Saturday, June 30, 2012

RIM's Tanking's Effect on the Ontario Economy

Certainly everyone has heard that about RIM's bad first quarter 2012 results. I'm not going to go over them although I will point out that I was predicting they were going to suck in April. People shouldn't have been surprised. Here's another tip, this quarter's results, ending today won't be good either, but we won't know precisely until the end of September. The final nail in the coffin was the delay in the BB10 operating system. Certainly RIM spending billions buying back shares looks particularly half-witted now.

RIM compared to the entire Ontario economy is obviously small, however considering Ontario under Dalton McGuinty has basically become a public sector based economy (like France, but without the multinationals partially owned by the state) it was an important part of the private sector economy in Ontario. Especially considering its importance to exports and the fact that RIM isn't like a hair dresser in that it doesn't have to be in Ontario. Beyond auto parts and in a sense banking services and mining, Ontario's exports have been moribund the past few years. This won't be good for Ontario's economy or tax revenues.

Fortunately for Hamilton, the effects of RIM imploding is minimal, apart from some locals living in Hamilton and working for RIM. KW is a different story. Sure there's a lot of high tech startups in Waterloo, but the majority of those will implode or stay small. Plus they don't pay remarkably well and are very engineer heavy and light everything else in terms of employment. Can the KW economy absorb all the soon to be former RIM employees? Sure the good people will find jobs but the dead weight that every big company builds up will have trouble. Expect a lot of vacant office space in KW.

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