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Crucial day for RIM: What to expect in new BlackBerry

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Crucial day for RIM Amid the security issues dogging Research In Motion Ltd. in several countries, the Waterloo, Ont.-based technology giant is expected this morning to unveil a new BlackBerry that analysts believe is key to the company's future. Battling the iPhone from Apple Inc. and other new smart phones on the market, RIM's new BlackBerry is expected to be a touch-screen device with a slide-out keyboard. Analysts are also watching to see if RIM gives a more detailed demonstration of its new operating system.

"Keys for the stock will be how well the BB6 OS shows (innovation, differentiation, form factor, etc.) and launch timing/pricing of the device," said UBS analysts Phillip Huang and Maynard Um. "[Management]has placed a high degree of importance on its BB6 OS as the 'next driver' of RIM's business, reflecting the longer-term importance of the announcement. Shorter term, launch timing could impact the quarter with an imminent launch helping to drive [second quarter of the 2011 fiscal year]results toward the high end of guidance ($.4-billion to $4.6-billion in revenues and 11.6-million to 12.1 million units) and vice versa."

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Today's announcement, made with AT&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.

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 yesterday that it is "committed to continue delivering highly secure and innovative products that satisfy the needs of both customers and governments."

Canadian dollar strong The Canadian dollar is actually down slightly from yesterday but still trading at a high level of about 97.60 cents U.S. It had been up sharply yesterday as oil prices and equities rose, said Scotia Capital currency strategist Sacha Tihanyi.

"Canada is getting more caught up in the 'risk on' trade as opposed to the U.S. growth/inflation woes, reflected primarily in [Canadian dollar] strength," said RBC Dominion Securities analysts Mark Chandler and Kam Bath. "The currency has given up a little ground this morning, but stands at a relatively firm 1.025, with near-term oil price futures back up to $81.70 a barrel. While up about 1 per cent over the past week against the [U.S.dollar, the Canadian dollar]is still underperforming most of the other major currencies over this period."

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.

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"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."

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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."

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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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