Thursday, March 28, 2013

B&E This Fortnight

INTERNATIONAL

BUSINESS & FINANCERIM – CAUTIOUS

In what seems to be a Catch-22 situation, Research In Motion (RIM) announced its financial results for the quarter and fiscal year ending February 26, 2011. Net earnings for Q4, FY2010-11, showed a 32% y-o-y increase (touching $934 million or $1.78/share, on revenue of $5.6 billion). But the market was disappointed on hearing the company’s expectations from the ongoing quarter, Q1, FY2011-12. While the company forecasted bottomline of $1.47-$1.55/share on revenues of $5.2-$5.6 billion, the market was expecting a much higher $1.65/share and revenues of $5.6 billion. As a result, its Nasdaq-listed shares lost 12% to close at $57.35 on March 23, 2011. 2010 was a great year for RIM, as Blackberry became the top-selling phone in US, Canada, Latin America and UK with record shipments of 52.3 million – representing a y-o-y rise of 43%. But RIM is expecting some goods from its new PlayBook tablet, which will go on sale starting April 19, 2011. About 20,000 retailers across US & Canada will test its desirability against Apple’s newly launched iPad 2. Cost of marketing associated with its new tablet and a risk of supply chain disruption arising due to the disaster in Japan are the biggest challenges for RIM in the short term. Hence the cautious guidance for Q1, FY2011-12.

OIL PRICES – SPIKE
As unrest continues in the Middle-East, and Japan & Asia struggle with a natural disaster and nuclear radiation problems, crude oil prices have started to become a worry. The per barrel price of crude oil breached a high of $106 for the first time on March 24, 2011 – the highest in two years. While 2010 ended with the price around $90/barrel, since February 21, 2011, the price has hovered around the $105/barrel mark. Even on March 25, 2011, West Texas Intermediate (the benchmark US contract) closed at $105.60 a barrel after peaking to $106.69 during the day. The benchmark crude for delivery in May peaked to $105.77/barrel in electronic trading on the NYMEX. Portugal’s debt crisis, US’ and China’s growing hunger for oil are among other factors that have contributed to this spike. Crude prices have jumped 25% since protests against Libyan leader Muammar Gaddafi began in mid-February and shut down most of the country’s 1.6 million barrels daily crude output. Experts claim that if all oil production is ceased in Libya, Bahrain and Yemen, prices could spike to $125 a barrel. Surely, this is an optimistic figure.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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