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Crucial day for RIM: What to expect in new BlackBerry

In Canada on August 3, 2010 at 08:43

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Crucial day for RIM
Amid the security issues dogging Research In Motion Ltd. RIM-T 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. AAPL-Q 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.”

Today’s announcement, made with AT&T T-N 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.”

Markets treading water
European markets aren’t doing much of anything so far today, and U.S. stocks appear poised to follow suit. The FTSE 100 index in Britain was down marginally early this morning, as was the Paris CAC-40, though Germany’s DAX was up slightly. Dow Jones industrial average YM-FT futures were just about flat and S&P 500 ES-FT futures were down slightly.

After the strong gains on Monday, a small selloff in early trading hasn’t concerned investors too much this morning,” Yusuf Heusen, senior sales trader at IG Index, said of the FTSE. “ … Looking ahead to the U.S. open, at the moment we are expecting the Dow to start off around 20 points lower than Monday’s close when trading resumes. Like the U.K. market, it seems to have had an injection of fresh enthusiasm yesterday so it should be an interesting session ahead to see if investors have the courage to build on yesterday’s gains and target 10,700 once again.”

Canadian dollar strong
The Canadian dollar CAD/USD-I 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.”

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. “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.

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