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Mike, Jim, come back, all is forgiven (RIM rout, Part II)

These are stories Report on Business is following Tuesday, Jan. 24, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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RIM shares sink again Seriously, what was the point of all that?

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Shares of Research In Motion Ltd. sank again today as investors continued to bail out of the BlackBerry maker after Sunday night's surprise management shakeup that turned out to be little more than a shakeup in name only.

Mike Lazaridis and Jim Balsillie stepped aside as co-CEOs and co-chairmen, to be replaced at the helm by Thorsten Heins, who has been with the company for several years, and Barbara Stymiest in the chair.

Mr. Heins certainly had less than a stellar market debut, telling the investment community that he's a new guy who plans no dramatic change. The stock plunged yesterday, and the rout continues today.

But it's the change in strategy that shareholders want, which is why there was such pressure on what was Canada's most valuable company, but now trades in the $15 range.

Mr. Heins may be capable in his field - he comes from Siemens - but he's seen as an insider and the wrong guy, although at the right time.

As RBC Dominion Securities analysts Mike Abramsky and Paul Treiber put it, "we remain concerned RIM's window is narrowing to pursue other strategic options should its plans prove less than successful. To become more (or less) constructive on the shares, we look for: 1) competitive products/software; 2) improving execution; and 3) improving financial performance (and guidance)."

All of which begs the question, why did the board bother to change chiefs but not strategy?

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How do you like them Apples? Here's today's blowout first quarter from Apple Inc. in a nutshell:

  • Record profit of $13.06-billion (U.S.) or $13.87 a share, up from $6-billion or $6.43 a year earlier.
  • Record revenue of $46.33-billion, up from $26.74-billion a year earlier.
  • 37.04 million iPhones sold, up 128 per cent.
  • 15.43 million iPads sold, up 111 per cent.
  • 5.2-million Macs sold, up 26 per cent.
  • 15.4 million iPods sold, down 21 per cent.
  • Forecast calls for revenue of $32.5-billion, earnings per share of about $8.50 in the second quarter.

"Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline," chief executive officer Tim Cook said in a statement as Apple shares climbed in after-hours trading.

No Greek deal in sight As Luxembourg's prime minister put it last night, "it's obvious that the Greek program is off track."

Talks between Athens and its private bondholders have hit yet another roadblock, with no deal in sight as the country heads toward a March deadline and Europe's finance ministers hold firm, but push for an agreement.

"It now appears that any deal might not be concluded until Feb. 13, despite Greek finance minister Venizelos insistence at the end of last week that a deal was in its final phase," said CMC Markets analyst Michael Hewson.

"It would appear that last night's rejection by European finance ministers of the private creditors so-called line in the sand of a 65-per-cent to 70-per-cent haircut, and a 4-per-cent coupon hasn't really impacted sentiment that much. EU officials want the creditors to accept a coupon of 3.5 per cent on their exchanged 30-year Greek bonds. With this issue unresolved the latest talks about a second Greek bailout are also unlikely to make much progress either, given that the two are contingent on each other."

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The fear is that failure in these talks will result in a messy bankruptcy.

"A failure of the restructuring process would result in a hard default for Greece," said Carl Weinberg of High Frequency Economics. "That would be a catastrophe."

Separately today, Standard & Poor's downgraded some French banks.

CN hikes dividend Canadian National Railway Co. boosted its quarterly dividend by 15 per cent today as it posted a hefty gain in fourth-quarter profit.

The railway earned $592-million or $1.32 a share, diluted, in the quarter, compared to $503-million or $1.08 a year earlier. Revenue climbed 12 per cent to a record $2.4-billion, The Globe and Mail's Brent Jang reports.

CN hiked its quarterly dividend to 37.5 cents, and signalled a stronger outlook for this year.

"Although the economic recovery may be affected by global uncertainty, CN believes the gradual improvement in the North American economy will continue in 2012," said chief executive officer Claude Mongeau.

"Despite significant headwinds from additional pension expense of about $120-million in 2012, CN is aiming to achieve a growth of up to 10 per cent in diluted earnings per share (EPS) over adjusted diluted EPS of $4.84 for 2011. CN also expects to generate 2012 free cash flow in the order of $875-million, which is in line with 2011 excluding major asset sales."

CN is Canada's biggest railway, and the industry's most efficient, and today's earnings come amid a fight that now involves CN, its rival Canadian Pacific Railway Ltd. and CP's activist shareholder Bill Ackman of Pershing Square Capital Management LP.

Mr. Ackman wants to put CN's former chief, Hunter Harrison, at the helm of CP, which is pushing back as the two head toward a proxy fight. But as The Globe and Mail's Mr. Jang and Jacquie McNish report, CN is in a fight of its own, blocking Mr. Harrison's pension payouts and accusing him of ignoring the restraints of his retirement agreement.

Separately, Mr. Harrison said today in Pershing Square statement that he sees "just as dramatic a turnaround" at CP as he did at CN.

Semtech to acquire Gennum California's Semtech Corp. has struck a $500-million deal for Canada's Gennum Corp. , marking the marriage of two big players in the semiconductor industry.

Semtech is offering $13.55 a share for Gennum, an established player founded in 1973 and based in Brutlington, Ont., with offices across the globe.

Semtech said it expects annual savings of some $15-million through the deal. There is a break fee of more than $19-million, and Semtech has the right to match rival bids.

RBC to launch impact fund Royal Bank of Canada is setting up its own impact fund, in what appears to be the first major move by a Canadian financial institution in this space, The Globe and Mail's Tara Perkins writes.

Impact or social finance is essentially finance with a social or environmental goal.

Canada is just beginning to dabble in social finance, a concept that the British government and capital markets players have been working on for more than a decade.

Jobs go wanting Canadian employers had 248,000 job vacancies last fall on average, even as the jobless rate remained above 7 per cent, a new national survey shows.

Statistics Canada's new job vacancy survey, released today, shows there were 3.3 unemployed people in Canada for every vacancy in the three months to September, The Globe and Mail's Tavia Grant reports.

IMF dims its outlook European leaders must try harder to resolve the continent's debt crisis or risk driving the world into another recession, the International Monetary Fund warns in its latest assessment of the global economy.

The travails of the euro zone forced the fund to slice its four-month-old forecast for global economic growth by more than half a percentage point, The Globe and Mail's Kevin Carmichael reports.

Canada's economy is projected to grow 1.7 per cent this year, down from an estimated 2.3 per cent in 2011 and 3.2 per cent in 2010. That pace would tie Canada with Japan as the second-fastest growing economy in the Group of Seven Nations.

Canadian CEOs see more resilience Canadian CEOs believe their companies are more resilient and have been less affected by global economic turmoil than corporate leaders in other countries, according to a new global poll of chief executives and reported today by The Globe and Mail's Janet McFarland.

Just 38 per cent of Canadian business leaders said they believe the sovereign debt crisis gripping many countries has had an impact on their operations this year, compared to 56 per cent of CEOs globally, according to a global poll of 1,258 CEOs by PricewaterhouseCoopers LLP.

Retail sales rise Not that it matters all that much at this point, but Canadian retailers chalked up gains in November as they joined America's Black Friday sales.

Retail sales in Canada increased by 0.3 per cent in November, Statistics Canada said today, marking the fourth month in a row of gains. In straight volume terms, sales were up by 0.5 per cent.

It was not an across-the-board win, however. Increases came in seven of the 11 groups measured, representing 65 per cent of the total.

"One surprise was in autos, where a drop in unit sales did not translate into a decline in nominal sales," said chief economist Avery Shenfeld of CIBC World Markets.

"Elsewhere, sales were mixed, but there appears to have been an impact from Canada adopting the U.S. 'Black Friday' tradition, generating big gains in general merchandise and clothing, which might come at the expense of December activity. Over all, a decent report, but not particularly surprising."

India eases up, Japan holds the line Like China, India is beginning to shift its focus toward economic growth.

Having hiked interest rates aggressively to fight inflation, the Reserve Bank of India held its key rate at 8.5 per cent today, but but cut the reserve requirements for commercial banks by half a percentage point.

Today's move shows the central bank still has its eye on rising prices, but is giving a nod to growth in an uncertain global climate.

The Bank of Japan, in turn, also held its key rate steady. And while it cut its growth forecasts for last year and this year, it boosted its outlook for 2013.

"The Bank of Japan left interest rates steady and made no changes to its quantitative easing efforts," said Benjamin Reitzes of BMO Nesbitt Burns.

"The bank downgraded its 2012 growth forecast to 2 per cent from 2.2 per cent previously, reflecting increased concern that the European crisis along with the strong yen will weigh on exports. The BoJ seems content with its current policy stance. Unless the outlook deteriorates further, the bank could refrain from more easing."

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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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