Today - Friday, December 6, 2013
6:41 PMServer sales drop again in Q3, H-P takes share from IBM
- IDC estimates server sales fell 3.7% Y/Y in Q3. That's a modest improvement from Q2's estimated 6.2% drop, but hardly a figure that will bring cheer to industry players. Gartner estimates revenue fell 2.1% in Q3 vs. 3.8% in Q2.
- The embrace by Web/cloud giants of home-grown servers produced by Asian contract manufacturers (ODMs) continues to upend the industry. IDC thinks sales of such servers rose 45% Y/Y, and now make up 6.5% of industry revenue. It estimates nearly 4/5 of these sales came from the U.S., largely from Google, Facebook, Amazon, and Rackspace.
- #1 H-P (HPQ), which recently reported encouraing enterprise hardware numbers, is assigned a 28.1% share (+150 bps Y/Y). #2 IBM, whose total Q3 hardware sales fell 17% Y/Y, is given a 23.4% share (-430 bps).
- Newly-private Dell had a 16.2% share (-40 bps, a reversal from recent gains), Cisco (CSCO - still seeing strong UCS server demand) a 5% share (+170 bps), and Oracle (ORCL - hurt by SPARC/UNIX server weakness) a 4.1% share (-60 bps).
- In a positive for Intel (INTC), x86 servers took share once again, with sales rising 2.8%.
- H-P is the leader in the x86 server market (32.3% share), as well as in the growing blade server (43.6%) and density-optimized server (30.7%) markets. There's a decent amount of overlap between the x86 market and the blade/density-optimized markets.
6:04 PMFCC delays major spectrum auction until mid-2015
- FCC chairman Tom Wheeler discloses a much-anticipated auction of broadcast TV spectrum to mobile carriers won't take place until mid-2015. Under prior chairman Julius Genachowski, the commission had set a June 2014 target date for auctioning the airwaves, which reside in the rural-friendly 600MHz. band.
- Sprint (S) and T-Mobile (TMUS), who badly need more low-frequency spectrum to expand their rural coverage, have been hoping the auction would happen sooner rather than later. Verizon (VZ) and AT&T (T), who own ~75% of all sub-1GHz. U.S. mobile spectrum, currently offer better rural coverage in many regions.
- Earlier this week, Wheeler hinted the FCC's auction rules will favor the likes of Sprint and T-Mobile, who have been calling for restrictions to be placed on how much spectrum Verizon and AT&T can purchase.
5:34 PMGoogle Nexus set-top reportedly could launch in 1H14
- The Information reports Google (GOOG) is working on an Android-based Nexus set-top, and could launch the device in 1H14. The device is said to support YouTube/Netflix/Hulu streaming (like many other boxes) and (more interestingly) the ability to play certain Android games. It also reportedly comes with a touchpad remote.
- The WSJ reported in June Google is working on an Android console, and that it could launch this fall (it doesn't look as if that'll happen). If/when it arrives, Google's set-top could face competition from a next-gen Apple TV supporting game controllers and pay-TV content.
- Google's reported set-top efforts might have much to do with the failure of Google TV to live up to the Web giant's lofty ambitions. Its $35 Chromecast HDMI streaming stick has been faring much better.
5:11 PMYahoo buys concert streaming startup
- In its latest talent/tech acquisition, Yahoo (YHOO) has acquired Evntlive, provider of a platform that enables the live streaming of concerts. Evntlive's service will shut down, and its team will join Yahoo.
- This isn't the first time Yahoo bought a startup for its streaming tech: A year ago, the company bought OntheAir, a developer of apps that enable group video chats and webcasts.
- Though progress has been incremental, Yahoo has made a priority out of improving the breadth and quality of its professional video content (and thereby grow its video ad inventory), as the Katie Couric deal drove home.
5:10 PMUQM Technologies' DoE grant extended to 2015, grant amount reduced
- UQM Technologies (UQM +10.5%) receives DoE approval for the continuation of its electric motor development grant under the American Recovery and Reinvestment Act.
- After submitting a revised plan in July upon the DoE's request, the company has received a revised total grant amount of $64.8M (from $90.3M originally) and reimbursable funding for qualifying project costs of up to $32.4M (from $45.1M previously). The renewed grant runs through Jan. 2015.
- Although the budget has been reduced, UQM believes it can "accomplish all of the objectives sought in its original 2010 plan." (8-K)
4:51 PMJPMorgan, Berenberg see Nokia improving IP monetization
- JPMorgan's Sandeep Deshpande, who started coverage on Nokia (NOK +1.9%) today with an Overweight and €8 PT today, thinks the company would be worth €15/share if it could raise its mobile device royalty rate to 1%. Berenberg's Adnaan Ahmad predicts Nokia's rate "should gradually inflate to 0.75% over time as it renegotiates existing deals and aggressively monetises its IPR pool."
- Qualcomm, which has profited far more than any company from mobile IP licensing, often receives royalty rates in the 4%-5% range, though certain firms have negotiated lower fees via cross-licensing deals.
- The sale of Nokia's phone unit to Microsoft frees the company to become more aggressive in its efforts to license its ~30K patents, since it now only needs cross-licensing deals for infrastructure gear. Thanks to the sale, Deshpande thinks there could be opportunities to unravel cross-licensing deals with firms whose IP Nokia no longer needs (such as Apple).
- He adds a recent U.K. injunction scored by Nokia in its patent battle against HTC could have big implications, since it suggests an OEM's use of baseband chips supplied by Qualcomm (a Nokia licensee) doesn't mean it's protected from having to separately pay Nokia.
4:16 PMBullish Pac Crest note helps Palo Alto continue fall rally
- Pac Crest trumpets Palo Alto Networks' (PANW +3.8%) firewall share gains, and declares the company a disruptive force in the network security space. It also asserts shares are trading at a 45%+ discount to those of companies growing at similar rates (Palo Alto posted 49% rev. growth in its Oct. quarter), and predicts the company's closely-watched legal battle with Juniper won't have serious consequences.
- Shares are now up 27% from their early-November lows. They jumped two weeks ago after Palo Alto beat FQ1 estimates and reported strong deferred revenue growth.
4:02 PMInvenSense outperforms following bullish Maxim note
- Maxim's Ashok Kumar reports InvenSense's (INVN +2.3%) orders from top customer Samsung remain strong. He's also optimistic about the motion sensor vendor's ability to win orders from Apple down the road.
- Kumar's predictions regarding InvenSense's 2013 iPhone/iPad design wins (or lack thereof) were more accurate than those of many peers.
- InvenSense mentioned on its FQ2 (Sep. quarter) CC Samsung is expected to continue accounting for a mid-30s percentage of total revenue. In a November note, Piper cited higher Samsung penetration as a potential growth catalyst for InvenSense.
2:59 PMBitcoin tumbles as Baidu reportedly stops accepting for payment| Comment!
2:49 PMChannelAdvisor climbs, Stifel bullish on Nov. and Dec. SSS metrics
- Shares of ChannelAdvisor (ECOM +6.4%) move up, potentially on a bullish note from Stifel Nicolaus that reiterates a Buy rating and raises the firm's PT to $42 from $38.
- Analyst Brad Reback noted that although ChannelAdvisor's Nov. same-store sales results appear to indicate meaningful deceleration at a cursory level, "most of this is just optical and due to a shifting in the holiday season ... if ECOM's results are adjusted for ... timing issues ... the trends are very strong ... SSS on Amazon increased 37.1% and SSS on eBay accelerated to 23.3%."
- Given this, and Reback's belief that Dec. results will be "very strong," the analyst is confident ECOM is positioned to exceed his Q4 revenue forecast of $19.8M (consensus is a tad higher, at $19.83M).
2:49 PMSina reportedly set to launch currency funds
- Marbridge Consulting reports Sina (SINA -2.6%) is partnering with Chinese asset management firms E Fund Management and China Southern Asset Management to launch " a series of 3 limited investment currency-based fund products with a targeted 10% annual return."
- If the report pans out, Sina would be far from alone among Chinese Web giants in showing an interest in financial services. Baidu recently launched an online wealth management platform aiming to give depositors an 8% annual return, and Alibaba (owns 18% of Sina) and Tencent have also launched financial services products.
- The companies are looking to take share from China's giant state-owned banks, and to profit from the Middle Kingdom's sky-high household savings rate.
2:32 PMEU raids Philips, Samsung offices in price-fixing probe
- The E.C. has raided Philips (PHG +2.1%) and Samsung's (SSNLF, SSNGY) local offices, as well as those of electronics store chain Media-Saturn.
- The Commission says it has raided several companies who are either making or selling consumer electronics and domestic appliances, in order to probe whether the firms had conspired to drive up prices by limiting the online sale of certain goods.
- The E.C. is already probing Samsung's use of standards-essential mobile patents in its legal battles. Samsung made a settlement offer in October.
2:18 PMSupreme Court to rule on software patents
- Amid intensifying scrutiny of software patents and perceived patent trolls, the Supreme Court says it will review whether companies should be able to obtain monopolies on software-related business methods via patent law.
- The review could represent a challenge to the Federal Circuit Appeals Court, which has routinely sided with patent owners in disputes related to software IP and other matters.
- The Supreme Court's decision comes shortly after the House passed the Innovation Act, a bill whose supporters argue will significantly cut the number of frivolous U.S. patent suits filed each year. Among other things, the bill requires litigants to list which patents are being infringed when making a complaint, and makes plaintiffs pay court costs if they lose.
- The White House, which earlier in 2013 issued 5 executive actions and 7 legislative proposals aimed at patent trolls, has voiced its support for the Innovation Act.
- Potentially affected companies: ACTG, RPXC, VRNG, VHC, WILN, IDCC, RMBS, PRKR.
1:50 PMCitrix outperforms as Stifel hikes PT; VMware also rallying
- Stifel's Brad Reback has raised his Citrix (CTXS +2.4%) PT to $74 from $70, while reiterating a Buy. Citrix has topped $60, and virtualization archrival VMware (VMW +2.9%) has rallied above $86.
- Reback's talks with Citrix's IR chief strengthened his belief the company's "uneven performance" (highlighted by its Q3 warning) is only due to sales execution and cyclical (rather than secular) headwinds. He also declares Amazon's WorkSpaces cloud PC virtualization service "more of a side-show than a meaningful enterprise threat, especially over the near-to-medium term."
- Both Citrix and VMware sold off when WorkSpaces was first announced. Though Reback disagreed, several analysts argued WorkSpaces could be a long-term threat, as its feature set grows.
- Reback likes the fact Citrix only trades at 10.8x his 2014 free cash flow estimate of $876.4M, and sees demand for Citrix's mobile software and the latest version of its XenDesktop PC virtualization platform acting as potential catalysts.
1:41 PMWidePoint climbs, CEO buys 28.7K shares, DHS contract speculation| Comment!
1:20 PMVerizon triples 4G capacity in top markets, looks to maintain network lead
- With its 4G rollout largely complete from a coverage standpoint (~300M Americans now covered), Verizon (VZ +0.7%) is making good on its promise to ramp network capacity. By turning on a new network in the high-frequency AWS band (good for urban areas), Big Red has tripled its 4G capacity in markets such as NYC, Chicago, and Seattle, and increased it by 150% in downtown L.A. and S.F. Dozens of additional markets will be added soon.
- On paper, the spectrum-rich network can support speeds of 100-150Mbps. Though most users won't see such numbers, the network should allow Verizon to take the U.S. 4G speed crown back from AT&T (T +0.6%), which is reallocating 2G/3G spectrum to improve its 4G capacity.
- The launch comes as Verizon admits soaring mobile data traffic has led to network congestion in markets such as NYC, Chicago, and S.F, and promises to increase capex to address the issue.
- Verizon's 4G network edge is a major reason why it has continued gaining postpaid share in spite of its premium pricing. AT&T just discounted its Mobile Share plans for certain users in an effort to better compete against Verizon and others.
12:49 PMVoxeljet buys HQ for €10M, shares lower
- Voxeljet (VJET -3.2%) discloses it has bought its Deuter, Germany HQ for €9.97M ($13.6M). The property is 15K sq. meters large, and contains two 3D printing production halls and an office building. (6-K)
- With Voxeljet only having €142K in cash/equivalents and €679K in "financial assets" at the end of Q3, the company doubtlessly used some of its Oct. IPO proceeds to finance the purchase.
12:25 PMSolar stocks fall in spite of market rally; ReneSola leads the way
- Even as markets rally in response to a favorable NFP report, solar stocks are giving back some of this year's gains. ReneSola (SOL -10.3%), which tumbled yesterday after positing Q3 results and announcing it's shuttering a polysilicon plant, is the biggest decliner.
- Credit Suisse has cut its ReneSola PT to $3 from $5, while reiterating an Underperform. The firm notes the plant shutdown removes 40% of ReneSola's polysilicon capacity, and undermines arguments the company will benefit from rising polysilicon prices in 2014/2015. It's also worried about ReneSola's "relatively low margins" and limited downstream (solar plant) exposure.
- One positive piece of industry news: A Japanese trade group estimates Japan's solar cell/module shipments rose 25% Q/Q and 231% Y/Y in Q3 to 2.075GW. Imports accounted for 58% of shipments, and rose 30% Q/Q and 540% Y/Y.
- Rising shipments to Japan have already lifted both the sales and margins of many Chinese module suppliers. First Solar (FSLR -1.9%) announced its entry into the market last month.
- Notable solar decliners: YGE -6.7%. TSL -3.5%. CSIQ -2.7%. JKS -2.6%. LDK -2.1%. JKS -2.6%. JASO -2.2%.
- Solar ETFs: KWT, TAN
12:01 PMPandora slides, Albert Fried sees Spotify affecting royalty talks
- A day after giving up its morning gains in response to a report that Spotify plans to offer limited mobile access to its library on an ad-supported basis, Pandora (P -2.5%) is selling off on an up day for equities. A note from Albert Fried's Rich Tullo could be playing a role.
- Tullo, who downgraded Pandora to Underweight last month prior to its FQ3 report, isn't worried about the competitive threat posed by Spotify's new service, given Pandora has held its own against Spotify thus far and "the ease of use case of the Pandora platform defends Pandora’s market share."
- He is, however, worried Spotify's willingness to pay higher royalty rates to artists will affect Pandora's 2014 negotiations with recording rights organization SoundExchange (responsible for a huge portion of Pandora's royalty payments).
- Tullo: "We think 2014 will be a tough year for Pandora from a news flow perspective ... artists may be going into the negotiation from the position that Pandora needs to pay 4x to 10x more per performance."
- Pandora recently gave up on trying to get the Internet Radio Fairness Act passed, and said it would focus on lobbying the Copyright Royalty Board for rate changes.
11:41 AMMellanox started at Hold, shares rally anyway
- Jefferies' James Kisner has started Mellanox (MLNX +3%) with a Hold and $40 PT.
- Kisner predicts adoption of Mellanox's "superior" InfiniBand interconnect tech will continue growing thanks to rising penetration of Web/cloud services and HPC/big data deployments (both place a premium on fast I/O transfer speeds). But he also thinks Mellanox's valuation assumes a 2014 revenue ramp "that is not riskless."
- Following a difficult 2013 (sales are expected to be down 21% Y/Y), Mellanox is expected to post 27% 2014 revenue growth. The company's shares, pressured by concerns about Intel's planned 2014 launch of Xeon server CPUs with built-in I/O connectivity, currently trade at 19x and 2014E EPS and 2.9x 2014E sales, after backing out net cash/investments.
11:08 AMUbiquiti falls after 2.5M-share block trade priced
- A 2.5M-share Ubiquti (UBNT -8.1%) block trade was priced at $38, 4.9% below yesterday's closing price of $39.95.
- CEO Robert Pera, who still owns a majority stake in Ubiquiti, is a possible seller. Investment firm Summit Partners, which significantly pared its stake earlier this year, is another.
- Ubiquiti's huge YTD gains could be motivating Pera or Summit to take some profits.
11:01 AMEA bounces; sell-side defends company amid Battlefield 4 worries
- Electronic Arts (EA +4.6%) has recouped the lion's share of the losses it saw yesterday in response to news its DICE unit is halting work on future projects to fix Battlefield 4. The efforts of several analysts to defend the gaming giant are likely helping out.
- While admitting Battlefield 4's game engine needs to be fixed, Piper's Michael Olson deems it unlikely EA's efforts have pulled in teams working other projects, and believes Battlefield 5 will ship in FY15 (ends March '15). Moreover, though he's only assuming 10M Battlefield 5 shipments for FY15 (compared with 13M Battlefield 4 shipments for FY14), Olson thinks EA can deliver more than $4.3B in FY15 revenue (consensus is at $4.23B).
- Pac Crest's Evan Wilson is more cautious. He argues Battlefield 4's disappointing initial sales, lukewarm reviews, and bugs have "lessened the value of the Battlefield franchise and the probability that it can indeed knock Call of Duty (ATVI +1.9%) off its perch." He also thinks they put into question "EA’s decision to standardize on the Frostbite [game] engine."
- Also: EA has launched iOS/Android games for its popular Heroes of Dragon Age strategy combat franchise. Like other EA mobile titles, the games are free to download, and monetized via in-app purchases.
10:50 AMOSI Systems plunges after TSA pulls $60M screening machine order
- OSI Systems (OSIS -7.7%) shares fall after the contractor loses a $60M order for passenger screening machines from the TSA. The order, secured by subsidiary Rapiscan Systems on Sept. 26, was "terminated for default ... TSA further stated it will issue a revised solicitation for the systems in the future."
- The company has struggled in the past year, with hundreds of its imaging machines being pulled from airports after the TSA concluded that OSI could not meet a congressional deadline to make images from its so-called "naked scanners" more generic.
- Oppenheimer noted, "The failure sounds rather pedestrian but in the context of the recent dispute with the TSA raises serious questions about the day-to-day management of OSI's most important segment."
10:34 AMRally Software tanks on decelerating metrics, weak Q4 guidance
- Shares of Rally Software (RALY -24.3%) plunge after a Q3 beat, decelerating fundamental metrics, and weaker-than-expected Q4 guidance.
- Management's expectations for Q4 revenue of $19.2M-$19.4M (+24%-25% Y/Y) are far shy of analyst expectations of $20.4M. EPS is seen by management at -$0.26 to -$0.24, below a consensus of -$0.20.
- Seat count grew 28% Y/Y to 155K and 3% Q/Q. Calculated Billings (revenue plus the change in deferred revenue), grew a much slower 8% Y/Y to $16.4M.
- A downgrade from Piper Jaffray to Neutral from Overweight is also hampering shares. Analyst Mark Murphy noted concerns on the conference call: "I think people right or wrong they are going to be horn in on the sequential growth rates for paid seats and differed revenue." Deferred revenue growth decelerated to 13% Y/Y, with the balance at $33.7M at the end of the quarter.
10:29 AMIBM takes controlling stake in Dexia IT unit, shrugs off downgrade
- IBM (IBM +0.7%) has inked $1.3B worth of outsourcing deals (spread out over 7 years) with Dexia and several other European financial institutions to manage their IT infrastructures. (PR)
- As a result, IBM will take a controlling stake in the Dexia IT services unit that had been managing said infrastructures, and will "implement a cloud infrastructure" to expand the Dexia unit's services offerings into new markets.
- The tie-up is the kind of higher-margin/value-added services deal IBM has been focusing on, as it looks for way to maintain EPS growth in the face of top-line weakness. IBM's services revenue fell 4% Y/Y in Q3, but its backlog ($141B) was flat Q/Q and up 2% Y/Y.
- Separately, Cowen has downgraded IBM to Market Perform. The firm cites negative survey data regarding Big Blue's services workload and execution/delivery, and (with $100B worth of contracts set to be renegotiated in 2014, and Indian competition an issue) thinks the company's U.S. revenue growth outlook and IT outsourcing base are at risk.
9:57 AMIntel jumps thanks to Citi, Drexel Hamilton upgrades
- Citi and Drexel Hamilton have both upgraded Intel (INTC +3%) to Buy. Citi's PT has been upped to $28, and DH's to $30.
- Citi's Glen Yeung says he's encouraged by stabilizing corporate PC demand (noted by IDC/Gartner in their Q3 data, and also mentioned by Intel during its investor day), and notes Oct. retail point-of-sale data showed growth for the first time in nine months.
- Yeung also calls Intel's forecast for a 5% 2014 drop in PC units "sufficiently conservative." IDC currently expects PC shipments to drop 3.8% in 2014 (those estimates have a habit of changing frequently).
- Intel shares were clocked recently due to investor disappointment with the chip giant's investor day guidance. They currently trade at 12x 2014E EPS after backing out net cash/investments.
9:39 AMA roundup of tech ratings changes
- H-P (HPQ +2.7%) has been upgraded to Hold by Edward Jones.
- Nokia (NOK +1.4%) has been started at Overweight by JPMorgan.
- Vodafone (VOD +2%) has been upgraded to Neutral by Berenberg.
- Infosys (INFY +1.6%) has been upgraded to Outperform by Cowen.
- BT (BT +2.4%) has been upgraded to Strong Buy by Raymond James.
- FairPoint Communications (FRP +5.1%) has been upgraded to Buy by Stifel.
- VOXX International (VOXX +4.6%) has been started at Strong Buy by Needham.
- Vocera (VCRA +3.7%) has been started at Overweight by Stephens.
9:29 AMAmazon roundup: Webstore fees, AmazonFresh, customer satisfaction
- Amazon (AMZN) is set to significantly increase the fees it charges merchants for selling via its Webstore platform. As of Feb. 4, subscription fees will rise to $79/month for both merchants selling only on their site, and those selling both on their site and Amazon; they respectively paid $40/month and no subscription fee before. In addition, the transaction fee charged to the latter group will double to 2%.
- Amazon has already carried out a string of fee hikes for its on-site fulfillment services. But while merchants have griped, the hikes haven't yet halted Amazon's share gains against EBAY and other rivals. 3rd-party sales accounted for 40% of Amazon's Q3 paid units, and are a relatively high-margin business.
- AllThingsD reports the AmazonFresh grocery delivery service could launch in San Francisco on Tuesday. AmazonFresh, which helps act as a foundation for Amazon's same-day delivery efforts, launched in L.A. earlier this year, and might soon launch in NYC. No drones for now.
- Amazon has topped analytics firm ForeSee's customer satisfaction rankings for 100 top brands, with a score of 87. eBay comes in at #39, and has a score of 82.
7:14 AMLinkedIn boosted by BMO on China launch
- "Management has discussed [the China launch] previously, and we learned from a separate NDR with MDC Partners that one of their agencies has been hired to begin a public relations outreach for LinkedIn (LNKD) in China," says analyst Daniel Salmon, upping the stock to a Buy with $235 price target. "We assume a formal launch in 2014, with monetization beginning to ramp in 2015."
- Salmon's team also likes LinkedIn's increasing focus on salespeople (LinkedIn believes there are 6x as many in sales on the platform as there are HR personnel), with a stand-alone product expected to ramp in 2015.
- "We also expect the hiring of Penry Price to lead ad sales to improve the relationship with the agency community; some ad products will likely be culled and a continued heavy focus on Sponsored Updates is expected."
- Shares +1.6% premarket
5:35 AMBitauto prices follow-on slightly below market
- Bitauto Holdings (BITA) prices its follow-on public offering of 2,749,200 ADSs by the Company and a selling shareholder at $30.
- BITA closed Thursday at $30.77.
- BIT provides internet content and marketing services for China's fast-growing automotive industry.
4:13 AMHouse OKs bill to stop frivolous patent lawsuits
- The House has overwhelmingly passed legislation designed to discourage patent trolls from filing frivolous lawsuits by requiring them to disclose more information about who owns the IP involved and so who would ultimately benefit.
- The measure, known as the Innovation Act, also requires judges to decide early on in the proceedings of a case whether a patent is valid, thereby potentially saving companies money on discovery.
- The legislation now needs authorization in the Senate.
- Patent companies include Vringo (VRNG), Wi-LAN (WILN) and Acacia Research (ACTG).
2:44 AMFCC commissioner doubts Comcast-TWC merger would be approved
- The Obama administration probably wouldn't authorize any attempt by Comcast (CMCSA) to acquire Time Warner Cable (TWC), FCC Republican commissioner Ajit Pai has told the WSJ.
- Precedents such as the government's blocking of AT&T's purchase of T-Mobile US suggest a Comcast-TWC deal "could face a number of hurdles in the Obama administration," Pai said. "A Republican administration likely would be more inclined to approve a deal."
- TWC has already turned down two bids from Charter Communications (CHTR), the WSJ reports, adding that Comcast and Charter are unlikely to make a joint offer.
- While the interest in TWC has sent the telecom carrier's shares soaring, it has also hurt its bonds, due to fears about a debt overhang that a deal could bring. The price of TWC's 30-year bond that matures in 2042 has tumbled 17% since the merger chatter began.