Apple IPhone 5 Pre-Orders Top 2 Million, Doubling Record

By Ryan Faughnder and Adam Satariano - Sep 18, 2012 2:12 AM GMT+0700

 Apple Inc. (AAPL) said advance sales of its iPhone 5 topped 2 million units in one day, more than double the record set by the previous model of the device.

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The new iPhone 5 during an Apple special event in San Francisco. Photographer: Justin Sullivan/Getty Images

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Sept. 17 (Bloomberg) -- Christopher Grisanti, founding partner at Grisanti Capital Management, talks about investment strategy and the outlook for Apple Inc. Grisanti speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)

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Sept. 17 (Bloomberg) -- Brian White, an analyst at Topeka Capital Markets, talks with Bloomberg's Betty Liu about the pre-orders for Apple's iPhone 5. They speak on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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Sept. 17 (Bloomberg) -- Apple Inc. said pre-orders of its iPhone 5 topped 2 million units in one day, more than double the sales record set by the previous model of the device. Betty Liu reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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Sept. 17 (Bloomberg) -- Dominic Chu reports on Apple's stock valuation. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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Sept. 17 (Bloomberg) -- A handful of people have begun camping out in front of Apple Inc.'s Fifth Avenue store on New York in anticipation of iPhone 5, which goes on sale in retail stores on Sept. 21. (Source: Bloomberg)

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People camp out in front of an Apple store in New York on Monday. Photographer: Peter Foley/Bloomberg

Because demand for the iPhone 5 exceeds the initial supply, some of the smartphones will be shipped to customers in October, Cupertino, California-based Apple said today in a statement. Most orders will be delivered on Sept. 21, the same day the handset arrives in U.S. retail outlets, Apple said.
“Clearly it’s a blowout,” said Brian White, an analyst at Topeka Capital Markets in New York, in an interview. He had anticipated sales of 1.3 million to 1.5 million units in the first 24 hours and up to 12 million by the end of the month. “These estimates look conservative.”
Apple gained 1.2 percent to $699.78 at the New York close and traded as high as $700.44, a record, in extended trading.
The iPhone is Apple’s best-selling product, making up about two-thirds of its profit. The company’s entry into the smartphone market in 2007 resulted in sales of 244 million iPhone units as of June and helped Apple become the world’s most valuable company. The new model, unveiled last week in San Francisco, has a bigger screen, light-weight body design, faster chip and new software features.

Shattered Record

“IPhone 5 pre-orders have shattered the previous record held by the iPhone 4S and the customer response to the iPhone 5 has been phenomenal,” said Philip Schiller, Apple’s senior vice president of global marketing, in the statement.
Apple is vying with Samsung Electronics Co. and other smartphone manufacturers for customers in a global market that grew 79 percent to $219.1 billion last year. Samsung, which releases several handsets a year using Google Inc. (GOOG)’s Android operating system, was the world’s biggest seller of smartphones in 2011. By contrast, Apple releases only one iPhone a year, resulting in pent-up demand.
AT&T Inc. (T), the largest U.S. phone company, said its customers ordered a record number of the iPhone 5. Subscribers ordered more of the new model than any previous iPhone both on its first day of advance sales and during the weekend, AT&T said in a statement today, without providing details.
With so much demand, production bottlenecks may curb how many iPhones Apple can sell, said Ben Reitzes, an analyst at Barclays Capital Inc. The new touch-screen glass technology for the iPhone 5 is one of the biggest potential sources of supply constraints, he said.
“We still believe Apple is facing significant production constraints,” Reitzes said in note to clients today. Manufacturing delays could postpone some purchases until later this year or early 2013, he said.
From October to December, Apple may sell 50 million iPhones, said Mike Walkley, an analyst at Canaccord Genuity Inc. The new iPhone hits stores this week in the U.S., Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the U.K. It goes on sale in 22 more countries on Sept. 28.
“It’s pretty clear there was a lot of pent-up demand for the new phone,” Walkley said in an interview.
To contact the reporters on this story: Ryan Faughnder in New York at rfaughnder@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Reaches $700 as IPhone 5 Shatters Sales Record

By Adam Satariano and Ryan Faughnder - Sep 18, 2012 3:47 AM GMT+0700

Peter Foley/Bloomberg

People in line at the Apple Inc. store on Fifth Avenue in advance of the sale of the iPhone 5 in New York, on Sept. 17, 2012. The iPhone 5 is expected to go on sale at stores on Sept. 21.

Apple Inc. (AAPL) surpassed $700 in late trading after announcing record first-day orders for the latest iPhone, fueling optimism that the company will keep generating the revenue growth that transformed it from a niche computer manufacturer into the world’s most valuable business.

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Apple Inc. shares surpassed $700 in late trading after announcing record first-day orders for the latest iPhone. Photographer: David Paul Morris/Bloomberg

Shares climbed as high as $700.44 after reaching a record $699.78 at the close in New York. The stock has advanced 73 percent this year.
The iPhone 5, which features a bigger screen, faster chip and a lighter body, sold 2 million units in first-day orders, more than double a record set by the previous model, Apple said. Since its 2007 debut, the device has become Apple’s top-selling product, accounting for about two-thirds of profit. Signs of robust demand reinforced expectations that Apple will withstand accelerating competition from Samsung Electronics Co. (005930) and Google Inc. (GOOG) in the $219.1 billion smartphone market.
“It leaves me in awe,” said Rex Ishibashi, chief executive officer of Callaway Digital Arts Inc. (2326), which develops games for the iPhone. “It’s reflective of how important these devices and these digital technologies have become in our lives.”
Apple’s surge gathered steam Sept. 14, after it began taking orders for iPhone 5. Apple’s website said new orders wouldn’t ship until Sept. 28, a week after the handset is due in stores, an indication that supply may be running thin.
“The initial batch is sold out,” Shaw Wu, an analyst at Sterne Agee & Leach Inc., said in an interview. He raised his sales estimate for the quarter ending in September to 26 million units, from 23 million. “We think that could turn out to be conservative.”

Exxon, Microsoft

Apple surpassed Exxon Mobil Corp. to become the biggest company in the world by market capitalization last year after overtaking Microsoft Corp. (MSFT) as the most valuable technology company in 2010. Before his death in October, co-founder Steve Jobs mastered a strategy of pushing Apple beyond its core business of selling computers into new markets, including digital music and mobile phones. Each new family of products helped the company boost revenue while inducing investors to snap up more shares.
Revenue increased to $35 billion in the June quarter from $1.73 billion in the last quarter before Jobs returned to Apple in 1997. Apple’s shares crossed the $600 threshold in July, after passing $500 in February and $400 last year.
IPhone sales last quarter alone reached $16.2 billion, 33 percent higher than Google Inc.’s total and almost as much as Microsoft Corp.’s $18.1 billion in revenue.

58 Million

As many as 58 million units of the iPhone 5 may sell by the end of the year, according the average estimate of analysts surveyed by Bloomberg. That could generate as much as $36.2 billion in sales for Apple.
Apple has grown adept at keeping existing customers and drawing new ones through incremental improvements to the hardware and software of its products while also cultivating a developer community that cranks out thousands of applications for use on the company’s phones and computers, said Dan Morris, chief investment officer at Morris Capital Advisors, whose largest holding is Apple.
The company’s shares are also getting a boost from a legal victory in August, when a jury said Samsung copied the iPhone. The outcome of the California trial may result in a ban on certain Samsung phones in the U.S., and it ratchets up pressure on Apple competitors to make their products less like the iPhone and iPad.

TV Challenges

Gains in coming months will hinge on the success of future products, such as a smaller version of the iPad tablet, which according to people with knowledge of the matter, will be released in October. Apple is also trying to make headway with products that let users view TV shows and movies on Apple devices. Yet the company has struggled to come to terms with communications providers over how products will be crafted, and media companies have been reluctant to cede control over content and customer relationships.
“That may be a tough market for them,” Morris said.
For now, the share rally is poised to continue, according to analysts who, on average, are predicting that Apple will rise to about $773 in the coming 12 months, data compiled by Bloomberg show.
To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Ryan Faughnder in New York at rfaughnder@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Reaches Record U.S. Market Value on IPhone Optimism

By Adam Satariano - Aug 21, 2012 11:01 AM GMT+0700

Dale de la Rey/AFP/Getty Images

An Apple store in Hong Kong.

Apple Inc. (AAPL) set a U.S. record for market value yesterday, surpassing the high mark reached by Microsoft Corp. (MSFT) during the Internet heyday, on optimism the next version of the iPhone will meet strong demand.

The shares of Cupertino, California-based Apple rose 2.6 percent to $665.15 at the close in New York, for a market value of $623.5 billion. That overtook Microsoft’s $616.3 billion closing market capitalization on Dec. 27, 1999, according to data compiled by S&P Dow Jones Indices LLC.

Apple is preparing to introduce the next version of the iPhone on Sept. 12 in what will be a design overhaul of its top- selling product, two people with knowledge of the company’s plans said last month. The next iPhone “could be the most impactful product upgrade in Apple’s history” and the company will probably sell as many as 250 million units over the life of the device, according to analysts at FBR Capital Markets.

“With the iPhone they have successfully created a strong customer following in an absolutely enormous marketplace,” Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co., said yesterday. “They have captured the hearts and minds of consumers.”

Apple gets about 70 percent of its profit from the iPhone, Sacconaghi said. The company’s stock has risen an average of 11 percent in the two months before previous iPhone updates have been released, he said.

The new iPhone will have a larger screen and thinner body, and is expected to work with faster, long-term evolution wireless networks being introduced by carriers such as Verizon Wireless and AT&T Inc. (T), according to analysts including Piper Jaffray Cos. (PJC)’ Gene Munster.

Smaller IPad

In addition to the iPhone, Apple also plans to introduce a smaller, cheaper iPad by the end of this year, people familiar with the plans said in July.

Apple, already the world’s most valuable company, has surged more than sevenfold since the iPhone debuted in January 2007. The stock has climbed 64 percent this year.

Because Microsoft’s record was set during the Internet boom, when valuations were inflated by predictions that later failed to materialize, a more significant long-term milestone would be if Apple’s market value tops $1 trillion, David Yoffie, a Harvard Business School professor who has written about Apple, said in an interview yesterday.

“We’re in a period now of much more normalcy, which makes Apple’s accomplishments even more impressive,” Yoffie said.

‘Easily Justified’

While the popularity of the iPhone and iPad make it possible that Apple might surpass that $1 trillion mark, it can be difficult for technology companies to sustain a run of successes like Apple has had over the past decade, he said.

“It doesn’t take much to miss a cycle,” Yoffie said. “Right now this valuation is premised on iPhone 5 and a new smaller iPad coming out, and if these are very good or great products then the valuation will be easily justified. If for any reason they have a hiccup on any of these products, then Apple would be vulnerable.”

PetroChina Co. became the world’s first company to be valued at $1 trillion, when the shares almost tripled on its first day of trading in Shanghai in 2007.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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RIM Customers Working on Contingency Plans

By Scott Moritz and Olga Kharif - Jul 10, 2012 3:21 AM GMT+0700

Research In Motion Ltd. (RIM) customers from GoDaddy Group Inc. to asset manager Thames River Capital UK Ltd. are preparing for the worst: the loss of the BlackBerry service their employees depend on to communicate.

RIM’s stock has slumped more than 70 percent in the past year, and tumbled 19 percent on June 29 after the company posted a quarterly loss and delayed the BlackBerry 10 operating system, increasing the pressure on RIM to find a buyer or sell assets. While RIM has built infrastructure to ensure continued service, some customers are devising backup plans as RIM prepares to face shareholders at its annual meeting tomorrow.

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Corporate customers, the backbone of RIM’s business, are fortifying contingency plans so they won’t be affected by a possible breakup of BlackBerry-maker Research In Motion Ltd., or other setbacks. Photographer: Simon Dawson/Bloomberg

“In the past three months there’s been a lot of concern that the BlackBerry platform won’t be around in the future,” said Maribel Lopez, founder of Lopez Research, a wireless- industry consultant based in San Francisco. “It’s not unheard of for a large phone manufacturer to go out of business.”

Corporate customers, the backbone of RIM’s business, are fortifying contingency plans so they won’t be affected by a possible breakup of the BlackBerry-maker or other setbacks. With millions of employees connecting to the office through mobile e- mail, companies have been eager to establish a fallback or replacement plan, said Avi Greengart, a technology research director at Current Analysis.

Thames River Capital supplies about 140 of its 170 employees with smartphones, most of them BlackBerrys, said Robert Cockerill, head of infrastructure at the London-based money manager. With the delay of BlackBerry 10 and a service contract with RIM expiring this year, Cockerill said he expects much of his staff to switch to Apple Inc.’s (AAPL) iPhone or devices based on Google Inc.’s Android platform.

Service Disruption

Cockerill has brought in MobileIron Inc., a Mountain View, California-based developer of software that helps companies manage and protect data on mobile devices and tablets. MobileIron provides security for Thames River Capital including encryption and password protection for non-BlackBerry devices such as iPads, he said.

Thames River Capital is preparing for scenarios where BlackBerry service may be shut down, disrupted, or if a competitor such as Microsoft Corp. (MSFT) acquires RIM and converts the operating system to its Exchange e-mail service, he said.

“There is a risk of RIM getting bought,” Cockerill said in an interview. “But if you have the right support you can be agnostic and it won’t really matter.”

MobileIron Chief Executive Officer Bob Tinker said his customer list includes 100 Fortune 500 companies, and about a quarter of those customers are financial services firms.

Embrace Innovation

“Large enterprises don’t want to be locked in with a single vendor anymore,” Tinker said in an interview. Customers want to embrace all the innovation in mobile and RIM’s delay of BlackBerry 10 doesn’t help that, he said.

“CIO’s are now asking us: ‘What do we do if RIM gets acquired or if they restructure,’” said Tinker.

Norton Rose LLP, a law firm with 6,000 BlackBerry-equipped employees, is using MobileIron’s software to support iPhones and iPads, which were given to some staff members as secondary devices, said Vlad Botic, group enterprise architect at the London-based firm.

Botic, who said Norton Rose would like to continue using BlackBerrys, began exploring alternatives last year after the three-day BlackBerry outage that caused users around the world to lose data services amid a network failure.

“RIM isn’t in a good position right now,” Botic said in an interview. “The problem with BlackBerry, which was highlighted when the service went down, was that the only way to solve it is with an entirely new device.”

‘Significant Outage’

While the chance of BlackBerry service getting shut down is slim, Botic said he has scheduled a meeting with RIM this week to seek assurances that there won’t be a disruption in the event of a takeover.

GoDaddy, an Internet domain-name and hosting company, could switch users to iPhone or Android devices “within hours,” said Auguste Goldman, chief infrastructure officer at the Scottsdale, Arizona-based company.

In the event of a “significant outage” for BlackBerry devices, GoDaddy has a plan to migrate users to other platforms, Goldman said in an interview.

“The BlackBerry infrastructure and services are among our most valuable assets,” said Nick Manning, a spokesman for Waterloo, Ontario-based RIM. “BlackBerry customers depend on our robust network and they can continue to depend on it going forward.”

RIM shares fell 5.3 percent to $7.67 at the close in New York.

iPhone, Android

Six staffers at Nationwide Mutual Insurance Co. first began planning for the possibility of a disruption in BlackBerry service last year. To prepare, Nationwide retained Good Technology Inc., whose software for servers and phones can provide secure corporate e-mail and calendar services to iPhones and Android devices.

“You could see that RIM started to decline,” Robert Burkhart, director of new technology innovation at Nationwide, said in an interview.

Today, the number of BlackBerrys Nationwide associates use is down to 7,000 from about 8,500 a year ago, while the number of non-BlackBerry devices used has risen from zero to 4,450, Burkhart said.

“We are well on our way to having a dual environment, so if RIM did go out, we’d be okay,” Burkhart said. “If people are starting contingency plans now, they are behind the eight ball. They should have been looking at this all along.”

Good Technology, which works with 4,000 corporate customers worldwide, including eight of the top 10 financial services companies, has seen an inflow of customers concerned about RIM’s prospects and making contingency plans.

Contingency Plans

“We’ve had two meetings this month with large financial services firms on this topic,” Brian Carr, senior vice president of worldwide sales at Sunnyvale, California-based Good Technology, said in an interview. “In the last year, I talked with half of Fortune 100 companies, and it’s a concern for all of them. Every single one of them is looking at contingency plans.”

The concerns are prompting many companies to speed up their transition from BlackBerries to other types of mobile devices, Carr said.

RIM has struggled to keep up with Apple’s iPhone and devices based on Google’s (GOOG) Android platform. Last month, RIM said it would cut 5,000 jobs and posted a quarterly loss that was five times bigger than projected. Sales last quarter plunged 43 percent as RIM’s share of the global smartphone industry fell by more than half to 6.4 percent in the first three months of the year, according to research firm IDC.

BlackBerry Migration

“RIM’s situation is dire, but even in a worst-case scenario, RIM’s servers aren’t likely to get turned off anytime soon,” said Current Analysis’s Greengart. “Still, IT managers are looking more seriously at alternatives to BlackBerry. There’s a whole industry ready to provide security and management around Apple and Android,” he said.

The migration from BlackBerrys started two years ago for Ken Lawonn, senior vice president of strategy and technology at Alegent Health, an Omaha, Nebraska-based health-care provider.

The shift was prompted by user preferences, rather than concerns about the future of RIM, said Lawonn who uses Good Technology’s software. The number of Alegent’s 300 smartphone users with BlackBerrys has shrunk to 10 percent from about 50 percent two years ago, he said.

“Should something occur, we believe that’s going to be a fairly easy transition,” Lawonn said. “If my BlackBerry broke down, I’d look at the options, and if a BlackBerry wasn’t available, I’d pick up an iPhone and be on my way.”

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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Amazon Said to Plan Smartphone to Vie With Apple IPhone

By Tim Culpan, Olga Kharif and Ashlee Vance - Jul 7, 2012 3:30 AM GMT+0700

Amazon.com Inc. (AMZN) is developing a smartphone that would vie with Apple Inc. (AAPL)’s iPhone and handheld devices that run Google Inc. (GOOG)’s Android operating system, two people with knowledge of the matter said.

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Seattle-based Amazon considered buying wireless patents from InterDigital Inc. before the King of Prussia, Pennsylvania- based company said in June that it will sell the assets to Intel Corp. for $375 million. Photographer: Chris Ratcliffe/Bloomberg

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July 6 (Bloomberg) -- Victor Anthony, an analyst at Topeka Capital Markets Inc., talks about a possible Amazon.com Inc. smartphone. Amazon.com is developing a device that would vie with Apple Inc.'s iPhone and handheld devices that run Google Inc.'s Android operation system, two people with knowledge of the matter said. Anthony speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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A smartphone would give Amazon a wider range of low-priced hardware devices that bolster its strategy of making money from digital books, songs and movies. Photographer: Chris Ratcliffe/Bloomberg

Foxconn International Holdings Ltd. (2038), the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said.

A smartphone would give Amazon a wider range of low-priced hardware devices that bolster its strategy of making money from digital books, songs and movies. It would help Chief Executive Officer Jeff Bezos -- who made a foray into tablets with the Kindle Fire -- carve out a slice of the market for advanced wireless handsets. Manufacturers led by Samsung Electronics Co. and Apple shipped 398.4 million smartphones and other mobile devices in the first quarter, according to researcher IDC.

Drew Herdener, a spokesman for Amazon, declined to comment.

Mark Mahaney, an analyst at Citigroup Inc., said in November that Amazon is planning to release a smartphone.

Seattle-based Amazon considered buying wireless patents from InterDigital Inc. before the King of Prussia, Pennsylvania- based company said in June that it will sell the assets to Intel Corp. for $375 million, two people said. Amazon is taking pitches and setting up briefings with other sellers, the people said.

Patent Protection

Amazon slipped less than 1 percent to $225.05 at the close in New York. Foxconn gained 3.7 percent in Hong Kong.

Amazon beefed up its patent prowess recently by hiring Matt Gordon, formerly senior director of acquisitions at Intellectual Ventures Management LLC, the company that was founded by former Microsoft Corp. Chief Technology Officer Nathan Myhrvold and owns more than 35,000 intellectual property assets. Gordon will be general manager for patent acquisitions and investments at Amazon, according to his profile on LinkedIn.

Adding patents would help Amazon protect itself against lawsuits alleging illegal use of technology. Amazon has been involved in five patent-related cases this year, and 20 cases last year, according to data compiled by Bloomberg.

Demand for mobile patents has increased, as shown recently by Google’s $12.5 billion acquisition of Motorola Mobility Holdings Inc. and its thousands of patents, which closed this year.

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net; Ashlee Vance in San Francisco at avance3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Apple Said to Pick AutoNavi to Offer IPhone Maps in China

By Mark Lee - Jul 6, 2012 3:27 AM GMT+0700

In most of the world, Apple Inc. (AAPL) and Google Inc. (GOOG) are in an escalating battle to rule smartphone maps. In China, they’ve found a common friend they can’t live without.

Apple has selected AutoNavi Holdings Ltd. (AMAP) as a partner for maps on future iPhones and iPads in China, said two people with knowledge of the matter, who asked not to be identified before an announcement. The Beijing-based maps company has worked with Google since 2006.

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After using Google Maps on the iPhone and iPad for years, Apple in June introduced its own mapping service for the next version of the software running its mobile devices. Photographer: Nelson Ching/Bloomberg

Apple’s decision gives AutoNavi a leg up against its chief rival, NavInfo Co. (002405), which works with Baidu Inc., Nokia Oyj, and Toyota Motor Corp. The two Chinese companies are locked in a tight competition: AutoNavi, which also works with Microsoft Corp. (MSFT) and Samsung Electronics Co. (005930), had 45 percent of China’s mobile map data market in the first-quarter, versus 43 percent for NavInfo, according to researcher Analysys International.

“When Apple comes into China, they want to choose the best map they can, and lo and behold, they choose AutoNavi,” said Jake Lynch, who rates AutoNavi a buy at Macquarie Group Ltd. in Shanghai. “By getting onto all the new iPhones and iPads, AutoNavi will be increasing their users pretty dramatically.”

Mobile e-commerce in China will generate 305 billion yuan ($48 billion) of transactions annually by 2015, 26 times the value last year, and about 20 percent of the market will rely on location-based technology, industry analyst iResearch estimates. Mobile marketing may jump 10-fold to 24.5 billion yuan a year, more than one-fifth of which will use technology that matches merchants with consumers based on their whereabouts, according to iResearch.

Google Bumped

After using Google Maps on the iPhone and iPad for years, Apple in June introduced its own mapping service for the next version of its mobile-device software. In China, owners of those devices will use AutoNavi’s map service and data instead of Apple’s. Beta, or test, versions of the software show AutoNavi’s logo on maps.

Just a dozen companies -- all of them Chinese -- have licenses for collecting map survey data. That means Apple, Google, and other foreigners need local partners such as AutoNavi or NavInfo to make their maps, according to Yan Xiaojia, an analyst at Analysys.

Advertising Revenue

Apple’s change from Google Maps will hurt mobile advertising sales at the search-engine company, said Nancy Shen, an analyst at iResearch. About a third of Google Map users in China currently access the service via Apple devices, Analysys estimates.

Helen Zhu, an investor relations manager at AutoNavi in Beijing, declined to comment on the company’s business with Apple. Carolyn Wu, a spokeswoman at Apple in Beijing, declined to comment on the company’s mobile map service in China.

Google seeks to “build the perfect map for our users in the months and years ahead,” the company said in an e-mailed statement, declining to comment on its maps service in China.

AutoNavi’s digital mapmaking business started with its car navigation products. The company, like Google, has a fleet of specially outfitted vehicles to take photos and uses satellite and infrared imaging to capture data for its maps.

Chairman Jun Hon, a former official at the Beijing Municipal Public Security Bureau, co-founded AutoNavi in 2002 with Chief Executive Officer Congwu Cheng to make car navigation systems. The company obtained a surveying and mapping license in 2004 to provide digital maps data.

Market Share

In 2010, AutoNavi set up a map venture in China with TomTom NV. (TOM2) Last month, the Amsterdam company said it signed an agreement to supply map content to Apple.

NavInfo maps data were installed on more than 37 million handsets at the end of last year, the company said in an e-mail. NavInfo said it also supplies data for devices made by Samsung, Motorola Mobility, and Sony Corp.

By comparison, AutoNavi had 52 million users for its mobile maps app at the end of March, according to its first-quarter report.

Spending to expand mobile mapping has crimped earnings at AutoNavi. The company’s first-quarter profit fell 16 percent to $8.9 million as operating expenses and research-and-development costs increased.

Shares Climb

AutoNavi fell 2.4 percent to $12.95 at the close in New York yesterday, compared with the $21.50 share price estimate by Lynch. The stock has gained 29 percent this year, compared with a 7.8 percent advance in the Amsterdam-traded shares of partner TomTom, and a 29 percent drop for Shenzhen-listed NavInfo.

AutoNavi is diversifying into technology for consumer devices more quickly than NavInfo, according to Hu Jiaming, an analyst at Capital Securities Corp. in Shanghai.

“NavInfo is still much more focused on its auto division,” Hu said. “Some of the company’s partners in mobile maps, such as Nokia, are not doing too well.”

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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Sun Valley Mogul Gathering Includes Buffett, Zuckerberg

By Edmund Lee - Jul 6, 2012 3:55 AM GMT+0700

Billionaires Warren Buffett and Bill Gates as well as Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg are scheduled to join media executives gathering at Allen & Co.’s conference next week in Sun Valley, Idaho, according to a guest list obtained by Bloomberg News.

Google Inc. Chairman Eric Schmidt, Twitter Inc. CEO Dick Costolo, Amazon.com Inc. CEO Jeff Bezos and Apple Inc. CEO Tim Cook are among those invited to attend. Technology investors Marc Andreessen and Peter Thiel are also on the list.

The exclusive gathering, sponsored by investment bank Allen & Co. since 1983, offers executives the opportunity to strike new deals, or in the case of Newark, New Jersey, Mayor Cory Booker, the chance to recconnect with Zuckerberg, whom he met last year. Zuckerberg donated $100 million to Newark schools. Booker is scheduled to attend this year, as is New York City Mayor Michael Bloomberg, the founder of Bloomberg News parent Bloomberg LP.

Buffett, who attended last year, has been acquiring newspapers, betting that community-focused publications will weather an advertising slump.

News Corp. (NWSA) CEO Rupert Murdoch, who recently announced a plan to spin off his company’s publishing division, is expected to attend, along with his sons Lachlan and James. News Corp. chief operating officer Chase Carey and Joel Klein, the former Justice Department lawyer who now heads up the company’s education division, are also invited.

New Attendees

Activision Blizzard Inc. CEO Bobby Kotick is also invited to attend. Vivendi SA recently announced it’s seeking a buyer for its $8.1 billion stake in the video-game maker.

New attendees may include Yahoo Inc.’s interim CEO Ross Levinsohn and Akamai Technologies Inc. CEO Paul Sagan, who was recently in contention to lead the New York Times Co.

The agenda and guest list for the conference aren’t made public. While the press isn’t typically invited to attend the closed-door events, reporters stay in Sun Valley to talk with the executives.

Mandy Tavakol, executive director of the Allen & Co. conference, didn’t immediately respond to a phone call seeking comment.

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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RIM Cutting Carrier Fee Shows ‘Spiral’ Concern

By Ari Altstedter and Hugo Miller - Jul 5, 2012 3:30 AM GMT+0700

Research In Motion Ltd. (RIM), the BlackBerry maker whose stock has dropped 95 percent since 2008, is under pressure from mobile phone companies to reduce carrier fees that generate $4.09 billion in annual revenue.

RIM said it faces demands to cut the fees paid by customers such as AT&T Inc. after posting its first loss in a decade last week. The fees account for more than a third of revenue at RIM, which is racing to introduce BlackBerry 10 phones and engineer a turnaround.

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RIM plunged 19 percent on June 29 after posting its first loss in a decade. Photographer: Nelson Ching/Bloomberg

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RIM Chief Executive Officer Thorsten Heins said yesterday, “This company is not ignoring the world out there, nor is it in a death spiral.” Photographer: Peter Foley/Bloomberg

“There’s definitely negotiations going on right now to reduce” the fees if the company has acknowledged its concern, said Sameet Kanade, a technology analyst at Northern Securities.

Kanade, who rates RIM a sell, estimates revenue from the monthly fee could drop 17 percent to $3.4 billion this year and another 18 percent to $2.8 billion in fiscal 2014 as carriers such as AT&T (T) and Verizon Wireless seek lower fees amid the company’s diminishing clout. RIM is the only handset maker to charge such a fee.

RIM levies the fees to carriers for subscriber access to its BlackBerry server infrastructure. As wireless operators face customers’ requests for reduced monthly charges, it becomes harder for those carriers to pass on the subscriber fee, said Kanade at Northern Securities in Toronto.

Spokespeople for AT&T and Verizon Wireless, BCE Inc. (BCE) and Rogers Communications Inc. (RCI/B), the two largest carriers in the U.S. and Canada respectively, declined to comment on the nature of any discussions they hold with RIM.

“RIM intends to continue generating a revenue stream from the services we offer,” said Nick Manning, a spokesman for Waterloo, Ontario-based RIM. He declined to elaborate on any requests for fee reductions cited by the company in last week’s earnings release.

Still Growing

Lower service fees in emerging markets, where RIM is increasingly reliant for growth as U.S. sales tumble, also pose a threat to business margins, said Kanade.

For now, it’s still a growing part of the business as RIM’s subscriber numbers rise, helped by increasing sales in markets such as Indonesia and South Africa. Revenue from those fees and other services climbed 4.1 percent last quarter from a year earlier as device sales plunged 57 percent. That lifted services’ share of total revenue to 36 percent last quarter from 20 percent the year before.

The fee revenue is expected to drop to $2.7 billion in fiscal 2014 and $2.3 billion in fiscal 2015, according to another estimate from Sanford C. Bernstein Ltd. analyst Pierre Ferragu.

While that may still give RIM enough cash to last two years, that doesn’t mean the company can afford to burn through its reserves, Kanade said.

Burning Cash

“Devices are definitely burning cash at a rapid rate,” said Neeraj Monga, an analyst at Veritas Research in Toronto. “They need to have the services business continue to give them cash so they can maintain their flexibility.”

Monga, who rates RIM a sell, said RIM may run out of cash by May if the new phone hasn’t launched by then, as hardware losses overwhelm shrinking service revenue.

“April, May of next year could be a time of reckoning for RIM,” he said. “It’s a race between what comes first: BB10, zero cash balance or an acquisition.”

RIM Chief Executive Officer Thorsten Heins said the BlackBerry maker isn’t in a “death spiral” as it works to deliver the new phone in 2013.

“The way I would describe it, we’re in the middle of a transition,” Heins said yesterday in a Canadian Broadcasting Corp. radio interview. “This company is not ignoring the world out there, nor is it in a death spiral.”

Delayed Release

RIM plunged 19 percent on June 29 after posting its first loss in a decade, delaying the release of a new phone it’s counting on to revive slumping sales and cutting 5,000 jobs. While the company said it had $2.2 billion in cash at the end of last quarter, Chief Financial Officer Brian Bidulka warned that number could drop if the company has to further restructure.

RIM has dropped 95 percent from its mid-2008 peak, cutting its market value to less than $4 billion. That makes the company’s cash reserves worth more than half its current market value. The stock closed unchanged at C$7.44 in Toronto. ‘As some pundits write RIM’s obituary, the company’s global subscriber base continues to grow to more than 78 million people in 175 countries,’’ Heins wrote in an editorial posted yesterday on the Globe and Mail’s website. He pointed out that RIM has no debt and more than $2 billion in cash.

“The facts about RIM’s business provide reason to believe that we can succeed, even as we take painful but necessary steps to focus our resources and build a lean, nimble organization focused intently on bringing BlackBerry 10 to market.”

Hires Bankers

The BlackBerry maker in May hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help evaluate options and has not ruled out a sale of the company. In the CBC interview, Heins said the company is “looking into all options. At the end of the day it’s about creating long-term shareholder value.”

RIM’s introduction of BB10 has been delayed by what Heins has said is the volume of software code that needs to be created for the platform that will run future BlackBerrys and its PlayBook tablet. RIM last week postponed the release of the first BB10 phone to the first quarter of 2013, a delay of a year from when the device was first planned to come into the market.

RIM may also need its cash for the BB10 release, which analysts increasingly see as a long-shot to get RIM to compete with Apple Inc. (AAPL)’s iPhone and devices built on Google Inc. (GOOG)’s Android platform. All of that means they can’t afford a sizable drop in services revenue, said Anil Doradla, an analyst at William Blair Co. in New York.

The drop over the next two quarters of services revenue “will not be so severe that they just have to stop their phone business,” said Doradla, who rates RIM the equivalent of a hold. “But it’s not going to be pretty.”

To contact the reporters on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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Apple Said to Plan Smaller IPad to Vie With Google Nexus

By Peter Burrows and Adam Satariano - Jul 5, 2012 11:01 AM GMT+0700

Apple Inc. (AAPL) plans to debut a smaller, cheaper iPad by year-end, two people with knowledge of the plans said, to help maintain dominance of the tablet market as Google Inc. (GOOG) and Microsoft Corp. (MSFT) prepare competing handheld devices.

The new model will have a screen that’s 7 inches to 8 inches diagonally, less than the current 9.7-inch version, said the people, who asked not to be identified because Apple hasn’t made its plans public. The product, which Apple may announce by October, won’t have the high-definition screen featured on the iPad that was released in March, one of the people said.

Enlarge image

Hugo Barra, director of product management at Google Inc., with the Nexus 7 tablet during the Google I/O conference in San Francisco on June 27, 2012. Photographer: David Paul Morris/Bloomberg

A smaller, less expensive iPad could undercut the ambitions of Google, Microsoft and Amazon.com Inc. (AMZN) to gain traction in the advancing tablet market, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. The new device will probably have a price closer to Google’s Nexus 7 tablet and Amazon’s Kindle Fire, both of which have 7-inch screens and cost $199.

“It would be the competitors’ worst nightmare,” Wu said in an interview. “The ball is in Apple’s court.”

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment yesterday.

Since the iPad went on sale in April 2010, Apple has dominated the tablet market, which is predicted by DisplaySearch to reach $66.4 billion this year. Apple has 61 percent of the market, according to Gartner Inc.

Apple’s rivals are eager to gain a toehold. Google said on June 27 that it will sell a tablet-style device called the Nexus 7. Earlier in the month, Microsoft announced a tablet called Surface that will have a similar screen size as the current iPad. Amazon’s Kindle Fire was released last year.

Google Strategy

The entrants’ best chance of success has been to focus on markets where Apple had no toehold, said Jan Dawson, an analyst at Ovum Ltd. The Surface comes in two models that are most likely to appeal to buyers who want to continue using Microsoft’s Windows software, Dawson said. While Microsoft has not disclosed pricing or timing for either, the higher-end version will probably be pricier than the iPad and targeted more at an emerging class of laptop PCs called Ultrabooks, he said. The latest iPad ranges in price from $499 to $829.

Google’s Nexus 7 could stack up well against Amazon’s Kindle Fire, which went on sale in November. The Nexus 7, manufactured by Asustek Computer Inc. (2357), has a faster processor and better battery life than the Kindle Fire, as well as a front-facing camera.

Still, competing with a lower-priced iPad will be more challenging, Wu said. Apple benefits from having more than 225,000 apps that have been tailored specifically for the current iPad.

Apple Retail

The company also boasts more than 360 retail stores where the device can be purchased and tested by consumers. Google said the Nexus 7 will be available only from its online store, while Microsoft will sell its tablets online and at its smaller chain of 20 stores.

Apple has considered introducing a smaller tablet since the original iPad was released, one person said. That approach has worked for Apple’s iPod, which is the world’s top music player and comes in various sizes and colors.

Yet Apple co-founder Steve Jobs spoke skeptically of smaller tablets before his death in October. He said in 2010 that the iPad’s current size was the minimum required to ensure a good user-experience and enable attractive software applications.

The screen of the small model will have the same number of pixels as those in the iPad before it was upgraded to the so- called Retina Display earlier this year, one person said.

Fatter Margins

Apple also may be at an advantage profit-wise. The gross margin on the latest iPad is about 37 percent, according to Wu. Apple could earn a similar profit on a smaller iPad because it will probably use the cheaper screen, Wu said. Apple can also charge more for the device without sacrificing sales, he said.

“This isn’t like the old days, when it cost thousands of dollars more to buy an Apple product,” Wu said. “Fifty or a hundred bucks wouldn’t be enough to make someone switch.”

Amazon, by contrast, loses money on every Kindle Fire it sells, with the aim of profiting from sales of books and other digital media. At the $199 price of the Nexus 7, Google’s plan should be to break even on the hardware, in exchange for the opportunity to win advertising and related revenue, said Michael Gartenberg, an analyst at Gartner Inc.

Apple’s plans to release a smaller sized iPad were reported previously in blogs, including DigiTimes.

Microsoft’s Stakes

The stakes are high for Microsoft and Google to succeed at hardware sales. Both companies have risked alienating long-time hardware partners, such as Samsung Electronics Co., by selling their own tablets, Gartenberg said.

“How does Samsung make money in tablets, when Google is partnering with Asus to make a product that makes no money?” he asked.

A failure to gain traction with the Nexus 7 and Surface, respectively, might also undermine the credibility of Google’s Android strategy and of Microsoft’s introduction of the next version of the Windows operating system, Wu said. If Google and Microsoft can’t make a must-have product around their own software, consumers may be harder to convince that hardware manufacturers could do it, he said.

“They’re really sticking their necks out this time, putting their own brands on this front and center,” Wu said.

To contact the reporters on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Here Comes Nexus 7 Nightmare: The iPad mini

By Peter Burrows and Adam Satariano - Jul 4, 2012 4:46 AM GMT+0700

Apple Inc. (AAPL) plans to debut a smaller, cheaper iPad by year-end, two people with knowledge of the plans said, to help maintain dominance of the tablet market as Google Inc. (GOOG) and Microsoft Corp. (MSFT) prepare competing handheld devices.

The new model will have a screen that’s 7 inches to 8 inches diagonally, less than the current 9.7-inch version, said the people, who asked not to be identified because Apple hasn’t made its plans public. The product, which Apple may announce by October, won’t have the high-definition screen featured on the iPad that was released in March, one of the people said.

Enlarge image

Google, along with other companies, are looking to compete with Apple's iPad for share of the tablet market. Photographer: Adrianna Williams/Corbis

A smaller, less expensive iPad could undercut the ambitions of Google, Microsoft and Amazon.com Inc. (AMZN) to gain traction in the advancing tablet market, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. The new device will probably have a price closer to Google’s Nexus 7 tablet and Amazon’s Kindle Fire, both of which have 7-inch screens and cost $199.

“It would be the competitors’ worst nightmare,” Wu said in an interview. “The ball is in Apple’s court.”

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment.

Since the iPad went on sale in April 2010, Apple has dominated the tablet market, which is predicted by DisplaySearch to reach $66.4 billion this year. Apple has 61 percent of the market, according to Gartner Inc.

Apple’s rivals are eager to gain a toehold. Google said on June 27 that it will sell a tablet-style device called the Nexus 7. Earlier in the month, Microsoft announced a tablet called Surface that will have a similar screen size as the current iPad. Amazon’s Kindle Fire was released last year.

Google Strategy

The entrants’ best chance of success has been to focus on markets where Apple had no toehold, said Jan Dawson, an analyst at Ovum Ltd. The Surface comes in two models that are most likely to appeal to buyers who want to continue using Microsoft’s Windows software, Dawson said. While Microsoft has not disclosed pricing or timing for either, the higher-end version will probably be pricier than the iPad and targeted more at an emerging class of laptop PCs called Ultrabooks, he said. The latest iPad ranges in price from $499 to $829.

Google’s Nexus 7 could stack up well against Amazon’s Kindle Fire, which went on sale in November. The Nexus 7, manufactured by Asustek Computer Inc. (2357), has a faster processor and better battery life than the Kindle Fire, as well as a front-facing camera.

Still, competing with a lower-priced iPad will be more challenging, Wu said. Apple benefits from having more than 225,000 apps that have been tailored specifically for the current iPad.

Apple Retail

The company also boasts more than 360 retail stores where the device can be purchased and tested by consumers. Google said the Nexus will be available only from its online store, while Microsoft will sell its tablets online and at its smaller chain of 20 stores.

Apple has considered introducing a smaller tablet since the original iPad was released, one person said. That approach has worked for Apple’s iPod, which is the world’s top music player and comes in various sizes and colors.

Yet Apple co-founder Steve Jobs spoke skeptically of smaller tablets before his death in October. He said in 2010 that the iPad’s current size was the minimum required to ensure a good user-experience and enable attractive software applications.

The screen of the small model will have the same number of pixels as those in the iPad before it was upgraded to the so- called Retina Display earlier this year, one person said.

Fatter Margins

Apple also may be at an advantage profit-wise. The gross margin on the latest iPad is about 37 percent, according to Wu. Apple could earn a similar profit on a smaller iPad because it will probably use the cheaper screen, Wu said. Apple can also charge more for the device without sacrificing sales, he said.

“This isn’t like the old days, when it cost thousands of dollars more to buy an Apple product,” Wu said. “Fifty or a hundred bucks wouldn’t be enough to make someone switch.”

Amazon, by contrast, loses money on every Kindle Fire it sells, with the aim of profiting from sales of books and other digital media. At the $199 price of the Nexus 7, Google’s plan should be to break even on the hardware, in exchange for the opportunity to win advertising and related revenue, said Michael Gartenberg, an analyst at Gartner Inc.

Apple’s plans to release a smaller sized iPad were reported previously in blogs, including DigiTimes.

Microsoft’s Stakes

The stakes are high for Microsoft and Google to succeed at hardware sales. Both companies have risked alienating long-time hardware partners, such as Samsung Electronics Co., by selling their own tablets, Gartenberg said.

“How does Samsung make money in tablets, when Google is partnering with Asus to make a product that makes no money?,” he said.

A failure to gain traction with the Nexus and Surface, respectively, might also undermine the credibility of Google’s Android strategy and of Microsoft’s introduction of the next version of the Windows operating system, Wu said. If Google and Microsoft can’t make a must-have product around their own software, consumers may be harder to convince that hardware manufacturers could do it, he said.

“They’re really sticking their necks out this time, putting their own brands on this front and center,” Wu said.

To contact the reporters on this story: Peter Burrows in San Francisco at pburrows@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Twitter User-Detail Inquiries From Governments Surge

By Brian Womack - Jul 3, 2012 6:04 AM GMT+0700

Twitter Inc., the micro-blogging service, said it received more requests from governments for user information in this year’s first half than it had for all of 2011.

Twitter, in its first Transparency Report, said 80 percent of the 849 queries it received from governments worldwide came from within the U.S. The San Francisco-based company fully or partially complied with 75 percent of the U.S. inquiries, Jeremy Kessel, its manager of legal policy, said in a blog post today releasing the study.

The company, which has grown to more than 140 million users, is trying to shed light on efforts by governments worldwide and what they want with user data. Twitter was told last month it must turn over information about an Occupy Wall Street protester’s posts, in an order from a New York judge who compared the duties of social media sites to those of witnesses to a street crime.

The July 4 Independence Day holiday in the U.S. is “an important reminder of the need to hold governments accountable, especially on behalf of those who may not have a chance to do so themselves,” Kessel said in his post.

Today’s inaugural report is similar to one produced by Google Inc. (GOOG), the world’s largest Internet search company, and closely held Twitter plans to publish updates twice a year. The report includes government requests for user information and to withhold content, as well as requests related to copyright.

In addition to the new report, the company is working with Herdict, a project of the Berkman Center for Internet & Society at Harvard University that monitors Web access around the world. The new partnership intends to drive more traffic and attention to Herdict, the company said.

In the report, Twitter said it fully or partially complied with 63 percent of user information requests on average around the world since Jan. 1. The U.S. led with 679 requests for user information, followed by Japan with 98.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Microsoft Writing Down $6.2 Billion After AQuantive Sputters

By Dina Bass - Jul 3, 2012 5:51 AM GMT+0700

Microsoft Corp. (MSFT) is taking a $6.2 billion writedown for almost the entire amount it paid for Internet-advertising company AQuantive Inc., signaling that its online division will perform worse than the company projected.

Enlarge image

The grand opening of a new Microsoft Store at University Village in Seattle. Photographer: Stuart Isett/Bloomberg

The non-cash charge means the company will probably post a loss for the quarter, which ended in June. Before the statement, analysts had predicted that Microsoft would report profit of $5.3 billion in the period, data compiled by Bloomberg show.

Microsoft bought AQuantive for about $6.3 billion in 2007 to catch Google Inc., amid an acquisition spree for companies that specialize in online advertising. The deal failed to accelerate growth as much as anticipated at the company’s money- losing online division, Microsoft said. The company won’t reverse losses as quickly as it intended, said a person with knowledge of the matter, who’s not authorized to speak publicly.

“Online services is the biggest drag on the company right now,” said Colin Gillis, an analyst at BGC Partners LP in New York, who has a buy recommendation on Microsoft.

Even as the AQuantive deal didn’t meet projections, Microsoft said its online division has shown improvement in other areas, including revenue per search and market share gains for the Bing search engine.

Operating losses in online services narrowed to $1.45 billion in the nine months through March 31, from $1.91 billion a year earlier, Microsoft said in April. Sales gained 11 percent to $2.13 billion in the period.

‘Slow Improvement’

“It’s the classic come-front-behind, slow, incremental improvement,” Gillis said. “Bing has made incremental gains.”

Microsoft agreed to buy AQuantive weeks after Google said it would acquire DoubleClick Inc., which also handles online advertising.

The company had to take the writedown because the online business isn’t growing as quickly as forecast, and it’s taking longer to turn around than Microsoft expected, said the person. The company hasn’t boosted revenue per search as much as it had projected. What’s more, distribution deals in which Microsoft pays companies like Dell Inc. (DELL) and Verizon Wireless have added customers -- though at a high cost, the person said.

“This is an accounting decision that the company made based on how the business is performing relative to the projections we had made during the past five years,” Microsoft Chief Executive Officer Steve Ballmer and online unit President Qi Lu, wrote in an e-mail to employees obtained by Bloomberg.

“We want to be very clear that we are strongly committed to a strong and financially successful” online division, according to the memo, whose authenticity was confirmed by Microsoft.

Microsoft was little changed at $30.56 at the close today in New York. It has climbed 18 percent this year.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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RIM’s Plunge Adds Pressure to ‘Sell, Break Up or Die’

By Hugo Miller and Serena Saitto - Jun 30, 2012 3:37 AM GMT+0700

Research In Motion Ltd. (RIM) plunged 19 percent, the biggest decline in more than a year, after posting a loss and delaying the next BlackBerry operating system, increasing pressure on the company to find an acquirer.

RIM reported a first-quarter loss yesterday of 37 cents a share, excluding some items, more than five times bigger than what analysts had predicted. Sales tumbled 43 percent to $2.8 billion, missing a prediction of $3.05 billion, and the company said it would cut 5,000 jobs.

The Waterloo, Ontario-based smartphone maker had been waiting for a release of the BlackBerry 10 in the fall to decide on its strategic options, betting that the success of the product would let it avoid a sale, according to two people familiar with the situation. With no new lineup this year -- and the next version of Apple Inc. (AAPL)’s better-selling iPhone looming -- RIM may have to seek a buyer now.

“They either sell, break up the company or die,” said Matt Thornton, an analyst at Avian Securities LLC in Boston who has a neutral rating on RIM. “It is just a question of when.”

Chief Executive Officer Thorsten Heins said in May that RIM had hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help evaluate its strategic options, though he said a sale wasn’t the company’s goal. RIM would prefer to find a partner or license its operating system. Heins reiterated that notion yesterday, saying he was “convinced” that RIM has a future as a maker of hardware and software.

Not Ready

RIM declined to comment on takeover speculation.

“RIM will comment on any detail from its strategic review when it’s ready,” said Heidi Davidson, a company spokeswoman.

The stock fell to $7.39 at the close in New York. The shares have now lost 95 percent of their value since peaking in mid-2008, cutting the business’s market value to $3.9 billion.

The company has struggled to keep pace with Apple’s iPhone and devices based on Google Inc. (GOOG)’s Android platform, spurring customers to flee the BlackBerry platform. The new BB10 software -- the linchpin of its comeback plan -- now won’t arrive until the first quarter of next year, RIM said yesterday. That’s more than a year later than originally planned.

“The delay increases the likelihood of a sale,” said Michael Walkley, an analyst at Canaccord Genuity Inc. in Minneapolis. “Even if BB10 launched in the fall against iPhone 5, it would be very, very tough to get consumers to try it out.”

Microsoft, IBM

Some investors were already pushing RIM to put itself on the block before the latest results.

“We would like to see a sale of the company or a breakup, and if a breakup, the sale of each of the parts,” Vic Alboini, chairman of the Toronto-based investment firm Jaguar Financial Corp. (JFC), said last month. He sees Microsoft Corp. (MSFT) or International Business Machines Corp. as potential buyers.

“We’re pushing and cajoling RIM to get to the promised land of a sale or breakup,” he said.

The job cuts will shrink RIM’s workforce by about 30 percent, cutting it from 16,500 to 11,500 by March, RIM said.

The company also reported a pretax writedown of $335 million and expects to post an additional operating loss in the second quarter. The first-quarter net loss was $518 million, or 99 cents a share, compared with a profit of $695 million, or $1.33, a year earlier.

Cost Savings

The company is trying to save $1 billion in annual operating costs by eliminating workers and manufacturing sites. The effort so far has saved RIM $300 million, Chief Financial Officer Brian Bidulka said yesterday on a conference call. The company’s cash investments rose to $2.2 billion last quarter, from $2.1 billion in the previous three months.

Still, future operating losses and severance payments will force RIM to burn through much of that money, said Walkley, who has a hold rating on the shares.

The situation may come to a head in the coming months, said Brian Blair, an analyst at Wedge Partners Corp. in New York.

“My view is that things get so bad this year and in early 2013 that they get forced into a sale,” he said. “It gets worse and worse for the next six months, guaranteed.”

RIM can’t expect any assistance from the Canadian government, Jim Flaherty, the country’s finance minister, told reporters today on a conference call.

Choosing a Path

“They need to look at their own options and to choose their path,” Flaherty said. He said he’s not aware of any interest from other companies in acquiring RIM.

A takeover of RIM’s size would trigger a review to determine whether an acquisition is in the national interest. In 2010, Prime Minister Stephen Harper’s government rejected Melbourne-based BHP Billiton Ltd. (BHP)’s $40 billion hostile takeover of Potash Corp. of Saskatchewan Inc. over concerns that the sale would cut jobs and tax revenue.

RIM had previously said that the first of the new BlackBerry 10 phones would come out in the latter part of this year, and the product was originally expected in the first quarter of 2012. Pushing BlackBerry 10 to 2013 means the phones may come out months later than the iPhone 5 and products built on Microsoft’s Windows 8 platform.

In the meantime, sales of the existing lineup are slumping. RIM shipped 7.8 million BlackBerrys and 260,000 PlayBook tablets in its last fiscal quarter, which ended June 2. A year earlier, it shipped 13.2 million BlackBerrys and 500,000 PlayBooks.

“The delay may just be the final nail in the coffin,” said Sameet Kanade, an analyst at Northern Securities in Toronto who has a sell rating on the stock. “This is not just a disappointing quarter, but is a big question mark about the company going forward.”

To contact the reporters on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net.

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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RIM Reports Loss as It Cuts Jobs, Delays BlackBerry 10

By Hugo Miller - Jun 29, 2012 4:53 AM GMT+0700

Research In Motion Ltd. (RIMM), losing ground to Apple Inc. (AAPL) and Google Inc. (GOOG), said it will delay the BlackBerry 10 phone release, cut 5,000 jobs and posted a quarterly loss that was five times bigger than projected.

The stock plunged 22 percent after the company reported a first-quarter loss of 37 cents a share, excluding some items. Analysts had estimated a 7 cent loss, according to data compiled by Bloomberg. Sales tumbled 43 percent to $2.8 billion, missing an estimate of $3.05 billion.

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RIM, which stopped giving sales and profit forecasts last quarter, has failed to keep up with the capabilities of Apple’s iPhone and Android devices, prompting customers to flee the BlackBerry platform. The company is working on an operating system with better Web and touch-screen features -- a lineup that now won’t arrive until the first quarter of next year, more than a year later than originally planned.

“The delay may just be the final nail in the coffin,” said Sameet Kanade, an analyst at Northern Securities in Toronto who has a sell rating on the stock. “This is not just a disappointing quarter, but is a big question mark about the company going forward.”

Stock Slide

RIM fell as low as $7.14 in late trading after closing at $9.13. The stock had already lost more than two-thirds of its value in the past 12 months and had fallen almost 95 percent from its stock market peak in mid-2008, cutting the business’s market value to $4.79 billion.

The job cuts will shrink the workforce by about 30 percent, cutting it from 16,500 to 11,500 by March, RIM said.

The company also reported a pretax writedown of $335 million and said it expects to report an additional operating loss in the second quarter. The first-quarter net loss was $518 million, or 99 cents a share, compared with a profit of $695 million, or $1.33, a year earlier.

RIM’s plummeting stock price has spurred investors to demand a shakeup in strategy, with some shareholders seeking a breakup or merger. Chief Executive Officer Thorsten Heins said in May that RIM had hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help evaluate its strategic options.

At the time, RIM forecast an operating loss for the first quarter and said it was streamlining operations by reducing spending and headcount. The company is trying to save $1 billion in annual operating costs by eliminating workers and manufacturing sites.

‘Not Satisfied’

“I am not satisfied with these results and continue to work aggressively with all areas of the organization and the board to implement meaningful changes to address the challenges, including a thoughtful realignment of resources,” Heins, 54, said today in a statement. “Our top priority going forward is the successful launch of our first BlackBerry 10 device.”

Even before the latest results, some investors were pushing RIM to put itself on the block.

“We would like to see a sale of the company or a breakup, and if a breakup, the sale of each of the parts,” Vic Alboini, chairman of the Toronto-based investment firm Jaguar Financial Corp. (JFC), said last month. He sees Microsoft Corp. (MSFT) or International Business Machines Corp. as potential buyers.

“We’re pushing and cajoling RIM to get to the promised land of a sale or breakup,” he said.

One bright spot is RIM’s cash balance, Kanade said today. The company’s cash, equivalents and short- and long-term investments rose to $2.2 billion last quarter, from $2.1 billion in the previous three months.

“The only saving grace is they have cash of $2 billion, but they’ll start burning that,” he said.

Market Share

The company’s share of the global smartphone industry fell by more than half to 6.4 percent in the first quarter, according to research firm IDC. Android, an operating system developed by Google and shared with manufacturers, jumped to 59 percent, while Apple’s iOS operating system accounted for 23 percent.

U.S. BlackBerry defections remain high, RIM said today on a conference call.

“Their business is being squeezed by Apple and Android,” said Scott Sutherland, an analyst at Wedbush Securities in San Francisco who has a neutral rating on RIM.

RIM had previously said that the first of the new BlackBerry 10 phones would come out in the latter part of this year, without giving a more specific time frame. And the product was originally expected in the first quarter of 2012. Pushing the BlackBerry 10 to 2013 means it could come out months later than Apple’s iPhone 5 and products built on Microsoft Corp.’s Windows 8 platform.

RIM said it shipped 7.8 million BlackBerrys and 260,000 PlayBook tablets in its last fiscal quarter, which ended June 2. Analysts had projected 8.8 million smartphones and 280,000 tablets, according to a survey of 10 analysts. A year earlier, RIM shipped 13.2 million BlackBerrys and 500,000 PlayBooks.

“Outside of breaking apart the business and trying to maximize the value for the pieces,” Sutherland said, “it’s going to be very, very difficult for them.”

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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