Tag: TSX

Why RIM will not suffer the same fate as Canadian giant Nortel

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nortel_broken

RIM is for many both a great smartphone manufacturer and a source of patriotism. It’s a leader in the ITC (Information and Communications Technology) sector and their executives, especially Jim Balsillie, are quick to point out that it’s a Canadian firm.

This brief description may remind you of another Canadian firm: Nortel. Nortel was also a source of Canadian pride as a prominent, high-technology firm based in Canada.

Both companies, due to their size and influence, have a notable impact on the Toronto Stock Exchange. While RIM occupies about 3% of the TSX, Nortel once accounted for more than one-third of the main TSX index.

Although there are a few similarities in the two companies, they are completely different and it’s safe to say that RIM will not suffer the same fate as Nortel.

Management at Nortel was infamous for receiving millions in incentives that promoted unethical business practices. In 2004, several of its top executives – including former CEO Frank Dunn – were accused of cooking the books to inflate profit numbers, resulting in millions of dollars of bonuses to these individuals. Last year, criminal charges were laid against Dunn and others.

Jim Balsillie got in trouble with the the OSC which alleged the executives backdated and repriced stock options using dates on which the market price of RIM’s shares was relatively low. Handing out options at the lower prices had the effect of improperly enriching the recipients and, the OSC alleged, could have deprived RIM of about C$66 million.

While both companies seem to be involved in some shady practices, they can’t really be compared because they are on completely different scales. The result of the Nortel scandal resulted in billions in losses for shareholders. The result of the RIM and OSC case was that Balsillie paid a penalty of C$5 million ($4.1 million), while Co-Chief Executive Mike Lazaridis paid a C$1.5 million penalty. The two also paid investigation costs to the regulator.

According to Kevin Restivo, a communications technology analyst at IDC Canada, “RIM and Nortel are very different companies,” he said. “Other than the fact that they’re both based in Canada and both publicly traded companies in the ICT sector … the companies’ histories and similarities separate pretty quickly.”

Some point to competition in the telecom industry, coupled with the crippling accounting scandal, resulted in Nortel’s eventual demise. The telecom industry began to see a large number of mergers such as Alcatel-Lucent and Nokia Siemens Networks, which left Nortel at a disadvantage. With the accounting scandal at hand, the company was in no condition to recover and eventually had to be protected from bankruptcy and sold off.

It’s competition that is also the popular topic when discussing the future of RIM. The difference is that competition will actually make RIM stronger in the end. Sure, market share in North America is fluctuating given sales of the iPhone, but can anyone prove that Apple sales have a negative impact on RIM’s growth? The App Store led an evolution in the market that RIM is still generating considerable profits from, having followed the trend with App World. Competition is also increasing the overall number of smartphone users, and this trend is helping to increase sales for RIM. Other smartphone manufacturers may represent competition, but for some reason the Palm Pre is often cited. Remember, Palm only sold 810,000 units last quarter compared to 8.9 million devices for RIM.

So while these two companies represent the talent that Canada possesses in the ICT world, they will have two very different fates.

[Via]

RIM deemed halal investment for religious Muslims

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saudi-bankers

Halal is an Arabic term used to designate objects and actions which are permissible according to Islamic law. Just as Orthodox Jews will follow kosher laws, religious Muslims have a set of practices deemed acceptable by the religion.

For many religions, there exists an ethical debate about investing in companies that engage in practices that would not be acceptable for followers of the religion to practice. As an investor, you have a responsibility to earn revenue for your clients. Although, if earning that money conflicts with your religious beliefs, you might be inclined to change your investment strategy.

In response to this, Standard & Poor have introduced a sharia-compliant TSX index, looking to tap into the rapidly growing Islamic investor community in Canada and abroad.

The S&P/TSX 60 sharia index re-categorizes equities on the S&P/TSX 60 and excludes all those that do not comply with Islamic law, which is based on the Qur’an. These include companies involved with alcohol, entertainment, pork-related products, tobacco and financial services. As well, companies with certain ratios of cash, leverage, and involvement in non-compliant business activities do not qualify.

Banks are excluded because investors are not allowed to profit from interest, which is considered an unequal distribution of risk.

There are 25 companies on the new index with a combined market capitalization of $328.7 billion, or roughly 73 per cent of total Canadian equity market cap.

Commodities dominate the index, which is very closely tied to its parent. Top 10 holdings include EnCana Corp., Potash Corp. of Saskatchewan and Suncor Energy and of course, Research in Motion.

[Via]

RIM and TSX take a leap – buy your spouse something nice

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Toronto Stock Exchange

The best thing we can do in times of economic hardship is spend. Get the economy moving people! The TSX and RIM had a great day today and so should you. Buy your spouse something nice. Take that special someone out for a nice dinner. Or, better yet, buy yourself that BlackBerry Storm you’ve been craving for the past couple months. Here are the facts:

Research In Motion Ltd. (TSX:RIM), up $9.10 or 14 per cent to $73.10
TSX up 1,058.7 points or 11.7 per cent to 10,123.9

The news came shortly after President Bush announced the government would spend US$250 billion to directly buy shares in the country’s leading banks. I’m curious to see how this plays out in the long term.

(Via LondonFreePress)