Archive for 2010

and best wishes for good health and good humour in 2011.

Having said yesterday I didn’t know where share price was headed, I proceeded to predict there would be a major move either up or down once Research In Motion results were released today. Well, RIM was up $3 at one point and down $1 at another in after-hours trading, but then settled out a mere 2 per cent higher despite posting a 40 per cent improvement in profits and beating the estimate on guidance.

Not so long ago, a year or two back, such powerful results would have sent share price higher by as much as 8 per cent. These days, RIM is like Marley’s ghost, dragging the chains and lock boxes of negative comments by so many analysts.

I have no idea, unlike those analysts who purport to know everything, what the numbers will look like when Research In Motion reports third quarter earnings after the market closes tomorrow. All I know is that one side or another is going to be right and the share price is likely to make a major move up or down. The other thing I know is that things have come to a pretty pass when BusinessWeek (no stranger to bad times itself) takes to laughing at the co-CEO’s tie. What’s that got to do with anything?

Meanwhile, if you want the longest read ever on what’s right and what’s wrong with RIM, at least according to one observer, here’s the link.

Julian Assange is a hero; Julian Assange is a criminal. Those are the two schools of thought about the anarchist (we can all agree on that) who through WikiLeaks has released thousands upon thousands of documents from multiple sources. He claims all he wants is justice but what he’s done is illegal.

I’m not one of those angst-ridden writers who sees conspiracies at every turn and claims Assange is all about free speech. The video showing the Eighth Cavalry aboard an Apache helicopter killing unarmed civilians and a journalist in Baghdad is one thing, but the most recent avalanche of not-so-scintillating views by second-string foreign-service officers is little more than an embarrassment.

Some of the leaders quoted, such as King Abdullah of Jordan, sound no better. “Thank God for bringing Obama to the presidency,” says his excellency, then changes his mind and proceeds to call the president “camel poo-poo.”

Assange started out life in Australia as a hacker, worming his way into supposedly secure computers to leave behind taunting messages. All these years later, he hasn’t become any more useful to society. Releasing details about companies that make critical components for missiles just delivers new target information to terrorists.

One of the civilizing aspects of living in a democracy is consenting to keep some matters secret for a variety of agreed-upon reasons. Assange doesn’t belong, never did, and should be halted in his hacker tracks.

Everyone of a certain age can tell you exactly where they were when they heard that John F. Kennedy had been shot. I can also tell you where I was on October 23, 2000 when I heard that Mike Lazaridis had donated $100 million to launch the Perimeter Institute. Not only was it the largest philanthropic donation ever made in Canada, the money was given in mid-career, a time when most people are still clambering for the top. As if that weren’t unusual enough, his name isn’t emblazoned on the edifice like some of those deathbed donors who desire a legacy by having an atrium named after them. Plus the money created a place for scientific thought and collaboration that Mike cheerfully admits might not produce anything for fifty years, if then. Mike has since donated another $70 million and encouraged the governments of Ontario and Canada to add a total of $180 million.

The Perimeter Institute is now moving to the next phase which includes almost quadrupling the number of scientists to 300 and bringing in major endowments from the private sector. First to sponsor one of five new chairs is Bank of Montreal with a $4 million gift to be matched by a similar amount from the Institute. This chair, to be named after Sir Isaac Newton, is expected to attract a top scientist.

And all this in aid of finding tomorrow. When Mike Lazaridis was recruiting the first executive director of the Institute, Howard Burton, Mike held out his BlackBerry and said, “Look at this. This is nineteenth-century physics. Imagine what we could do with twentieth-century physics or twenty-first century physics.” Every day moves the world one step closer.

How’s my old friend Manulife doing 18 months after Donald Guloien replaced Dominic D’Alessandro as CEO? The first thing to say is that Guloien finally seems to be coming into his own. Share price has firmed up at $15, the annual investors day last week when analysts hear from senior officers went well, and the problem of hedging variable annuities seems solved – as long as equity markets don’t go into the toilet again.

Manulife badly needs this newfound stability. Share price tumbled from $40 two years years ago to $9, rose briefly to $26, fell again to $12 and now seems settled in the mid-teens. For shareholders, who for years enjoyed double-digit annual returns, this recent ride has been scary.

D’Alessandro, who was the focus of my book on Manulife published in 2009, has been blamed for the disruption because he did not insulate the company against falling equity markets. His explanation is simple: (1) who could have predicted the severity of the global crisis and (2) if insurance companies can’t invest in equities for the long haul, who can?

Unlike some successors to a corporate throne, Guloien has not bad-mouthed the ancien regime for the current situation. He has simply set out to correct it. In addition to cutting the dividend and hedging, he has also launched a multi-million dollar promotional campaign.

Moreover, the board of directors is now travelling again, most recently to Beijing, on a trip that had been postponed to save money during the down days. The event generated a positive piece in the Globe last Saturday although one unnamed analyst claimed that by the time China made any contribution to the company’s profits the analyst would be playing bingo and wearing a bib.

Meanwhile, by all reports the new boss of Manulife is having fun in his role. That’s always a good sign.

Now that Industry Minister Tony Clement has said no to the sale of Potash Corp. and BHP Billiton has withdrawn its offer, nationalists like myself should feel happy, but I don’t. Rather than a hollowing-out where a head office was moved, what we have here is a hollow victory. It feels like your team won because the other side scored in its own net during the dying seconds of the game.

Don’t get me wrong, this is the right outcome, but the wrong way to get there. Canada has the most open policy in the developed world when it comes to foreign takeovers. Since 1984 there have been more than 1,800 foreign acquisitions of Canadian companies without a peep of official protest. Then, all of sudden, this decision. A committee has been struck to draw up a better set of criteria, one that is more transparent, so everyone knows the new rules of the game. I trust that the net-benefit hurdle will be higher than it has been, otherwise Canadian ownership of entire sectors will continue to disappear as has already happened with oil and gas, mining and steel to the detriment of us all.

The inimitable CBC commentator, Larry Zolf, has in the past used a phrase on other topics that applies to the decision-making process here: ad-hockery night in Canada. We can’t always count on fluke victories.

The lateral arabesque by Jim Prentice from government to business augurs well for both worlds. The former minister of the environment will be able to guide CIBC in the ways of government and public policy without having to lobby or get anyone’s knickers in a knot over conflicts of interest, perceived or otherwise.

Prentice joins a short, but distinguished, list of senior officials and politicians who have recently made a similar leap to the private sector. Others include Frank McKenna, Kevin Lynch and David Dodge. Fewer are the wandbearers who leave business for public service. Bank of Canada Governor Mark Carney (from Goldman Sachs) and Nigel Wright (from Onex) come to mind, but there should be more. There are many aspects about U.S. politics that are not admirable, but the ability of that country to allow high-level exchanges between business and government is something Canada should emulate.

Nigel Wright’s two-year excursion into the Prime Minister’s office could cause other business leaders to spend some time in public service. His ethical wall, as he calls it, has been built. What he needs in the next few weeks is to find a policy fight he can win with his new boss, Stephen Harper. My sense of the prime minister is that he doesn’t take advice well. In order to succeed in his role, Wright needs to change that failing of past office-holders. If Wright can be seen to make a difference, others from business may also conclude that Ottawa can be a good place to combine private ambition and public duty.

Don’t they read their own paper at The Globe and Mail? Hard on the heels of the speculative October 13 story on a possible acquisition of Research In Motion, columnist Barrie McKenna revisits the same topic again this morning. I wish I could tell you he had something new to say although he did try to clothe the old idea in the context of the takeover offer for Potash Corp.

McKenna writes about how RIM is widely held, has a global brand, and makes a case for Ottawa to protect the Waterloo-based company. Yada, yada, yada. After declaring that Ottawa has to start thinking about the next big takeover, McKenna concludes, “Bombardier, Magna, Encana, RIM. There aren’t that many Canadian champions left.”

Nor, apparently, are there that many new topics available.

Last month, when Research In Motion unveiled PlayBook at the BlackBerry Developers Conference in San Francisco, there was no demo. The co-CEOs, Mike Lazaridis and Jim Balsillie, had done this sort of tapdance before. In the pre-BlackBerry days, when the then current model was called Bullfrog because it was so big, RIM came up with Leapfrog. It was much smaller, about the size of a deck of cards.

In 1997 Mike and Jim flew to Atlanta to show Leapfrog to executives at BellSouth. But all they had were two wooden models, each with a plastic screen and a pasted-on paper keyboard. You could turn the sidemounted trackwheel, but nothing happened. It didn’t matter. The grown men around the boardroom table took turns reverently holding the devices just as if they worked. BellSouth placed a $70 million order and RIM was well and truly launched.

The September audience in San Francisco  was not so easily amused. Then, yesterday, at the Adobe Developers Conference, Mike showed a real working PlayBook tablet complete with video from YouTube and other demos. “We believe the PlayBook is by far the most leading-edge BlackBerry device ever designed and the device could be a catalyst for the stock,” wrote Barry Richards, an analyst with Paradigm Capital, in a note to clients today. “With 50 million users, the device has a $20 billion potential market, even in just the BlackBerry installed base.” Richards, who has been following RIM since the days of Leapfrog, has a buy on the stock and a 12-month target price of US$105.

Mike’s demo sent RIM share price up more than 5 per cent yesterday and it’s heading higher again this morning. All of which proves in today’s world of reality TV, audiences want to see working models. The wooden ships of yore are not good enough for today’s highflyers.