Seeking Alpha
  • Today - Sunday, April 19, 2015

  • 7:45 AM
    • ECB president Mario Draghi said Saturday that Europe is rooting for Greece to resolve its problems, but the Hellenic Republic is the only party that can save itself.
    • Draghi also referred to a comment he made in August 2012 - when pressed by reporters about a Grexit - affirming that the euro "cannot be reversed."
    • Ongoing talks between Athens and its creditors have been going painfully slow, with the latter insisting on a set of detailed structural reforms to approve €7.2B in aid for the cash-strapped country.
    • As a result, Eurogroup ministers set an April 20 deadline last week for Greece's next reform proposal.
    • ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
    | 13 Comments
  • 7:04 AM
    • BMW (OTCPK:BAMXY) is recalling about 91,800 Mini Coopers in the U.S. to fix a defect with the passenger seat mat that may prevent the air bag from deploying.
    • The problem affects the 2005 to 2008 models of the Mini Cooper and Cooper S.
    | Comment!
  • 6:54 AM
    • Raytheon (NYSE:RTN) has agreed to buy Websense from P-E firm Vista Equity Partners, in a deal that values the network security company at $1.9B, including debt, Reuters reports.
    • The new company will be 80% owned by Raytheon and Vista will keep a 20% stake.
    • Websense makes software that blocks websites and lets companies inspect network traffic and filter emails for security and hacking threats.
    • Previously: Raytheon higher as report says in talks to acquire Websense (Mar. 16 2015)
    | Comment!
  • 6:36 AM
    | 8 Comments
  • 6:02 AM
    • Saudi Arabia's bourse is on the rise after the Kingdom announced it would open its $530B stock market to direct foreign investment from June 15. Final rules will be published on May 4.
    • Up to now, foreigners have been restricted to buying Saudi shares indirectly through swaps or ETFs.
    • Tadawul All Share Index +3.4%.
    • Previously: Saudi Arabia sets date to open stock market to foreigners (Apr. 17 2015)
    • ETFs: GULF, MES
    | 1 Comment
  • Saturday, April 18, 2015

  • 10:55 PM
    • Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) will meet Wednesday with the Justice Department in hopes of negotiating concessions to assuage the department's reported opposition to their $45B merger, The Wall Street Journal is reporting.
    • It's the first time the companies would meet with any regulators -- and the deal is nearing its endgame with both Justice and the FCC.
    • Bloomberg reported Friday that staff attorneys at Justice were leaning toward blocking the deal, though any final word would come from senior officials there.
    • The Justice Department's concern is antitrust issues in the combination of two giant service providers; the FCC is evaluating the deal to see whether it is in the public interest.
    | 3 Comments
  • 8:04 PM
    • Nokia (NYSE:NOK) and Alcatel-Lucent's (NYSE:ALU) planned merger could unravel Nokia's R&D partnership/reseller deal with Juniper (NYSE:JNPR). Juniper, which has partnered with Nokia on solutions that pair the former's routers with the latter's base stations and mobile core network gear, counts Alcatel as its second-biggest rival (after Cisco) in the carrier router market, and also squares off against the company in other markets such as carrier SDN software.
    • Ruckus (NYSE:RKUS) is another Nokia partner that could be in the crosshairs: The company competes against Alcatel in carrier Wi-Fi hardware, and has a reseller deal with Nokia that goes back to 2012. The deal was recently expanded to cover Wi-Fi/4G small cell systems.
    • At the same time, the merger has fueled speculation one or more rivals could respond with acquisitions of their own. A potential acquisition of Juniper by mobile infrastructure giant Ericsson (NASDAQ:ERIC) has especially been the subject of much talk.
    • Ericsson is also viewed as a potential suitor for optical networking hardware vendors/fellow Alcatel rivals Ciena and Infinera. Ruckus has been seen as a potential M&A target for a long time. However, it currently competes against Ericsson, which bought Wi-Fi hardware vendor BelAir Networks in 2012.
    • RF backhaul hardware maker DragonWave (NASDAQ:DRWI) could also lose business thanks to the merger; it bought Nokia's RF backhaul business in 2012. and maintains a reseller deal. However, H.C. Wainwright recently downplayed those concerns, arguing Alcatel's RF backhaul systems are expensive and clunky.
    • Juniper and Ericsson report earnings on April 23, and Ruckus on April 30.
    | 10 Comments
  • 5:57 PM
    • Though 3D printer makers have seen their shares pummeled in 2014 and early 2015 thanks to a mixture of earnings disappointments, margin/spending concerns, and multiple compression, Canalys forecasts total sales of 3D printers and related materials/services will rise another 56% in 2015 to $5.2B. It also forecasts a 44% industry CAGR from 2014-2019, leading revenue to reach $20.2B.
    • Canalys' Joe Kempton notes improving printer speeds, the availability of new materials, and the launch of new manufacturing methods have boosted growth. He also observes patent expirations have helped the vat polymerization segment of the 3D printer market grow rapidly; material extrusion printers have historically held a much larger shipment share.
    • At the same time, Kempton points out there has been a major increase in the number of industry players, particularly from Asia. "In the next five years, more companies will move in to establish their own niches ... Long-existing vendors such as Stratasys (NASDAQ:SSYS) and 3D Systems (NYSE:DDD) are well placed to take advantage of this growth but may find their dominant positions challenged by newer rivals."
    • The aerospace, automotive, and medical markets are expected to remain major enterprise growth drivers, as firms such as GE, Boeing, and BMW continue investing heavily in 3D printing. On the consumer side, $500 is seen as the "sweet spot at which many consumers are likely to make impulsive purchasing decisions; " 3D Systems' Cube printer goes for $999. Kempton also argues performance, materials, and software improvements are still needed for consumer adoption to take off.
    • Other 3D printing industry firms: XONE, VJET, OTCPK:AMAVF, MTLS, CAMT, ARCW
    • Yesterday: Stratasys' MakerBot unit conducts layoffs
    • Three days ago: 3D printing stocks up strongly amid NYC conference
    | 7 Comments
  • 5:18 PM
    • WhatsApp (NASDAQ:FB) has surpassed 800M monthly active users (MAUs) 3 months after reaching 700M, co-founder/CEO Jan Koum shares on his Facebook page. Given the pace of growth, the world's most popular mobile messaging platform has a good shot of reaching 1B before year's end.
    • The disclosure comes 3 weeks after WhatsApp began supporting VoIP calls on its Android app (iOS support is on the way), a move that makes it an even bigger headache for carriers who have seen WhatsApp eat into their SMS cash cow - over 30B WhatsApp messages are now sent daily, topping global SMS traffic of 20B/day. In spite of the friction, WhatsApp has struck deals with dozens of carriers, often for providing unlimited access to its services for a small monthly fee.
    • WhatsApp's MAU base is ~200M larger than Facebook Messenger's, which recently topped 600M; Instagram has over 300M MAUs, and Facebook proper had 1.39B at the end of Q4. Whereas Facebook launched a 3rd-party app platform for Messenger last month, WhatsApp, which is mostly monetized via $1/year subscription fees charged in some markets, has no plans to launch something similar. Its mobile messaging share is huge in Europe and various emerging markets (e.g. India, Brazil), but relatively small in the U.S., Japan, and China.
    • Meanwhile ahead of Facebook's Wednesday Q1 report, ad partner Nanigans has reported a 17% Q/Q and 260% Y/Y increase in its customers' Facebook ad click rates (CTRs). Their ad prices fell 17% Q/Q and rose 4% Y/Y for ads sold on a cost per click (CPC) basis, and fell 3% Q/Q and rose 273% Y/Y for ads sold on a cost per 1K impression (CPM) basis. While seasonality played a role in the Q/Q drops, it's worth noting e-commerce ad CPCs were also down 14% Y/Y; gaming CPCs and e-commerce/gaming CPMs were all up strongly Y/Y.
    • Video ad spend among Nanigans clients rose 180% Q/Q, as Facebook continues ramping video ad products launched last year. Spending on multi-product ads (launched last summer, support 3-5 images and links) rose 420% Q/Q.
    | 18 Comments
  • 10:04 AM
    • American Airlines Group (NASDAQ:AAL) won approval from the DOT to take over a Los Angeles-Mexico route from Alaska Airlines (NYSE:ALK).
    • The company faced a challenge from Delta Airlines over the valuable route.
    • An important note from the DOT is that the agency says it expects "substantial changes" in the market over the next year after advanced trade talks between the U.S. and Mexico.
    • United Continental (NYSE:UAL), Volaris (NYSE:VLRS), and Aeromexico (OTC:GRPAF) are also active in the L.A. to Mexico market.
    | 5 Comments
  • 9:48 AM
    • The roll-out of 4G LTE high-speed wireless connections in all 2016 General Motors (NYSE:GM) models could provide the automaker with new sources of revenue and jump-start tech initiatives of rivals.
    • GM sees OnStar 4G leading to e-commerce revenue from transaction splits (fast-food, hotel rooms, entertainment, advertising), services, and data usage.
    • Software upgrades pushed out via broadband connections could also save GM money on repair and warranty costs.
    • While execs with GM estimate OnStar will generate $350M in profit over the next three years, some analysts have aimed much higher with their projections.
    • Gartner sees 10% of all revenue from the automobile industry generated from connected broadband platforms by 2020 - a formidable mark which explains the increasing presence of Apple and Google in the sector.
    • Partnerships between Silicon Valley and Detroit are expected to accelerate.
    • GM sits in a nice position to defend its turf against the tech heavyweights through its valuable OnStar property - while BMW (OTCPK:BAMXY), Audi (OTCQX:VLKAY), Nissan (OTCPK:NSANY), and Tesla Motors (NASDAQ:TSLA) are also a few steps away from Internet-based revenue streams.
    • Other companies which might benefit to a degree from a connected car explosion: MBLY, NVDA, AMBA, SWKS,SBUX, DPZ, T - add your own in the comments.
    | 42 Comments
  • 8:25 AM
    • An eventual recovery in U.S. oil drilling activity "will fall well short of reaching previous levels," because of a growing reserve of wells that have been drilled but not yet hydraulically fractured and increased activity in re-fracking wells that are running dry, Schlumberger (NYSE:SLB) CEO Paal Kibsgaard said in Friday's earnings conference call.
    • At least 2,700 wells have been identified as candidates for re-fracture in North America, representing a total market value of ~$5B, says EvercoreISI's James West, adding that the Eagle Ford likely contains 1,000 of the wells while the Bakken has ~500.
    • The assessment suggests the disconnect between oil rigs and the trajectory of U.S. production may get worse before it gets better; while output had been rising in tandem with the number of rigs, production has continued climbing even as the rig count has collapsed to less than half its October 2014 peak.
    • ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, XES, IYE, IEO, IEZ, FENY, PXE, PXJ, RYE, FXN, DDG
    | 8 Comments
  • Friday, April 17, 2015

  • 9:13 PM
    • A spokesperson for ESPN (NYSE:DIS) has weighed in on reports that Verizon (NYSE:VZ) will offer unbundled or "skinny" packages to give customers choice about what they receive -- and ESPN says that's not allowed.
    • “Media reports about Verizon’s new contemplated bundles describe packages that would not be authorized by our existing agreements," says the company's statement. "Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package.”
    • The move's unsurprising coming from ESPN, which charges the highest prices per subscriber by far among national cable peers, reportedly now more than $6/month. That compares with TNT at around $1.48/subscriber month.
    • ESPN has made defending bundles a policy priority in Washington, and companies with powerful bundles of channels like Disney (with the various flavors of ESPN as well as the Disney Channel and Soapnet) can force channels with low or no consumer interest into bundles with the desired flagship stations to build their audience.
    • The statement suggests Verizon didn't get a sign-off from Disney before talking about unbundling, though Peter Kafka reports that Verizon's Alberto Canal said the company had gotten authorization from all programmers in its new bundle.
    | 28 Comments
  • 8:36 PM
    • After pressure from Canada's privacy commission, BCE now faces a $750M class-action lawsuit over its ad targeting.
    • The suit, filed against its Bell Canada and Bell Mobility units, says that the divisions breached laws and user contracts by sharing personal info with a third party without consent.
    • Plaintiff lawyer Ted Charney estimates up to 5M of Bell Mobility's 7.9M customers had been tracked through the company's targeted "Relevant Advertising Program," which began in November 2013.
    • Criticism of the program includes that the information collected wasn't detailed at the start, and that customers had to opt out rather than opt in.
    | Comment!
  • 7:54 PM
    • Mobile phone consumers might be happy, but the industry's price war is showing up as average revenue per account is dropping, according to Cowen's quarterly wireless survey.
    • Bills fell for a second straight quarter, to an average of $136/month, down from Q4's $141. The biggest drop came to Sprint (NYSE:S), whose "Cut Your Bill in Half" promotion is taking hold by reducing its average bill 14% Q/Q to $132/month.
    • Verizon (NYSE:VZ) is below $150 for the first time in the survey, slipping 5% to $143.
    • On the other hand, AT&T (NYSE:T) was essentially flat at $143/month and T-Mobile (NYSE:TMUS) actually increased ARPA 4% to $121.
    • Sprint may face a churn problem: 24% of subscribers whose contracts are up in the next six months say they'll leave, above the industry average of 13%.
    • Subscribers without contracts are up to 34.5% from Q4's 30.5%, spurred by T-Mobile's huge contract-less base.
    | 32 Comments
  • 7:14 PM
    • "We believe ServiceNow (NYSE:NOW) saw increased seasonality in Q1, which is in part the result of the company's shift to Services Automation beyond IT, where the company will be focusing on larger cross-enterprise deals," writes Brean (Buy) after ServiceNow (NOW) provided light Q2 guidance and a smaller top-line beat than has been seen in recent quarters amid heavy forex pressures.
    • On the CC (transcript), CEO Frank Slootman stated ServiceNow "had quite a bit of deal slip" in Q1, and was also dealing with a drained deal pipeline (as of January) and a salesforce reorg. Brean isn't worried. "This is a common occurrence for enterprise software companies, but appears to have unfortunately caught many by surprise (ourselves included). However, we believe the after-market reaction reflects strong outperformance into the print, as well as overall anxiety in the market, as opposed to deteriorating fundamentals."
    • "When you trade at 9x 2016 revenues you don't get a pass...on anything," admits Canaccord (Buy). It's not thrilled with the Q1 numbers, but also thinks there was nothing to change its belief ServiceNow will grow to $3.5B-$4B/year business with 20%+ free cash flow margins by 2020. The firm still sees shares reaching $200 in 4 years.
    • TechStockRadar's Rob DeFrancesco: "[T]he longer-term outlook remains bright because the company continues to benefit from the broad enterprise transition to the cloud (it faces little legacy vendor competition) and gain traction in IT operations management (ITOM), a $10-billion market that is significantly larger than its core [IT service management] market. In the latest quarter, ServiceNow generated about 10% of its business from ITOM, indicating plenty of room for expansion."
    • Shares fell 11.5% in regular trading to $73.29. They're still up 38% from where they traded a year ago.
    • Yesterday: ServiceNow's Q1 results, guidance/details
    | Comment!
  • 7:06 PM
    • As reports spread that Justice Dept. attorneys were likely to recommend blocking Comcast's (CMCSA -2.1%) $45B buyout of Time Warner Cable (TWC -5.4%), the cable companies both argued there was no basis to block the deal.
    • It'll mean "faster broadband speeds, access to a superior video experience, and more competition in business services resulting in billions of dollars of cost savings," according to a Comcast statement. "These benefits have been essentially unchallenged in the record."
    • Meanwhile, over at the FCC, 37 groups opposed to the deal wrote Tom Wheeler, the agency's chairman, saying that even conditional application of net neutrality regulation wouldn't soften their opposition. Signatories included Dish, Consumers Union, the Writers Guild of America, West, and Free Press; "they don't make any new arguments," Comcast responds.
    • Some volume came into competitive stocks and gave them a (relative) lift after the news: Charter Communications (NASDAQ:CHTR) came off lows to finish down 1.9%; Cablevision Systems (NYSE:CVC) rebounded to finish just -0.3%.
    • In February, BTIG analyst Rich Greenfield laid out why he thought the deal would ultimately get rejected.
    • Then shortly after the Justice Dept. news broke, Comcast noted it was bringing its top-speed 2-Gbps Gigabit Pro service to the California Bay Area. The company previously said it would launch the service in Atlanta (where Google Fiber and AT&T plan 1-Gbps service); it's setting June for the California launch, but still no word on possible pricing.
    | 4 Comments
  • 6:51 PM
    • "AMD’s model appears to be breaking, as we now have them burning substantial amounts of cash," writes Bernstein's Stacy Rasgon, reiterating an Underperform following the CPU/GPU vendor's Q1 miss and soft Q2 guidance. "Frankly, this call is getting depressing. But, we see little reason to step off of it."
    • Rasgon doesn't see AMD going bankrupt (no major debt payments are due before 2019), and likes its improved inventory management. But he also thinks the company will be in "serious trouble" if PC demand doesn't stabilize later this year thanks to improved inventories and Windows 10.
    • He also notes AMD's 20% Q/Q and 38% Y/Y PC CPU/GPU division sales drops compare with 16% Q/Q and 8% Y/Y drops for Intel's PC/mobile CPU unit. "This continues to suggest continued share losses by the company (though this should hardly be shocking at this point)."
    • Ascendiant's Cody Acree, who downgraded to Hold: "In addition to a relatively weak macro computing environment, we believe AMD’s gross and operating margin leverage will likely also be constrained. We believe CPU and GPU pricing from both INTC and NVDA will continue to be aggressive and that AMD’s semi-custom business will only support modestly higher margins as pricing declines meet console volume increases."
    • Though maintaining an Outperform for now, Wells Fargo's David Wong now forecasts losses for the rest of 2015, and also through 2016. He sees profits eventually returning on account of AMD's engineering expertise. Oppenheimer notes gross margin (down in Q1) is expected to be flat Q/Q in Q2, and thinks new semi-custom wins are unlikely to ramp before 2H16.
    • Jefferies' Mark Lipacis (Buy) is hoping improved PC/console demand and the launch of AMD's anticipated Fiji GPUs provide a 2H15 lift. He also expects AMD to use its May 6 analyst day to "articulate its first long-term strategy and business model in years."
    • Shares fell 10.3% in regular trading to $2.58. The 52-week low is $2.14.
    • Yesterday: AMD's Q1 results, guidance/details
    | 18 Comments
  • 6:36 PM
    • Wal-Mart (NYSE:WMT) says it plans to eliminate the position of zone managers and reassign those ~14K workers to department manager and assistant manager positions within its stores, while adding up to 8K new department heads, as part of an overhaul of its store operations.
    • WMT says the cut to the layer of in-store management is meant to reduce bureaucracy and put more power in the hands of people running the company’s 4.5K U.S. stores.
    • WMT says the cost is included in the $1B investment in wages and staffing outlined in February; the costly turnaround plan under CEO Doug McMillon also includes raising wages for a half-million employees, with hourly rates going to $9/hour this month and $10/hour by next year.
    | 3 Comments
  • 6:11 PM
    • Celanese (NYSE:CE) hit a new 52-week high today and closed with a 15.5% gain after reporting Q1 earnings that routed analyst estimates and raising its FY 2015 EPS guidance to $5.60-$5.90 from an earlier outlook for $5.00-$5.50 and above the $5.21 consensus estimate.
    • CEO Mark Rohr said CE began 2015 with "significant headwinds at the macro level," including an uncertain macroeconomic environment and volatile currency markets as well as the company's methanol transition and tow inventory de-stocking, but CE's strong Q1 commercial performance "gives us confidence that we can overcome these headwinds."
    • UBS raised its price target on CE to $69 from $65 following the Q1 results, citing the increased guidance and cost savings initiatives, while UBS reiterated its Buy rating on the shares.
    • CE also says it is considering expanding its south Texas chemical plant to produce methanol; the $800M project, to be built under a JV with Japan's Mitsui, would have the capacity to produce 1.3M tons/year of methanol.
    | Comment!
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