TORONTO (Reuters) – Research In Motion stunned investors with a steep downward revision of its current quarter forecasts on Thursday, sending its stock spinning lower even as it promised a turnaround from a line-up of new BlackBerry smartphones it will unveil next week.
The new touchscreen phones, featuring an upgrade to RIM's existing operating system and improved hardware, are crucial weapons in the BlackBerry maker's scrappy fight against leaders Apple and Google in a fiercely competitive smartphone market.
"The interest is global, the products are truly fantastic," RIM's co-chief executive, Jim Balsillie, told analysts on a conference call. "I would have liked to have them sooner."
Investors weren't waiting until the BlackBerry World conference in Florida next week, clipping more than $6, or 11.2 percent, off the stock in after-hours trade.
"This is the beginning of the slide," said Edward Snyder from Charter Equity Research. "It's going to be like air coming out of a balloon slowly."
The Canadian company is facing a difficult transition as it launches its first tablet computer, the PlayBook, with a completely overhauled operating system it expects will run its new phones from early next year.
While reviewers, customers and analysts appear impressed with the operating system, QNX, focus is on how quickly it can be ported and what the competitive landscape will look like by then.
Google gives its Android software to handset makers, who in turn seek to set themselves apart with high-end hardware. Apple redefined smartphones with its iPhone and created the tablet computer market with its iPad. RIM launched its tablet, the PlayBook, to lukewarm reviews last week.
RIM also faces a challenge from behind, as Microsoft pays handsomely to win over developers and has tied up a deal that will see its software on phones from Nokia, the world's largest handset maker by volume.
MAINTAINS FULL-YEAR OPTIMISM
In an unusual warning just a month after RIM reported quarterly earnings and disappointed investors with a weak short-term outlook, the company said it expects earnings of $1.30 to $1.37 a share for the current quarter, which ends in late May, down from the $1.47 to $1.55 it forecast in late March.
Before RIM's March forecast, analysts had on average expected the company to earn $1.65 a share for the current quarter.
But RIM maintained its robust forecast for full-year earnings of $7.50 per share, piling on the pressure for it to perform in the second half of the year.
POWERFUL PHONES PROMISED
RIM, which has failed to match the power or prestige of competing Apple and Android-based devices in recent years, is widely expected to power up its new touch-focused devices.
"Increasingly RIM is being relegated to the low end, quasi-smartphone. Without a flagship touchscreen, high-end smartphone they are going to continue to lose traction," Snyder said.
RIM's Balsillie promised to deliver in Orlando next week.
The company may unveil a new Bold -- its workhorse phone -- to add a touchscreen to RIM's trademark keyboard, a beefed-up Torch and a touchscreen-only device to erase memories of RIM's first take on the style, the Storm, which failed to resonate.
All are expected to have double the processing power of the first Torch, which launched last August, and more than the latest iPhone.
"I'm sure RIM understands that there are serious gaps in their portfolio," said CCS Insight analyst John Jackson. "And I'm sure that the transition to QNX -- the OS that runs the new PlayBook tablet -- is one in a series of measures put in place to address this."
RIM said shipments this quarter will likely be at the low end of the 13.5 million to 14.5 million forecast the company gave in March, and that revenue would miss the range of $5.2 billion to $5.6 billion that it had forecast in March.
Balsillie said the aged BlackBerry portfolio and delays in launching new products had hit particularly hard in the United States -- a key market -- and Latin America, where RIM has grown steadily in recent quarters.
"It's not great news but in this transition period there are a lot of numbers that are moving around and I don't think we can view it as that incremental," said Wunderlich Securities analyst Matthew Robison. "Transitions are always a challenge."
RIM said it has not experienced significant supply disruptions from the Japan earthquake and shipments of its PlayBook tablet are on track.
(Additional reporting by Poornima Gupta in San Francisco and Tarmo Virki in Helsinki; Editing by Janet Guttsman, Peter Galloway and Steve Orlofsky)
CINCINNATI – Procter & Gamble Co. tempered its earnings outlook for the year Thursday because of fast-rising costs for raw materials and fuel and the still-sluggish economies in the U.S. and other developed countries.
The maker of Pampers diapers, Tide detergent and Crest toothpaste said that profits and sales rose in its third quarter, led by sales in emerging markets. The company also announced plans for more price increases.
P&G, based in Cincinnati, said net income was $2.87 billion, up 11 percent over last year. Earnings per share were 96 cents on revenue of $20.23 billion. Analysts expected 97 cents a share on $20.24 billion.
P&G shares rose 48 cents to close at $64.50 Thursday. They have traded in a 52-week range of $39.37 and $66.95.
P&G reported double-digit sales increases in Asia, with strong sales for Pantene shampoo there and in Brazil, and for Gillette razors in countries such as India, areas the company is increasingly relying on for sales growth. But developed market sales, which still account for two-thirds of P&G's business, continued to be nearly flat.
"The results show that consumers in developed markets are struggling," Bob McDonald, chairman and CEO, told reporters. "They're struggling with higher gasoline prices ... which is causing them to make choices."
McDonald said P&G is counting on offering more value and innovation, such as Tide Pods, concentrated laundry detergent tablets it will roll out in North America this July, to keep consumers buying its big-name brands instead of trading down to store brands or other cheaper competitors.
The world's largest consumer products maker and its competitors face rising costs for key raw materials such as pulp and resin and fuel and have begun testing household tolerance for higher prices.
Jon Moeller, chief financial officer, said P&G's commodity costs are increasing even faster than expected earlier, now estimated at $1.8 billion higher for the year, up from $1 billion projected in February, and were more than double what was expected in the third quarter.
P&G increased prices in the quarter on Gillette blades and razors and Duracell batteries, and just hiked prices on Pampers diapers and wipes, Charmin toilet paper and Bounty paper towels. Moeller said pulp costs are up 10 percent for the paper-related products. He said diesel oil is up 25 percent, adding to transportation costs, while resin used in packaging rose 15 percent.
P&G said Thursday it will raise prices this summer on Head & Shoulders shampoo, Iams pet food and Cascade dishwashing detergent, among other items. The company also said it is trying to reduce costs with less packaging, alternative materials and more efficient energy use.
Moeller told analysts on a conference call that Middle East turmoil and the Japanese earthquake also hurt sales in those markets, although P&G operations are continuing as normal.
The company Thursday dropped the high end of its earnings outlook for the year, to between $3.91 and $3.96 per share from $4.01. Analysts expect $3.96 on $82.02 billion in revenue. It also narrowed its outlook for organic sales, a measure that excludes impacts of currency fluctuations and acquisitions or divestitures, to 4-5 percent for the year from 4-6 percent.
For overall sales, P&G expects growth of 4-5 percent; analysts project about 3 percent for the year, to $82.02 billion.
For the current quarter that ends in June, P&G expects earnings of 80-85 cents per share, with revenue expected to grow 8 percent to 10 percent with the help of higher prices and favorable foreign exchange.
Analysts surveyed by FactSet expect, on average, 85 cents on $20.28 billion, a sales increase of 7 percent.
NEW YORK (Reuters) – Apart from the murmur of voices and bursts of laughter, nothing was heard on Thursday from 12 jurors studying the evidence in hedge fund manager Raj Rajaratnam's high-profile insider trading trial.
Unlike the past three days of deliberations, no notes emerged from the jury room in Manhattan federal court asking for exhibits or to hear replays of FBI phone taps central to what U.S. prosecutors call the biggest probe of insider trading at hedge funds on record.
The panel began its deliberations on Monday after hearing seven weeks of often complex evidence. They will resume deliberations on Friday in a shortened session of three hours because of juror commitments, U.S. District Judge Richard Holwell said in court.
Litigation experts are reluctant to analyze the behavior of sitting jurors or predict when they will deliver a verdict, but some say this panel has a lot of work to do in deciding the fate of Galleon Group founder Rajaratnam.
"I think the volume of information there and the jury sensing the importance of the case will likely cause them to take their time," said Artur Davis, a former federal prosecutor and congressman who is a partner at SNR Denton law firm in Washington D.C.
A conviction would likely lead to more probes involving the use of secretly recorded phone calls and an acquittal would be a huge blow to one of the U.S. Department of Justice's priorities in fighting wrongdoing on Wall Street.
The sound of several jurors laughing and even some clapping was heard from the locked jury room adjoining the courtroom. At other times, only the low murmur of voices could be heard.
Rajaratnam's seasoned defense lawyer John Dowd said during a casual chat with reporters while waiting for the verdict that this would be the last trial for him.
He said he would not take part in court arguments of the civil case against Rajaratnam by U.S. market regulators, choosing to hand it over to younger lawyers in the team.
"They're hungry," Dowd, 69, said and "I'm exhausted."
Sri Lankan-born Rajaratnam spent most of the day sitting with Dowd and Terence Lynam in nearby courtrooms on the 17th floor of the building where the trial began on March 8. The lawyers have been colleagues for decades at Akin Gump Strauss Hauer & Feld LLP in Washington, D.C.
The jury is considering prosecution evidence that Rajaratnam, 53, traded on corporate secrets leaked by highly placed insiders such as a former director at Goldman Sachs Group Inc (GS.N), Wall Street's most influential bank. The government accuses Rajaratnam of making an illicit $63.8 million from 2003 to March 2009.
The defense team presented the panel with a blizzard of data to show the one-time billionaire drew on a vast collection of research and public information to make his trades, not secrets, and asked for an acquittal.
If convicted on charges of securities fraud and conspiracy, Rajaratnam could be imprisoned for up to 25 years. Rajaratnam, who was arrested in October 2009, is the only one out of 26 charged in the broad Galleon case to go on trial so far. Twenty-one have pleaded guilty.
To convict Rajaratnam, the government's evidence must convince all of the panel beyond a reasonable doubt that he received material nonpublic information from people who had a fiduciary duty not to disclose it and that he knew it was wrong to trade on it.
During the long trial, Dowd said he has rarely slept past 2 a.m. Daily walks of about a mile between the Ritz Carlton Hotel and the courthouse in lower Manhattan provided welcome solace from the long days in court.
On Thursday the defense team -- which has numbered up to 10 lawyers at times -- closed its trial "war room" a few blocks from the courthouse, the lawyer said.
Dowd, perhaps best known for investigating bets on baseball in the 1980s by Cincinnati Reds great Pete Rose, has over the years represented people including U.S. Senator John McCain and an executive who played a key role in the Enron Corp scandal.
The case is USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184.
(Reporting by Grant McCool and Basil Katz; Editing by Phil Berlowitz)