The Star Online: Business
The Star Online: Business |
- BlackBerry maker RIM's shares dive 20% as fee changes catch market off guard
- Employers can sack workers they find too sexy, Iowa supreme court rules
- Wall Street Week Ahead: A lump of coal for "Fiscal Cliff-mas"
| BlackBerry maker RIM's shares dive 20% as fee changes catch market off guard Posted: 21 Dec 2012 08:57 PM PST Shares of BlackBerry maker Research In Motion Ltd plunged more than 20 percent on Friday on fears that a new fee structure for its high-margin services segment could put pressure on the business that has set the company apart from its competitors. It was the stock's biggest, single-day, percentage price drop since September 2008. But shares were still nearly 80 percent above the year's low, which was reached in September. They started to rally in November as investors began to bet that RIM's long-awaited new BlackBerry 10 phones, which will be unveiled in January, would turn the company around. The services segment has long been RIM's most profitable and accounts for about a third of total revenue. Some analysts said there was a risk that the fee changes could endanger its service ecosystem and leave the Canadian company as just another handset maker. The fee changes, which RIM announced on Thursday after market close, overshadowed stronger-than-expected quarterly results. The company said the new pricing structure would be introduced with the BlackBerry 10 launch, expected on January 30. RIM said some subscribers would continue to pay for enhanced services such as advanced security. But under the new structure, some other services would account for less revenue, or even none at all. Chief Executive Thorsten Heins tried to reassure investors in a television interview with CNBC on Friday, saying RIM's "service revenue isn't going away". He added: "We're not stopping. We're not halting. We're transitioning." Since taking over at RIM in January, Heins has focused on shrinking the company and getting it ready to introduce its new BB10 devices, which RIM says will help it claw back ground it has lost to competitors such as Apple Inc But the new services pricing strategy came as a shock to markets, and some analysts cut their price targets on RIM stock. RIM will not be able to sustain profitability by relying on its hardware business alone, said National Bank Financial analyst Kris Thompson, whom Thomson Reuters StarMine has rated the top RIM analyst based on the accuracy of his estimates of the company's earnings. Thompson downgraded RIM's stock to "underperform" from "sector perform" and cut his price target to $10 from $15. Forrester Research analyst Charles Golvin said the move was likely about stabilizing market share: "At the moment, they need to stem the bleeding." He said the tiered pricing might line up better with RIM's subscriber base as it expands in emerging economies. RIM's Nasdaq-listed shares closed down 22.7 percent at $10.91 on Friday. The stock fell 22.2 percent to C$10.86 on the Toronto Stock Exchange. COUNTDOWN TO LAUNCH The success of the BB10 will be crucial to the future of RIM, which on Thursday posted its first-ever decline in total subscribers. Heins said on CNBC that the company expected to ship millions of the new devices. He cautioned that this will require heavy investment, which will reduce RIM's cash position in its fourth and first quarters from $2.9 billion in its fiscal third quarter. He said, however, it would not go below $2 billion. Still, doubts remain about whether RIM can pull off the transformation. Needham analyst Charlie Wolf said the BB10 would have to look meaningfully superior to its competitors for RIM to stage a comeback. Canaccord Genuity analyst Michael Walkley said it was highly unlikely that the market would support RIM's new mobile computing ecosystem, and he remained skeptical about the company's ability to survive on its own. "We believe RIM will eventually need to sell the company," said Walkley, who cut his price target on RIM shares to $9 from $10. Baird Equity Research analysts said BB10 faced a daunting uphill battle against products from Apple, as well as those using Google Inc's Baird maintained its "underperform" rating on the stock, while Paradigm Capital downgraded the shares to "hold" from "buy" on uncertainty around the services revenue model. "RIM has gone from having one major aspect of uncertainty - BlackBerry 10 adoption - to two, given an uncertain floor on services revenue," William Blair analyst Anil Doradla said. RIM will have to discount BB10 devices significantly to maintain demand, Bernstein analyst Pierre Ferragu said. The BlackBerry, however, still offers the security features that helped it build its reputation with big business and government, a selling point with some key customers. Credit Suisse maintained its "neutral" rating on the stock, but not because it expected BB10 to be a big success. "Only the potential for an outright sale of the company or a breakup keeps us at a neutral," Credit Suisse analysts said. Separately on Friday, ailing Finnish mobile phone maker Nokia |
| Employers can sack workers they find too sexy, Iowa supreme court rules Posted: 21 Dec 2012 08:43 PM PST The Iowa Supreme Court ruled on Friday that employers in the state can legally fire workers they find too attractive. In a unanimous decision, the court held that a dentist did not violate the state's civil rights act when he terminated a female dental assistant whom his wife considered a threat to their marriage. The dental assistant, Melissa Nelson, who worked for dentist James Knight for more than 10 years and had never flirted with him, according to the testimony of both parties, sued, saying she would not have been fired if she were a man. At trial, Knight testified he had complained to Nelson on several occasions that her clothing was too tight, revealing and "distracting." But sometime in 2009, he also began exchanging text messages with Nelson. Most of these were work-related and harmless, according to testimony. But others were more suggestive, including one in which Knight asked Nelson how often she had an orgasm. She never answered the text. In late 2009, Knight's wife found out about the text exchanges and demanded her husband terminate the dental assistant because "she was a big threat to our marriage." In early 2010, he fired her, saying their relationship had become a detriment to his family. Nelson sued, saying that she had done nothing wrong, that she considered Knight a friend and father figure, and that she would not have been terminated but for her gender. Knight argued that Nelson was terminated not because of her gender - all the employees of his practice are women - but because of the way their relationship had developed and the threat it posed to his marriage. The seven justices, all men, said the basic question presented by the case was "whether an employee who has not engaged in flirtatious conduct may be lawfully terminated simply because the boss views the employee as an irresistible attraction." The high court ruled that bosses can fire workers they find too attractive and that such actions do not amount to unlawful discrimination. The case was Melissa Nelson v. James H. Knight DDS, PC and James Knight. - Reuters |
| Wall Street Week Ahead: A lump of coal for "Fiscal Cliff-mas" Posted: 21 Dec 2012 08:40 PM PST NEW YORKL Wall Street traders are going to have to pack their tablets and work computers in their holiday luggage after all. A traditionally quiet week could become hellish for traders as politicians in Washington are likely to fall short of an agreement to deal with $600 billion in tax hikes and spending cuts due to kick in early next year. Many economists forecast that this "fiscal cliff" will push the economy into recession. Thursday's debacle in the U.S. House of Representatives, where Speaker John Boehner failed to secure passage of his own bill that was meant to pressure President Obama and Senate Democrats, only added to worry that the protracted budget talks will stretch into 2013. Still, the market remains resilient. Friday's decline on Wall Street, triggered by Boehner's fiasco, was not enough to prevent the S&P 500 from posting its best week in four. "The markets have been sort of taking this in stride," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago, which has about $38 billion in assets under management. "The markets still basically believe that something will be done," he said. If something happens next week, it will come in a short time frame. Markets will be open for a half-day on Christmas Eve, when Congress will not be in session, and will close on Tuesday for Christmas. Wall Street will resume regular stock trading on Wednesday, but volume is expected to be light throughout the rest of the week with scores of market participants away on a holiday break. For the week, the three major U.S. stock indexes posted gains, with the Dow Jones industrial average <.dji> up 0.4 percent, the S&P 500 <.spx> up 1.2 percent and the Nasdaq Composite Index <.ixic> up 1.7 percent. Stocks also have booked solid gains for the year so far, with just five trading sessions left in 2012: The Dow has advanced 8 percent, while the S&P 500 has climbed 13.7 percent and the Nasdaq has jumped 16 percent. IT COULD GET A LITTLE CRAZY Equity volumes are expected to fall sharply next week. Last year, daily volume on each of the last five trading days dropped on average by about 49 percent, compared with the rest of 2011 - to just over 4 billion shares a day exchanging hands on the New York Stock Exchange, the Nasdaq and NYSE MKT in the final five sessions of the year from a 2011 daily average of 7.9 billion. If the trend repeats, low volumes could generate a spike in volatility as traders keep track of any advance in the cliff talks in Washington. "I'm guessing it's going to be a low volume week. There's not a whole lot other than the fiscal cliff that is going to continue to take the headlines," said Joe Bell, senior equity analyst at Schaeffer's Investment Research, in Cincinnati. "A lot of people already have a foot out the door, and with the possibility of some market-moving news, you get the possibility of increased volatility." Economic data would have to be way off the mark to move markets next week. But if the recent trend of better-than-expected economic data holds, stocks will have strong fundamental support that could prevent selling from getting overextended even as the fiscal cliff negotiations grind along. Small and mid-cap stocks have outperformed their larger peers in the last couple of months, indicating a shift in investor sentiment toward the U.S. economy. The S&P MidCap 400 Index <.mid> overcame a technical level by confirming its close above 1,000 for a second week. "We view the outperformance of the mid-caps and the break of that level as a strong sign for the overall market," Schaeffer's Bell said. "Whenever you have flight to risk, it shows investors are beginning to have more of a risk appetite." Evidence of that shift could be a spike in shares in the defense sector, expected to take a hit as defense spending is a key component of the budget talks. The PHLX defense sector index <.dfx> hit a historic high on Thursday, and far outperformed the market on Friday with a dip of just 0.26 percent, while the three major U.S. stock indexes finished the day down about 1 percent. Following a half-day on Wall Street on Monday ahead of the Christmas holiday, Wednesday will bring the S&P/Case-Shiller Home Price Index. It is expected to show a ninth-straight month of gains. U.S. jobless claims on Thursday are seen roughly in line with the previous week's level, with the forecast at 360,000 new filings for unemployment insurance, compared with the previous week's 361,000. (Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: rodrigo.campos(at)thomsonreuters.com - Reuters |
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