Posted on 31st March 2011 by PETER SVENSSON in Business
NEW YORK – Research in Motion Ltd.’s stock took a hit Thursday after the maker of the BlackBerry reported revenue from its latest quarter that fell short of expectations and warned that sales in the current three-month period are shifting to cheaper models.
RIM’s shares were down $6.59, or more than 10 percent, at $57.50 in extended trading after the Waterloo, Ontario, company reported results from the three months that ended Feb. 26.
It posted net income of $934 million, or $1.78 per share, for its fiscal fourth quarter. That was up 31 percent from $710 million, or $1.27 per share, a year earlier.
Analysts surveyed by FactSet expected earnings of $1.75 per share, on average.
Revenue rose 36 percent to $5.6 billion, shy of the $5.65 billion expected by analysts.
For the current quarter, ending in May, RIM said it expects earnings of $1.47 to $1.55 per share, below the average analyst forecast at $1.65. It said that was because cheaper phones would make up more of its sales in the quarter, and it’s spending more on research, development, sales and marketing, especially on its new tablet, the PlayBook.
“These are investments in the future,” RIM co-CEO Jim Balsillie told investors on a conference call. The decline in earnings isn’t a trend, he said. The PlayBook and new “superphones” that use the same underlying software as the tablet will keep growth going, he said.
“I have many corporate clients that have approached us about, you know, each wanting tens of thousands, several tens of thousands of PlayBooks,” Balsillie said.
The PlayBook goes on a sale in the U.S. on April 19. It’s half the size of Apple Inc.’s iPad, and it’s designed to work both as a standalone tablet and as an accessory for a BlackBerry phone.
RIM said Thursday that the PlayBook will be able to run applications written for Google Inc.’s Android software.
RIM expects earnings for the entire fiscal year of $7.50 per share, well above the analyst forecast at $6.82.
The growth of BlackBerry sales has slowed in North America due to competition from the iPhone and phones running Android. But overseas, sales are taking off, as corporations are only starting to put BlackBerrys in the hands of employees. Sales outside the old core markets of U.S., Britain and Canada are now 52 percent of the total, the company said. Cheaper models make up more of the overseas sales, analysts say.
Balsillie also said the company is selling more of its cheaper phones because more BlackBerrys are sold without contracts. Such phones aren’t subsidized as much by the wireless carriers, so they’re usually cheaper, entry-level models.
Posted on 31st March 2011 by PETER SVENSSON in Business
CHICAGO (Reuters) – Family Dollar Stores Inc (FDO.N) sees higher-than-expected yearly profit after more shoppers flocked to its stores for low-priced holiday items and groceries and spent a little bit more on average.
Family Dollar sells most of its items for $10 or less and caters to consumers with household income of $40,000 and below.
The discount chain earned $123.2 million, or 98 cents per share, in the fiscal second quarter ended on February 26, up from $112.2 million, or 81 cents per share, a year earlier.
Analysts, on average, were expecting it to earn 97 cents, according to Thomson Reuters I/B/E/S. Analysts had raised their expectations from 95 cents per share earlier this month, after Family Dollar suggested earnings would be 97 cents to 98 cents per share.
Family Dollar, which has more than 6,880 discount stores in 44 U.S. states, rebuffed a buyout offer from Nelson Peltz’s Trian Group earlier this month, saying its $55 to $60 per share offer “substantially” undervalued the company.
Instead, Family Dollar is continuing to open more stores and renovate older ones as it tries to capture more of shoppers’ spending on basic items such as food. It plans to open about 300 new stores and shut some 80 to 100 doors this year.
Shares of Family Dollar rose 1.8 percent to $53.36 in premarket trading on Wednesday.
EXPECTS STRONGER YEAR THAN WALL STREET
Family Dollar forecast fiscal year earnings of $3.13 to $3.23 a share, while analysts were expecting earnings of $3.12. It expects sales to rise 8 to 10 percent this year.
For the current third quarter, Family Dollar forecast earnings of 92 cents to 97 cents per share, while analysts expect it to earn 94 cents per share.
The company expects sales at stores open at least a year, or same-store sales, to rise 5 to 7 percent in both the current quarter and the fiscal year.
On March 14, Family Dollar said that second-quarter sales rose 8.3 percent to about $2.26 billion, with same-store sales up 5.1 percent.
More customers visited its stores, based on the number of transactions, and the average transaction increased modestly, the company said. Sales of consumables, which include basic household goods, and seasonal items were strongest.
(Reporting by Nivedita Bhattacharjee in Bangalore and Jessica Wohl in Chicago; Editing by Saumyadeb Chakrabarty, Dave Zimmerman)
Posted on 31st March 2011 by PETER SVENSSON in Business
DUBLIN – Anglo Irish Bank, the dying institution at the heart of Ireland’s journey to near bankruptcy, confirmed Thursday an Irish-record 2010 net loss of euro17.7 billion ($25 billion) because of property development loans gone bad.
Anglo originally revealed its expected 2010 figures Feb. 8 and Thursday’s audited figures contained only minor revisions. They eclipsed the previous record loss in Irish corporate history — the euro12.7 billion deficit that Anglo recorded in 2009.
Taken together, the nationalized, state-insured losses at Anglo represent nearly a third of Ireland’s surging national debt and underscore Ireland’s belief that, had it permitted Anglo to collapse in 2008, it would have taken the entire Irish banking system down with it.
Publication of Anglo’s results came hours before Ireland’s publication of potential losses at four other Irish banks. Anglo is excluded from that exercise because it was the first, and worst, to go through the process.
Anglo’s chief executive, Mike Aynsley, offered one bit of good news Thursday: He believes that Ireland won’t need to invest any more money in Anglo beyond the euro29.3 billion it has already committed. If true, this would be the first time since Ireland’s banking crisis began in 2008 that a bank’s estimated bailout needs weren’t raised later.
Aynsley, appointed to oversee the bank’s wind-down, described the work to date as cleaning “the scum off the top of the pond.”
He cautioned that Anglo could require more cash if the underlying value of its remaining loan book, currently valued at euro27 billion, suffers further heavy falls. Irish land prices have slumped by as much as 80 percent, and commercial properties by 60 percent or more, over the past three years. But analysts say prices at the retail end — particularly residential property — are yet to reach bottom.
Anglo said it recorded total loan losses of euro19.3 billion. This included transfers of euro14.1 billion in dud loans to Ireland’s “bad bank,” the National Asset Management Agency. It has taken control of the largest toxic debts of five Dublin banks, all of which spent a decade funneling foreign money into a runaway Irish property market.
Anglo said it partly offset its 2010 loan losses by forcing its most junior bondholders to accept a euro1.6 billion discount on their investments.
Ireland plans to close Anglo and has already transferred its deposits to other banks. The skeleton of Anglo’s partially constructed future corporate headquarters on the north bank of Dublin’s River Liffey stands as a symbol of all Anglo’s ambitions gone bust.
During the Celtic Tiger boom, Anglo recorded exponential growth as the market’s most aggressive lender to an elite of Irish property development barons. Ireland’s membership in the eurozone made it much easier for Anglo to borrow funds at low interest rates from foreign banks.
Anglo’s former senior executives are now under criminal investigation for a series of accounting scandals designed to hide losses and illicit loans from shareholders.
The deals included secret 2008 loans to 10 top Anglo clients on condition they invested the lot — euro460 million — into slumping Anglo shares.
External investigators also caught Anglo trying to hide its massive losses of deposits in 2008 by borrowing billions from another Dublin bank on the eve of its 2008 results, mislabeling the money as new deposit business, then transferring the funds back soon after its annual report was published.
As the New Yorker’s former press critic, A.J. Liebling, famously said, “Freedom of the press is guaranteed only to those who own one.” Perhaps that quotation is framed somewhere in a boardroom at the General Electric Corp., which owns NBC News.
In spite of robust profits of $14.2 billion worldwide, GE has calculated a corporate tax bill for 2010 that adds up to zero, via a creative series of tax referrals and revenue shifts. (This was, indeed, the second year running that the company—which has an enormous, and famously nimble, 975-employee tax division, led by former Treasury official John Samuels—paid nothing in U.S. taxes; indeed by claiming a series of losses and deductions, GE came up with a negative tax of 10.5 percent in the admittedly dismal business year of 2009, and realized a $1.5 billion “tax benefit.”)
The curious thing about this year’s tax story is that it turned up in many major news outlets, with one key exception: NBC News. As the Washington Post’s Paul Farhi notes, the network’s “Nightly News” broadcast, hosted by Brian Williams, has not mentioned anything about its corporate parent’s resourceful accounting, even though the story has been in wide circulation in the business and general-interest press for nearly a week. “This was a straightforward news decision, the kind we make daily around here” network spokeswoman Lauren Kapp told the Post.
One press critic who begs to differ: Daily Show host Jon Stewart, who noted that the Nightly News found the time for a dispatch on the inclusion of slang expressions in the Oxford English Dictionary, such as “LOL” and “OMG.” Of course, Comedy Central’s corporate parent, Viacom, is also no slouch when it comes to tax strategy: Earlier this year it sold its struggling videogame unit Harmonix for $50—so that it could claim a tax credit of $50 million.
NEW YORK (Reuters) – U.S. stocks ended a solid quarter with the barest of moves on Thursday, as investors looked ahead to Friday’s U.S. jobs report to provide a catalyst to push indexes to new highs for the year.
After gaining 5.4 percent in the first quarter, the benchmark S&P 500 hovered near 1,330, a level the index has been unable to break despite several attempts in the past month. A strong payrolls number may tip it over and technical momentum could kick in, lifting stocks further.
“The market has stalled around this area before,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis. “Unless we get a bad number tomorrow, this market is going to make a run at the year highs.”
Stocks were resilient through the first quarter, hanging tough despite Japan’s earthquake and nuclear crisis and a series of uprisings in North Africa and the Middle East. Friday’s jobs report would confirm investor optimism that a strong U.S. recovery can overcome the global trouble spots.
In March, the Dow industrials outperformed both the S&P 500 and Nasdaq, indicating preference for stronger companies as overseas concerns lingered.
Initial claims for unemployment benefits last week showed the trend of labor market improvement remains intact, but at a slow pace.
The data precedes Friday’s closely watched employment report from the Labor Department, which is expected to show the U.S. economy added 190,000 jobs in March.
Daily volume was light again, continuing the week’s pattern. About 6.9 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below last year’s estimated daily average of 8.47 billion.
The Dow Jones industrial average (.DJI) dropped 30.88 points, or 0.25 percent, to 12,319.73. The Standard & Poor’s 500 (.SPX) dipped 2.43 points, or 0.18 percent, to 1,325.83. The Nasdaq Composite (.IXIC) edged up 4.28 points, or 0.15 percent, to 2,781.07.
For the month, the Dow edged up 0.76 percent, the S&P shed 0.1 percent and Nasdaq dipped 0.04 percent.
That trend also proved true for the entire first quarter, with the Dow rising 6.4 percent, compared with the S&P’s gain of 5.4 percent and the Nasdaq’s advance of 4.8 percent.
Berkshire Hathaway’s class B shares (BRKb.N) fell 2.1 percent to $83.63 a day after the resignation of David Sokol, the man widely seen as the leading successor to Warren Buffett to run Berkshire. Sokol resigned after Buffett revealed that Sokol had bought shares in chemical company Lubrizol Corp (LZ.N) before pushing Buffett to acquire it.
In an interview on CNBC, Sokol said he did nothing wrong in buying the shares.
Retailers ranked among the worst performers, dragged lower by Carmax Inc (KMX.N), which lost 7.2 percent to $32.10 after posting fourth-quarter earnings. The S&P Retail index (.RLX) lost 0.76 percent, while the Morgan Stanley retail index (.MVR) dropped 1.1 percent.
Advancing stocks outnumbered declining ones on the NYSE by 1,746 to 1,241, while on the Nasdaq, about four stocks rose for every three that fell.
(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)
Posted on 31st March 2011 by PETER SVENSSON in World News
DUBLIN – Ireland’s ailing banks need another euro24 billion ($34 billion) in cash in a move that will leave all of them under state control and facing a complete overhaul, officials announced Thursday in a long-awaited effort to cap a 3-year banking crisis.
The Central Bank of Ireland made that recommendation as it published pessimistic results for stress tests on four banks. The banks, whose losses the government insured early during the financial crisis, caused Ireland to need a bailout in the first place, so their fate is closely tied with that of the wider country.
The tests presumed that the country’s real estate market would keep sinking for the next two years and produce tens of thousands of home foreclosures, a problem that is just starting to bite in a country committed to the idea of home ownership for all.
Central Bank Governor Patrick Honohan said all four banks would need enough money to cover mammoth write-offs of dud property loans and to boost their cash reserves to higher standards. He said these cash requirements can’t be met by any of the banks, so each will have to receive funding from Ireland’s emergency European Union-International Monetary Fund credit line.
The European Commission, European Central Bank and Washington-based IMF in a joint statement praised the Irish plans as “comprehensive” and “a major step toward restoring the Irish banking system to health.”
And in a separate statement, the ECB said it now considered the four banks solvent and worthy of uninterrupted flows of short-term liquidity loans until Ireland’s banks are restructured and able to borrow on open markets again. It also announced a lowering of lending conditions in the interim.
In recent months that funding, provided in tandem by the ECB and the Irish Central Bank, has soared to more than euro180 billion and raised tensions between Frankfurt and Dublin over when, if ever, Irish banks could be weaned off the funds.
Analysts sounded a skeptical note. They noted that Ireland now has produced three supposedly definitive stress tests on its banks since 2009 claiming to have found the bottom — only to produce even scarier numbers within months.
“Our initial impression is that the question of whether this is enough will continue to linger,” said Marchel Alexandrovich, European financial economist at Jefferies International.
Ireland’s 3-week-old government unveiled plans to shrink the country’s financial sector through a series of mergers and asset selloffs.
Finance Minister Michael Noonan told parliament that Ireland intended to create “two pillar banks” based on the market leaders, Bank of Ireland and Allied Irish Banks. The other four Irish-owned banks would essentially disappear within the next few years by selling their good bits and transferring their bad to the two market survivors.
Noonan said the inadequacy of Ireland’s previous stress tests and other bailout efforts meant that, this time, the new government had no choice but to embrace a financial Doomsday scenario — and show how Ireland could withstand it.
“The cost is huge. And it’s huge because Ireland has very little credibility left,” Noonan said in an interview. “So the policy … is to overcapitalize the banks, to restore confidence and credibility. They’re literally being stuffed with capital.”
Noonan said this was necessary because “people don’t believe Irish statistics anymore.”
“They have been given assurances about numbers too many times before that have proven to be incorrect. So now we have had to undergo the most conservative stress tests anywhere in the developed world, and we’ve had to overdo it in terms of capitalization,” he said.
The government plans to take majority control of Irish Life & Permanent, Ireland’s biggest provider of private pensions and residential mortgages. Until now, it has been the only bank to avoid the process of creeping nationalization — but now it’s going to be dismantled.
As part of the new plan, Irish Life & Permanent will sell off its profit-making units in pensions and investments in a public flotation. Its most vulnerable unit, retail bank and mortgage provider Permanent TSB, will be merged with one of the two survivors.
Noonan said the fourth and smallest bank targeted by Thursday’s stress tests, Educational Building Society, will be merged into Allied Irish. Ireland already wholly owns ESB and has a 93 percent stake in Allied Irish.
The outside consultants who designed the stress tests, New York-based investment managers BlackRock, based their estimates of loan losses and cash needs on an Irish economy that falls deeper into recession over the coming two years. BlackRock based its projections on mortgage defaults, in part, on the housing-market implosion in Las Vegas.
BlackRock’s hypothetical Ireland of the near future would suffer mortgage losses of up to euro17 billion, while average house prices would fall 17.4 percent this year and 18.8 percent next year. The economy would shrink 1.6 percent this year.
Honohan stressed he didn’t think any of this would actually happen, but Ireland needs to demonstrate it can cope if it does.
The EU and IMF in November offered the government loans, worth up to euro67.5 billion ($95 billion), on condition that the banks be tested again to determine a worst-case scenario for funding. The EU-IMF bailout fund earmarked up to euro35 billion for bolstering the banks, so Thursday’s figures come in well below that limit.
Nonetheless, the new figure would take the estimated total cost of Ireland’s bank-bailout efforts since 2009 to euro70 billion ($99 billion) — some euro15,500 ($22,000) for every man, woman and child in Ireland.
Ireland has already put euro46 billion into its banks since 2009, when it began nationalizing them to prevent their collapse — and took the country to the brink of bankruptcy as a consequence.
The state already owns 36 percent of Bank of Ireland. It also fully nationalized and is shutting down two other banks, Anglo Irish and Irish Nationwide, that were not targets of Thursday’s stress tests.
Thursday’s plan calls for Allied Irish to receive euro13.3 billion more; Bank of Ireland euro5.2 billion; Irish Life & Permanent euro4 billion; and EBS euro1.5 billion.
Posted on 31st March 2011 by PETER SVENSSON in World News
MEXICO CITY – President Felipe Calderon announced the resignation of his attorney general on Thursday and nominated the assistant in charge of organized crime as his successor, the first woman to hold the post if she is approved.
Calderon gave no reason for the departure of Arturo Chavez Chavez, the second attorney general to resign since Calderon was elected president in 2006. He nominated Marisela Morales, who heads the organized crime unit of the Attorney General’s Office, to replace Chavez. She must be approved by the Mexican Senate.
Chavez was appointed in 2009 after the departure of Eduardo Medina Mora, one of the main architects of Calderon’s crackdown on drug trafficking and organized crime. More than 34,600 people have been killed since Calderon’s administration launched the campaign shortly after he became president.
While Medina Mora was constantly in the public eye, Chavez had maintained a low profile as the country’s chief prosecutor.
U.S. Embassy officials in Mexico City found Chavez’s appointment to be “totally unexpected and politically inexplicable,” according to a diplomatic cable from September 2009 posted by WikiLeaks three weeks ago.
The dispatch noted that Chavez, former top prosecutor in the border state of Chihuahua, “has strong detractors within the Mexican human rights community” because he oversaw botched investigations into the murders of women in the 1990s in Ciudad Juarez, a violent city across the border from El Paso, Texas.
Medina Mora had been unable to work with the head of federal police, Genaro Garcia Luna, according to a leaked cable from October 2009.
The September cable suggested Chavez “is a less capable political operator, who will be overshadowed by Garcia Luna and stymied by his considerable human rights baggage.”
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NEW YORK – Research in Motion Ltd.’s stock took a hit Thursday after the maker of the BlackBerry reported revenue from its latest quarter that fell short of expectations and warned that sales in the current three-month period are shifting to cheaper models.
As the New Yorker’s former press critic, A.J. Liebling, famously said, “Freedom of the press is guaranteed only to those who own one.” Perhaps that quotation is framed somewhere in a boardroom at the General Electric Corp., which owns NBC News.
NEW YORK (Reuters) – U.S. stocks ended a solid quarter with the barest of moves on Thursday, as investors looked ahead to Friday’s U.S. jobs report to provide a catalyst to push indexes to new highs for the year.
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