MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Today - Wednesday, June 19, 2013
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4:28 PM Finisar +8.9% AH following its FQ4 beat. FQ1 guidance is for revenue of revenue of $245M-$260M and EPS of $0.22-$0.26, mostly above a consensus of $248.9M and $0.20. A 150 bps Q/Q increase in gross margin to 32.2%, attributed to a favorable mix, contributed to the EPS beat. Finisar says it's seeing strong demand for 10G and 100G Ethernet components for datacom gear - 10G is being rapidly adopted in data centers, and some firms are starting to embrace 100G. Opex +4% Y/Y. a little above rev. growth of 2%. JDSU +3%, NPTN +4.3%., and CIEN +1% in sympathy. FN, OCLR, and OPLK could also rally. CC at 5PM ET (webcast). (PR) Comment!
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4:14 PM Nokia (NOK) +2.6% AH after the WSJ reports Microsoft (MSFT) held advanced talks to buy Nokia's phone business, and was "close to an oral agreement" at one point, but that discussions broke down in part due to price and concerns about Nokia's competitive positioning. One source says the talks "took place as recently as this month, but aren't likely to be revived." 1 Comment
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4:03 PM "Nothing has changed regarding the financing ... We expect to have [$5.2B] in the next couple of weeks ... I would provide [$2B], if necessary." Thus speaks Carl Icahn, addressing reports he's struggling to line up financing for his Dell (DELL -0.6%) bid and making a case for his new $14/share tender offer. Unsurprisingly, Dell's special committee isn't enthusiastic about the tender, and says it's still waiting on requested info about Icahn's leveraged recap proposal. Some think Icahn's real motivation is getting Michael Dell/Silver Lake to sweeten their offer. "Icahn is historically known for looking for dislocations," observes one Dell shareholder. Comment!
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2:48 PM William Blair's Brian Drab provides a fairly positive take on 3D Systems' (DDD -2.4%) recent analyst day, but nonetheless reiterates an Underperform on account of valuation. Drab observes 3D's management talked up the expansion of its healthcare offerings (specialized/personalized products) and Quickparts on-demand parts service (new markets/geographies), and hinted price points for Cube desktop printers could fall below $1K and (in 12-18 months) $500. But with shares trading at 46x 2013E EPS, Drab considers expectations too high. (analyst day slides) 3 Comments
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2:31 PM Verizon (VZ) broadband subs are complaining about receiving low-quality Netflix (NFLX) streams, and the culprit appears to be Verizon's unwillingness to upgrade its network to handle more Netflix traffic from fellow carrier and Netflix bandwidth supplier Cogent (CCOI). The dispute drives home the thorny relationships Netflix, which now makes up ~1/3 of U.S. Web traffic during peak hours, has with many ISPs, in spite of its efforts to relieve congestion via its Open Connect CDN (some ISPs are on board, some aren't). In Verizon's case, the carrier's efforts to compete with Netflix via its Redbox Instant JV could also be a factor. 2 Comments
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2:01 PM Ahead of Micron's (MU +0.4%) afternoon FQ3 report, Charles Kau, the chairman of Micron's Inotera JV, predicts the current DRAM shortage will last through 2015, thanks to controlled expansion and surging mobile DRAM usage. Kau expects DRAM demand to outstrip supply by 3% in 2013, 5%, in 2014, and 7% in 2015. Those numbers back up recent comments from Credit Suisse, which declared the DRAM industry is seeing structural improvements following a wave of consolidation around Micron, Samsung (SSNLF.PK), and SK Hynix. Analyst commentary on Micron has been very positive going into earnings, but a lot of good news has been priced in. Comment!
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1:36 PM Though high-end Lumia models such as the 920, 925, and (expected) EOS get most of the ink, the low-end 520 could be the biggest seller in Nokia's (NOK -0.3%) Windows Phone lineup. Google Trends data points to surging interest in the 520, which features a 4" display, lacks 4G support, and is dirt cheap - Wal-Mart sells the 521, a variant working on T-Mobile's network, for an unsubsidized $130 .... if it's in stock. Also, the 520 is now #2 in GSM Arena's daily interest rankings, behind only the Galaxy S4; no other Nokia phone is in the top-10. 10 Comments
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1:15 PM While Amazon plots a big expansion of its U.S. grocery delivery business, eBay's (EBAY) Indian site has begun selling food/grocery items through a section called eBay Daily. 1,600 products, generally packaged goods, are available for sale. eBay's move comes a couple months after it led a $50M funding round for local e-commerce marketplace Snapdeal, and a year after it announced plans to invest heavily in the Indian market, where e-commerce penetration is still low and Amazon (AMZN), which just launched an Indian marketplace site, has been slowed by foreign investment rules. 2 Comments
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12:55 PM Though a new Congressional bill proposes to legalize and regulate online gambling across the U.S., online gambling proponents remain skeptical the bill will end the industry's legal battle. Casinos, tribes, state lotteries, and other interest groups are still fighting for special rights, ideological opposition remains, and the bill features an opt-out provision for individual states and tribes. On the other hand, public support for legalization has been growing, and Nevada and New Jersey's moves have led other states to worry about being left out. ZNGA and GLUU are both waiting for the chance to expand their online gambling efforts from the U.K. to the U.S. (I, II). Comment!
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12:24 PM Google (GOOG +0.1%) steps up its challenge to Yelp (YELP +2.3%) by showing an interactive "carousel" of businesses when PC searches are made for local info. The update follows the launch of a carousel for tablet users in December, and the January addition of Zagat listings to the Google Places API. Meanwhile, CLSA has raised its PT for Google to $1,100, even though Q2 data from search marketing firm Performics has been mixed, with Y/Y spending growth falling to 4.5% from 12.4% thanks partly to tough comps. Mobile now makes up 36% of Performics' tracked U.S. paid clicks, but only 13.5% of ad spend, due to lower prices. CLSA is confident Enhanced Campaigns will help narrow the gap. 1 Comment
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11:55 AM LG Display (LPL -0.9%) expects to mass-produce a flexible OLED panel for major smartphone clients in Q4. 38% shareholder LG Electronics is likely one of those clients - the company has already said to plans to sell a flexible OLED phone by year's end. Samsung was at one point expected to use a flexible OLED in its upcoming Galaxy Note III, but is believed to have changed its mind due to production issues. Universal Display (PANL -2.1%) is hoping the technology takes off sooner rather than later. (Samsung demo) Comment!
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11:33 AM Telecom Italia (TI -3.3%) should be able to reach a deal with Italian telecom regulator AGCOM for its planned wireline spinoff by early 2014, says chairman Franco Bernabe. TI is believed to be hatching plans to sell a 30% stake in the unit, which has an estimated value of $17B-$20B, to a state-backed fund. Comment!
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11:20 AM The Street reacts favorably to Nvidia's (NVDA +7.3%) decision to license its GPU cores and related IP to other mobile processor developers, rather than simply pin its mobile hopes on Tegra sales. "If there was ever a way for Nvidia to get into Apple, the IP licensing angle is likely it," says Raymond James, which thinks the move could also limit traction for ARM's (ARMH -0.8%) Mali GPU cores. Evercore is less optimistic about Apple, stating checks point to "significant internal GPU design efforts" at the company. It views Samsung as a possibility, but adds the Korean electronics giant is "cycling through IP vendors and chip suppliers." 3 Comments
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11:09 AM ReneSola (SOL +4.9%) spikes higher after SA contributor Sneha Shah argues a low cost structure and diminishing competition in the solar wafer and polysilicon markets will allow the company to keep gaining share (it recently passed LDK to be the world's #2 wafer vendor), and that shares are due to rally after underperforming Chinese peers with stronger Japanese exposure. Shah also sees gross margin bottoming - it's expected to rise to 3%-5% in Q2 after coming in at -2% in Q1 - and predicts ReneSola will become a top-10 module supplier in 2013, with a 4%-5% share. 12% of the float was shorted as of May 31. Comment!
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10:56 AM Mark Zuckerberg (FB) asked Samsung (SSNLF.PK) to build a "Facebook-friendly" phone during his visit, but Samsung is cool to the idea, The Korea Herald reports. "Samsung doesn’t want to help nurture a second Google," says one source. The fact the HTC First (comes with Facebook Home built-in) hasn't exactly been a smash hit might also influence Samsung's thinking. Comment!
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10:23 AM BofA/Merrill upgrades Adobe (ADBE +6.1%) to Buy in the wake of its FQ2 EPS beat and strong Creative Cloud adds: the firm is upbeat about CC into 2015, and sees Adobe converting much of its Creative Suite base. Jefferies notes CC net adds of 221K beat a consensus of ~185K. Mentioned on the earnings call: the majority of paid CC subs are individual members; Adobe is evaluating new options for CC pricing (previous); "targeted promotions" could hurt CC ARPU in the near-term; and Adobe thinks its infrastructure and analytics tools will allow Marketing Cloud to remain differentiated in the face of new competition. Ad software rival Marketo (MKTO +10.1%) is in sympathy. Comment!
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