Archive for April, 2011

Storm clouds gather for RIM after profit warning

Friday, April 29th, 2011 | Finance News

TORONTO (Reuters) – Like the little boy who cried wolf too often, BlackBerry maker Research In Motion has to prove it really can deliver on ambitious promises about its next generation of gadgets.

RIM on Thursday slashed its sales and earnings forecasts, a third body blow in just over a month after an anemic forecast in late March and the troubled launch of an as-yet underwhelming competitor to the red-hot Apple iPad last week.

Its shares shed some 13 percent early on Friday, in line with a late-trade fall on Thursday and an eerily similar drop to that after its March results.

"We've heard for too long about RIM's great product roadmap. Consumers are not listening nor waiting," National Bank analysts said in a note. "RIM does not even seem to have dual cameras on its upcoming BlackBerry product line-up. The last time we checked, video is the future."

Thursday's after-market warning focused on weak sales of RIM's aging smartphones in the United States and Latin America, and the company lowered an already tepid outlook for the current quarter.

All hope seems to now rest on what the Canadian company pulls out of its labs and onto center stage at a Florida trade show, BlackBerry World, starting Monday, where the company will unveil a new generation of touch-screen BlackBerrys.

Expectations are low.

NO TURNAROUND

Analysts said consumers are tired of waiting for RIM's innovations to kick in, and were "voting with their dollars," spending much of them in Apple stores and on Google's Android platform.

RIM had hoped to turn that around with the later-than-expected launch of its PlayBook tablet -- a sleek compact computer that runs on a fresh QNX platform that RIM says will transform its business.

But the PlayBook won dismal reviews and complaints it was rushed out before it was ready, despite a six-month launchpad.

"Misexecution has undermined sentiment recovery," wrote Mike Abramsky, a longtime optimist on RIM, who kicked RIM out of his preferred list of stocks and slashed his target price to $55 from $90.

RIM's Nasdaq-listed shares fell 13 percent to $48.21 by mid-morning on Friday. Its Toronto-listed shares fell to C$46.79.

"PlayBook is a promising tablet contender, but RIM bears some responsibility for its less-than-favorable debut, confusion over its positioning and criticisms it was not fully ready for market," Abramsky wrote.

Customers and developers are eager to know when the PlayBook will run Android and BlackBerry smartphone applications, while investors want to know how many PlayBooks sold in the first week and when better phones will ship.

LOST FAITH

Jefferies analyst Peter Misek dropped his rating by two notches to "underperform" and cut his price target to $35 from $80. He said RIM was scrambling to fix glitches in the PlayBook and integrate QNX, likely leading to delays for new handsets and flagging interest from carriers.

RIM has tried to shift attention to what comes next -- a suite of phones running an upgraded (but not yet QNX-based) operating system with beefed-up hardware.

"We're cutting over to a whole new platform, a whole new set of products, a whole new set of architecture. And it's very, very powerful and very, very exciting," RIM's co-chief executive Jim Balsillie told a conference call on Thursday.

"Stay tuned, the products are truly fantastic both in terms of their style and their performance. The issue is, I would have liked to have them sooner."

The sliding stock price shows that the market is yet to be convinced.

(Additional reporting by Soham Chatterjee and Tenzin Pema in Bangalore; editing by Janet Guttsman)

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Pump prices rise 2 cents as supplies tighten

Friday, April 29th, 2011 | Finance News

AP – • Pump prices may hit $4 a gallon by early May as U.S. supplies tightened after a series refinery outages reduced gasoline output this week.

The national average rose 2 cents on Friday to about $3.91 for a gallon of regular, according to AAA, Wright Express and Oil Price Information Service. Thats 6 cents more than it was a week ago and more than $1 higher than a year ago.

While gas may hit $4 a gallon across the country within a week or two, many analysts believe it will begin to fall, perhaps by Memorial Day, as more gas becomes available.

Benchmark crude rose 7 cents to $112.93 a barrel in early trading on the New York Mercantile Exchange.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Oil prices climbed back to near $113 a barrel Friday as a weaker dollar made crude more attractive to investors with other currencies and the conflicts in Libya and Syria raised risk premiums.

By early afternoon in Europe, benchmark crude for June delivery was up 40 cents at $113.26 a barrel in electronic trading on the New York Mercantile Exchange.

The contract added 10 cents to settle at $112.86 on Thursday and reached $113.97 during in the session, the highest since September, 2008.

In London, Brent crude for June delivery was up 44 cents to $125.46 a barrel on the ICE Futures exchange.

Investors have been looking for signs that this year's surge in energy costs and a slowing U.S. economy will start to undermine consumer demand. U.S. gross domestic product grew an annualized 1.8 percent in the first quarter, down from 3.1 percent growth in the fourth quarter.

"Energy prices are now clearly in territory where we should start to see demand destruction set in," said Edward Meir from MF Global in New York.

While U.S. gasoline supplies fell last week for a third consecutive week, a downward revision by the Energy Department's Energy Information Administration of U.S. oil demand in February was likely due to softer demand for gasoline, analysts said.

Climbing prices are likely cooling appetite for gasoline, an argument "against a further rise of the oil price," said a report from Commerzbank in Frankfurt. "But in light of the fighting in Libya, the unrest in the Middle East and the weakness of the U.S. dollar, the oil price remains well supported, and so we do not expect it to fall steeply, either."

Syrian security forces opened fire on a demonstration Friday in the coastal city of Latakia — the heartland of the ruling elite — wounding at least five people as thousands took to the streets in several places across the country, witnesses said.

More than 450 people have been killed across Syria and hundreds detained since the popular revolt against President Bashar Assad began in mid-March.

"Syria only produces 400,000 barrels of crude oil a day, 0.5 percent of the world total," Capital Economics said in a report. "However, a prolonged and violent political crisis in Syria will affect investment and tourism in the region overall, and add upward pressure on oil prices."

On Friday, fighting between Libyan rebels and forces loyal to Moammar Gadhafi has spilled over into neighboring Tunisia.

In other Nymex trading in May contracts, heating oil rose 1.14 cents to $3.243 a gallon and gasoline fell 0.48 cents to $3.425 a gallon. Natural gas June futures were up 4.1 cents at $4.612 per 1,000 cubic feet.

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Alex Kennedy in Singapore contributed to this report.

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Good times roll for auto suppliers

Friday, April 29th, 2011 | Finance News

DETROIT (Reuters) – Major auto suppliers blew past profit expectations on Friday, suggesting the recovery in the global auto market remains strong despite rising oil prices and the disaster in Japan.

Goodyear Tire & Rubber Co (GT.N), powertrain maker American Axle and Manufacturing Holding Inc (AXL.N) and Lear Corp (LEA.N), which makes seating and electrical power management systems, posted first-quarter earnings that easily exceeded Wall Street estimates on improving global demand.

"What we're seeing from these results is the volumes are significantly higher and therefore the recovery in the auto industry is gaining momentum," said Tim Ghriskey, chief investment officer with Solaris Asset Management.

"Clearly, the sales are doing well and the consumer is replacing older vehicles," added Ghriskey, who has owned auto stocks in the past and still follows the sector closely.

Shares of Goodyear, American Axle and Lear were up 10.9 percent, 3.3 percent and 2.5 percent, respectively, in morning trading.

Lear cited a 5 percent increase in global auto production in the first quarter compared with a year earlier. Demand grew around the world, offsetting a 32 percent production decline in Japan due to the earthquake and tsunami last month.

Friday's earnings reports continued a strong week for the sector, underlined by Ford Motor Co's (F.N) better-than-expected profit.

Other suppliers whose results topped expectations this week included BorgWarner Inc (BWA.N), Federal-Mogul Corp (FDML.O) and Dana Holding Corp (DAN.N).

Dealer groups -- AutoNation Inc (AN.N), Penske Automotive Group Inc (PAG.N), Asbury Automotive Group Inc (ABG.N) and Group 1 Automotive Inc (GPI.N) -- also posted strong profits, although many warned the Japanese crisis would crimp vehicle inventories on their lots.

"Obviously, it's all about volume," Morningstar analyst David Whiston said. "With a lower fixed cost and a better top line, it's not a surprise to see earnings doing so well."

While he still expects some choppiness due to the Japanese crisis, he said the industry's recovery remains in place.

David Silver, analyst with Wall Street Strategies, cautioned against exuberant expectations, however.

"I wouldn't call it a party right now. It's more of a get-together," he said. "The profitability of the North American automakers is much improved from 2007 and 2008, but the Japan disaster is an overhang."

Silver expects more of drag on automaker and supplier earnings later this year.

That squared with comments from General Motors Co (GM.N) Chief Executive Dan Akerson, who said on Thursday that the Japanese crisis was a "second-quarter event.

Akerson, like Ford CEO Alan Mulally, said the disaster in Japan was not likely to have a great impact on earnings.

Silver also said the European market will be weak for the year, while Ghriskey voiced concern about rising raw material costs.

(Additional reporting by Bernie Woodall; editing by John Wallace)

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