces. "Health care has been growing by about 6 per cent to 7 per cent per year across the provinces, and given an aging population, little let-up in health expenditures on a status-quo basis can be expected."
  • Rising interest costs: "These will go up as interest rates rise and debt accumulates. Under the latest budget plans, and based on private sector forecasts for interest rates, this would translate into an increase in the costs of servicing the debt from $51-billion in [fiscal year] 2009-2010]to $71-billion in [fiscal year]2013-14. These higher costs are almost equally spread across the federal and provincial levels of government."


Talisman in Colombian deal with BP Talisman Energy Inc. and Colombia's national oil company Ecopetrol are spending $1.9-billion (U.S.) to get in on the asset sale launched by BP-PLC in the wake of the oil spill disaster in the Gulf of Mexico. BP is selling its Colombian business to the two companies, part of its $30-billion worth of planned asset sales to raise funds that will help cover the costs of the spill. Talisman will have 49 per cent of the Colombian business and Ecopetrol 51 per cent. The two companies already are partners in areas of Colombia and Peru.

"These are tremendous assets that our team knows well," Talisman chief executive officer John Manzoni said in a statement. "They are attractively priced, with excellent running room and we are partnering with the pre-eminent oil and gas company in Colombia ... Completion of this transaction will accelerate our objective of building a material core area in Latin America, with target production of at least 50,000 [barrels of oil equivalent per day]"

Wheat prices running up Wheat prices have been surging on fears of a supply shortage, driven in part by speculators, though they remain below the highs of late 2007 and early 2008 and dipped just slightly today. "Fires in Russia and its regions have prompted speculative buying as capital rotation through the soft commodity markets moves into wheat exacerbating price moves in these rather illiquid markets," said CMC Markets analyst Michael Hewson. "Due to the fires, there are fears that Russia, Ukraine and Kazakhstan's export production could drop by as much as 27 per cent for 2010/11."

Since the beginning of June, he noted, wheat prices have jumped to about $4.50 (U.S.) a bushel to hit $7 yesterday in futures trading on the Chicago Board of Trade. "These rises in price have been the fastest in three decades, but in the short term they don't look in any way sustainable," he said.

Gildan settles suits Gildan Activewear Inc. said today it is paying $22.5-million (U.S.) to settle class-action suits in Canada and the United States, relating to its decision to revise its fiscal 2008 earnings outlook. The clothing maker said that as part of the settlement, both Gildan and its senior officers deny any claims of wrongdoing. "The settlement will be entirely funded by the company's insurance policies and will have no impact on the company's earnings or cash flows," it added.

Molson Coors profit jumps Molson Coors Brewing Co. today posted a sharp jump in second-quarter profit, and while global volumes dipped on "challenging economic and beer industry conditions," the brewer cited growth in Canada, Britain and other markets. Molson Coors said profit jumped to $237.2-million or $1.27 a share from $187.3-million or $1.01 a share a year earlier.

"In the U.S., strong cost management and higher net pricing drove double-digit earnings growth," chief executive officer Peter Swinburn said in a statement. "In Canada, although underlying pretax income declined 3 per cent in local currency, we grew volume and market share and reduced our cost of goods sold per hectoliter. In the U.K., profit declined due to a non-cash increase in pension expense, but we achieved solid top-line performance, growing volume and price in the quarter."

Mr. Swinburn noted that the outlook is still challenging given high global jobless rates.

U.S. consumers saving U.S. consumers have decided they'd rather save than splurge. Consumer spending stalled in June, the U.S. Commerce Department said today, as did growth in personal incomes. The savings rate in the United States rose to 6.4 per cent, its highest level in a year. The stagnation in personal incomes in June, though, follows increases of 0.4 per cent and 0.3 per cent over the previous two months, meaning that they rose "at a fairly decent clip" in the second quarter overall, said Paul Dales, U.S. economist at Capital Economics in Toronto.

"By and large, households decided to save, rather than spend, this extra income," he said. "...This surge in saving is something of a double-edge sword. On the one hand, it restrains spending growth in the near-term; nominal personal spending was flat in June, and in real terms it rose by just 0.1 per cent month over month and by an annualized 1.6 per cent in the second quarter as a whole.

"But on the other hand, households now appear better placed to boost their spending further ahead. The recent fall in confidence suggests this may not happen in the third quarter. What's more, much depends on whether the labour market recovery continues to generate decent rates of income growth. Nonetheless, it is of some comfort that households now appear to have something of a cushion that can be used to pay down debt or support spending."

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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