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
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."
RIM Stock Chart - October 23, 2007
S&P/TSX Composite Top 10 at the close October 23, 2007: