Canadian Business Thread
This thread is to discuss Canadian Business. I'll start things off with the latest headline:
RIM shares hits fresh high on China deal Teams up with telecom giant Alcatel-Lucent to sell BlackBerrys in China David George-Cosh, Financial Post Published: Tuesday, October 23, 2007 http://a123.g.akamai.net/f/123/12465...anada-rim_.jpg Research in Motion co-CEO Jim Balsillie is silhouetted while speaking at the Ottawa Centre for Research and Innovation Technology Showcase. RIM has partnered with telecom giant Alcatel-Lucent to sell BlackBerry wireless devices in China. Investors yesterday sent Research in Motion Ltd.'s stock to a record high, at one point making it the most valuable company in the country during trading yesterday, after revealing it had partnered with telecom giant Alcatel-Lucent to sell BlackBerry wireless devices in China. The manufacturer saw its stocks surge to $120.42 on the TSX, up 8.19% following the announcement that their 8700 BlackBerry model would be distributed in the booming Chinese market later this year, though no specific date was given for distribution. The stock jumped US$11.15, or 9.8%, to close at US$124.53 on the Nasdaq market. Canaccord Adams senior technology analyst Peter Misek said RIM's developments in China are just the beginning of what could be a banner year for the Waterloo, Ont.-based company. "This is going to be the biggest company in Canada," said Mr. Misek, who rates RIM as a "buy." "The company is a world beater and its technology is second-to-none. It's got an excellent execution engine and tremendous earnings growth." "This is just step one for RIM in China. They're going to have additional partnerships, additional devices, additional services," he added. China poses a huge opportunity for RIM. The country is relatively untapped in terms of mobile device penetration, with more than 10 million workers employed in Fortune 1000 companies and around 400 million middle-class residents who have found themselves flush with disposable income and with a culture that embraces new, exciting technology. However, RBC Capital Markets analyst Mike Abramsky said that yesterday's market reaction was ahead of itself and was valuing RIM mostly on its long-term prospects rather than what he called, "modest traction in the short term." He rated the stock as an outperform. Still, the announcement caused the street to drive RIM's market capitalization to a peak of $69.2-billion, surpassing Royal Bank of Canada as the country's most valuable company for much of the afternoon. RIM's shares are the biggest success story on the TSX, increasing 138% so far this year and rising more than twentyfold over the past five years. Any concerns over RIM entering the risky Chinese market, says Mr. Misek, should be calmed with its decision to partner with Alcatel-Lucent, which has strong roots in China. "Alcatel-Lucent has been ... in China a lot longer than RIM has, for about the past 25 years," he said. "You have to have senior politburo contacts in order to do business in China in the scale that they're looking at." Entering a major market such as China won't be a cakewalk for RIM, says Rob Enderle, president of the Enderle Group, a market research firm in San Jose, Calif. He says RIM will face daunting competition in a market saturated with a number of different mobile options, including the RedBerry, a homegrown BlackBerry knockoff. Mr. Misek doesn't believe the cheaper device, made by China Unicom, will pose any challenge for RIM's 8700 model once the device hits the Chinese market. "[RIM] has a network operations centre that effectively manages IP address, traffic, data, everything. Then you have compression and spectral technologies that RIM employs and an operating system on its devices that is remarkably thin and efficient," said Mr. Misek. "There's so much more intellectual property than just a brand, which is why they're beating companies like Palm, Microsoft and Apple." From GlobeInvestor.com RIM Stock Chart - October 23, 2007 http://i196.photobucket.com/albums/a...ober232007.jpg S&P/TSX Composite Top 10 at the close October 23, 2007: http://i196.photobucket.com/albums/a...dbyMarke-4.jpg |
This morning BNN reported that RIM is now the biggest company in Canada (by market cap).
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*cough* Nortel *cough*
Just kidding guys I'm sure that won't happen to you. Seriously though RIM has an outrageous P/E multiple and is wildly overpriced by just about any metric IMO. In regards to the talk about RIM being the largest company in Canada, perhaps it narrowly beats RBC in market cap, but take a look at real money: RIM Q2 Revenue: $1.37B Net Income: $287.7M Royal Bank Q2 Revenue: $5.48B Net Income: $1.395B |
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The problem with your flawed argument regarding the P/E multiple is that RIM was wildly overpriced a few years ago too... since then the stock price has gone up by 500%... good call Scott. ;) The fact is... according to the market RIM is priced just right. P/E multiple by itself means very little... you also must consider the growth rate.:) |
You misunderstand my argument. I'm not saying the market got it wrong or that RIM does not deserve a large P/E. Clearly they have high growth rates. All I'm saying is that the law of large numbers has to come into play at some point and growth will slow, just ask Microsoft. At that point the P/E will drop and unless RIM has earnings numbers somewhere in the ballpark of RBC then their market cap will be lower. Yes RIM will diversify into other products and blah, blah, blah growth will continue and the market will probably always give them a higher multiple than a bank. But they have a long way to go to reach RBC's earnings.
The problem with momentum growth stocks like RIM is that eventually something happens that knocks down these precariously perched stocks. They break down real fast and as Kevin O'Leary says - "grown men will weep". The implication behind the posts from the Waterloo forumers is that RIM's success is KW's success, and that is somewhat true. I'm just saying that a company with a huge market cap and relatively low earnings doesn't have the same amount of positive economic effect on its community as a company with tons of real earnings and investment. For example, according to the statement of cash flows in their most recently reported quarter: Cash Used in Investing Activities (net of short term investments) RIM: $ 105,830,000 Suncor: $1,322,000,000 Encana: $1,189,000,000 Let the Calgary/KW pissing match comence. |
Something that could have significantly more national relevance than who has the largest market cap - Nexen is making big ass profits in areas Encana deemed unprofitable at sub 50 dollar/barrel oil. If Eddie imposes to harsh a royalty increase, expect to hear more of this ....
Nexen profits as Buzzard lifts off Globe and Mail Update October 24, 2007 at 7:55 AM EDT Oil and gas producer Nexen Inc.'s [NXY-T]third-quarter profit more than doubled from a year ago to $403-million or 75 cents a share, as production ramped up at its Buzzard oil field in the North Sea. The profit for the three months ended Sept. 30 came in two cents ahead of analysts' consensus forecast and compared with $199-million or 37 cents a share a year earlier, the Calgary-based company said Wednesday. It noted that profit for the latest period included a $55-million after tax recovery on stock-based compensation. Production climbed to the equivalent of 261,000 barrel s of oil a day from 203,000 a year earlier and net sales rose to nearly $1.45-billion from $997-million, Nexen said, while cash flow from operations rose to $868-million or $1.65 a share from $594-million or 77 cents. The company attributed the growing production volumes to completed development projects in the North Sea, including Buzzard and Duart. Nexen's third-quarter profit more than doubled as it ramped up production at its Buzzard gas play in the North Sea. “A number of our development projects are now on stream, but these have taken us longer to complete than we expected,” Nexen chief executive officer Charlie Fischer said in a news release. “As we bring these development projects on stream, we are starting to achieve our target rates and our financial results are beginning to show the significant value of these projects.” The soaring Canadian dollar took a toll on the Canadian company's numbers. It said that although the average price of West Texas Intermediate crude rose to $75.38 a barrel from $70.48 a year ago, it was “unable to retain the full benefit of the price increase due to the weakening U.S. dollar.” |
Out of curiousity, do you perchance work for RIM?
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I would estimate the combined net worth of RIM's top two executives (residents of Waterloo) at around $7 billion.... what's the net worth of Calgary's top two executives just out of curiousity? Quote:
RIM's affect on Waterloo is MUCH larger that both Encana's and Suncor's affect (added together) on Calgary.... I mean just how many WORLD CLASS institutes have those companies started in Calgary? |
well, it probably has more to do with the fact that Encana is somewhat of a "drop in the bucket" for Calgary. Waterloo is a much smaller city, so having one really successful business in town is going to make a much larger difference, proportionally
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Without going into the side debates in this thread, the one thing i will give RIM is that they seem to have world class management and that can go a long way....
Claeren. |
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I will give WaterlooInvestor this, RIM is changing the way all Canadian businesses will be viewed in the future. They are truely on the leading edge of technology in a way Nortel could never say it was. BTW: Nortel still exist in Brampton and Ottawa ( they didn't disappear after their stockprice nosedived.) Edit: Oh shit, I just forgot, Nortel sold their Brampton headquarters to Rogers a couple of years ago. |
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A weak and non-visionary top means the company plays it too safe, as is the case with many Canadian companies. A weak secondary executive tier of 'yes-men' allows the top people to push too far, as is the case with many American companies that have been hollowed out this way. Great companies have balance. I don't knwo for sure if that is RIM yet but i get that impression based on the moves they have been making. I get the same impression from Richard Branson's Virgin Group, for example. Claeren. |
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By the way, just where does that "vast metropolis" aka Winnipeg fit into the Canadian business scene? |
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Actually I was quoting Cash Used in Investing Activities, not dividends per share or share price appreciation. Suncor's investments are pretty much all in Alberta and Encana has most of their's here as well. @Waterlooson: Yes I have heard of all of those facilities (only on this forum though - actually it seems like that's all I ever hear from the KW people), their is no doubt that RIM and its founders have been generous to Waterloo. Also, I really hope that RIM does become as large as Microsoft or Google some day, I just don't see it happening. Feel free to buy a whole swack of RIM stock, I just won't be joining you. I would consider having it as 1% of my portfolio at most. |
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Just because the courts ruled one way does not mean that RIM did not have a case or that what NTP's does is right. And the lowest figure i heard for a settlement was $450M, do you have a source for $25M? Claeren. |
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After the case was settled, a NTP principal stated that RIM could have settled the case (while still in the early stages of the dispute) for around $25 million.... RIM let the matter go to court and lost... then NTP wanted way more. RIM challenged NTP's patents and had them declared invalid, but it was too late because the judge wasn't bound by the patent rulings. "When he and business partner Donald Stout contacted RIM in 2000 about obtaining a license for the NTP technology, however, they didn't get a response.... Stout told The Washington Post last year that RIM has had to spend more in legal fees -- $25 million to $50 million -- than it would have cost to license the company's technology." http://www.washingtonpost.com/wp-dyn...030301957.html |
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Just because an American judge sides with an American company over a patent that while legal was morally questionable does not mean Balsillie was wrong. It could mean the law was wrong, it could mean that there are companies out there that specialize in blackmailing major tech firms and sometimes those companies have to stand up for themselves even if they sometimes lose.... I don't think it means that much in the scheme of things and obviously a lot of shareholders agree with me. Claeren. |
It may not be a Canadian company, but it's good business news for Metro Vancouver at least...
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