Cisco shares spike as net profit jumps 18%. Cisco's (CSCO) shares climbed 7.7% premarket after the company's FQ1 results beat analyst expectations, with net profit jumping 18% to $2.1B, adjusted EPS coming in at $0.48, and revenues rising 6% to $11.9B. Cisco also gave FQ2 guidance that was in line with consensus. The increase in earnings came despite weaker government demand dragging on U.S. sales and a 10% plunge in EMEA revenues, although Cisco's video business grew strongly, helped by its $5B acquisition of NDS.
Obama to demand extra $1.6T in tax revenues. President Obama will go into budget negotiations with Congressional leaders on Friday calling for a $1.6T increase in tax revenues over 10 years, double the $800B discussed during debt-ceiling talks in 2011. The sides are sticking to their guns over tax hikes for the rich, while Republicans also want entitlement changes. Today, Obama is due to meet a who's who of top CEOs, including those of Wal-Mart (WMT), IBM (IBM) and Ford (F).
PBOC governor looks to be heading for retirement. As scripted, China's 18th Communist Party Congress has closed with President-To-Be Xi Jinping and Premier-To-Be Li Keqiang elected to the party's Central Committee. However, off the committee is Zhou Xiaochuan, the governor of the People's Bank of China, possibly signaling the end of his tenure at the PBOC. And causing consternation is the appointment of former banker Wang Qishan to the Communists' top discipline post. The move might be good for fighting corruption, but could hamper efforts to overhaul China's economy.
Top Stock News
Staples swings to net loss of $569M. Staples (SPLS) swung to a net loss of $569M in Q3 from a profit of $324M a year earlier, due to the impairment of goodwill and other assets, and charges related to restructuring, accelerated amortization and taxes. EPS of $0.46 beat forecasts, although revenues slipped 2% to $6.35B and missed expectations. Earnings were also hurt by increased investment in Staples' online business, falling margins, and weakness in Europe and Australia.
Intel, Qualcomm eye Sharp investment. Intel (INTC) and Qualcomm (QCOM) are in talks to invest ¥30B ($378M) in cash-strapped Sharp (SHCAY.PK), Reuters reported yesterday, two months after the Japanese company denied speculation of an Intel capital injection. Sharp's IGZO low-power and high-resolution panels are a good fit for Intel-powered ultrabooks and tablets, while its 5" 1080p panels could be a killer app for high-end smartphone app processors.
Facebook slips ahead of lock-up expiration. Facebook (FB) shares were -0.85% premarket ahead of today's expiry of a lock-up on another 800M shares, the third and biggest expiration since the social network's IPO. The two previous releases of share restrictions caused a sharp decline in Facebook's stock price, although sentiment on Wall Street has since improved following the company's Q3 earnings report.
AMD denies that it's considering a sale. AMD (AMD) has dismissed speculation that it's planning either a sale of itself or its assets, although it didn't deny a report it has hired JPMorgan to explore its strategic options. Reuters reported that while a full-blown sale is "not a priority," a patent sale is among the options on the table. There's logic behind an effort to raise money: AMD has over $2B in debt, while its deteriorating cash flow has led to downgrades. Shares fell 1.9% after-hours.
Toyota recalls 2.77M vehicles worldwide. Toyota (TM) is recalling 1.52M vehicles in Japan and 1.25M overseas, including 670,000 Prius cars in the U.S., due to issues with the steering column and water pump. The move follows a recall of 7.43M vehicles last month over faulty power-window switches. "Unless the (latest) defects turn out to be very complicated," says Satoshi Yuzaki of Takagi Securities, "the cost...shouldn’t affect their earnings too much."
New York opens investigation into power utilities. With over 130,000 New York State residents still without power following Superstorm Sandy, Governor Andrew Cuomo has created a commission to investigate the area's utilities over their handling of the storm and to recommend reform. "It has to be overhauled and you need a new system," Cuomo said. NY power companies include ConEd (ED), CH Energy (CHG) and National Grid (NGG).
Vale gets caught up in Chinese bias for state-owned companies. Vale (VALE) has spent around $2B on a fleet of mega-ships to carry its iron ore from Brazil to China, but the latter won't let them in, possibly due to the opposition of a Chinese shipping-industry group dominated by a state-owned company. It's a blow to Vale's global distribution strategy and illustrates the blurred line between China's government enterprises and the country's regulators.
KAR Auction Services ends auction - of itself. KAR Auction Services (KAR) has ended its attempts to sell itself following the breakdown of negotiations with P-E firm Clayton Dubilier & Rice over price and other transaction terms, Reuters reports. The vehicle auction company, which has a market cap of $2.38B, is 78%-owned by a group of P-E firms, including Goldman Sachs Capital Partners (GS).
Top Economic & Other News
Yen slumps after Japanese PM offers to call early elections. The yen was -0.8% vs the dollar premarket U.S. time after Japanese PM Yoshihiko Noda offered to dissolve parliament on Friday and hold early elections next month if the opposition agrees to pass a bill that will allow the government to issue debt - and thereby avoid running out of money - and back electoral reform. With Noda's Democratic Party slumping in the polls, it's expected to lose any election.
Anti-austerity strikes sweep Europe. Millions of workers in Europe are on strike to protest austerity as part of a "European Day of Action and Solidarity." Spanish and Portuguese unions are carrying out their first coordinated general strike, while organizations in Greece, Italy, France and Belgium planned stoppages or demonstrations. The question is whether the protests will have any significant effect on economic policy - so far, they haven't.
Budget deficit soars in October. While concerns about the fiscal cliff grow, so does the budget deficit, jumping 22% on year in October to $120B and above forecasts of $114B. Expenditure increased 16% to $304B while receipts climbed 13% to $184B.
Mexico's Senate backs major job-market shakeup. Mexico's Senate yesterday passed a historic labor-market reform bill that makes it easier to hire and fire staff, and shorten labor disputes. The government hopes the measures will create up to 400,000 jobs a year and cut the number of workers in the black market, which is estimated to cost Mexico as much as $15B in lost taxes each year.
In Asia, Japan flat at 8665. Hong Kong +1.2% to 21442. China +0.4% to 2055. India closed.
In Europe, at midday, London -0.5%. Paris -0.3%. Frankfurt -0.3%.
Futures at 7:00: Dow +0.4%. S&P +0.4%. Nasdaq +0.6%. Crude +0.2% to $85.58. Gold -0.1% to $1723.80.
Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
10:00 Business Inventories
10:30 EIA Petroleum Inventories
2:00 PM FOMC minutes
See full real-time earnings coverage »
Wall Street Breakfast is sent out by email for free -- Get it now »