Today - Saturday, November 22, 2014
- The Rayno Report states Verizon (NYSE:VZ) has launched a major trial of bare-metal (commodity) switches running on a networking OS and SDN switching software respectively supplied by startups Cumulus Networks and Pica8.
- Light Reading backs up the report, while adding Verizon "aims to determine whether bare-metal switches ... could eventually replace more expensive, proprietary Juniper Networks Inc. (NYSE:JNPR) equipment." Nonetheless, Rayno reports Juniper is a part of the trial, supplying "routing and switching technology that helps tie the network together with VXLAN [networking virtualization] technology."
- Though the trial is in its early stages, both sites report hearing it's a big deal, given the potential for bare-metal/white-box gear to replace proprietary hardware on a large scale. "[Verizon] can reduce their costs massively," says a Rayno source. The trial coincides with the deployment by Verizon's cloud services ops of an SDN solution using server-based hardware from Super Micro (NASDAQ:SMCI).
- Cisco (NASDAQ:CSCO), which maintains a 60%+ data center switch share and a leading position in the carrier router market, has already called white-box hardware its biggest threat. Internet giants have been quick to embrace SDN/white-box solutions - Facebook has even open-sourced a data center switch design - and AT&T is looking to adopt SDN through its Domain 2.0 initiative.
- Cisco's recently-launched ACI/APIC SDN/networking virtualization solution is gaining traction within the company's enterprise base, but critics call it too expensive/proprietary - pricing for an APIC controller runs from $40K-$58K, and software licenses for ACI-capable switches run from $3K-$15K. Meanwhile, Verizon, AT&T, and other carriers are hungry to cut wireline capex.
- Juniper has adopted an SDN strategy that's more friendly to open platforms, but there might be some internal dissent on that front. Rayno reports recently-ousted CEO Shaygan Kheradpir "was more pro-SDN than the existing Juniper management, which is more conservative about protecting its installed base."
- Test drilling began Friday night. Kinder Morgan (NYSE:KMI) intends to work 24 hours a day over the next 10 to 12 days to complete its work.
- KMI is test drilling 250 meters into the ground as part of its survey work for a proposed expanded pipeline, which would see it bore a tunnel under the mountain to reroute its existing Trans Mountain pipeline.
- KMI received a court injunction a week ago to have protesters removed from the site. More than 30 protesters have been arrested since Thursday.
- An investigation by The Telegraph finds that one in four pensioners who retired with a private pension in the past seven years is entitled to more annual pension income.
- Aviva (NYSE:AV) Britain’s largest insurer, says it's paying compensation and increasing the annual payouts of hundreds of customers.
- FCA watchdog will publish a report in December that experts say could "open the floodgates to claims" and force other companies to take similar actions.
- Russia does not plan to cut oil production to support falling crude prices, Energy Minister Alexander Novak said on Rossiya 24 TV today.
- It's unclear whether Novak was replying to a remark he made Friday, when he said Russia was discussing whether to cut oil output.
- Russia, the world's biggest energy exporter, relies on oil and gas exports for about half its federal budget.
- ETFs: USO, OIL, RSX, UCO, SCO, RUSL, BNO, DTO, DBO, RUSS, ERUS, CRUD, USL, UWTI, RBL, DWTI, DNO, SZO, OLO, RUDR, OLEM
- SGL Group (OTCPK:SGLFF), who supplies carbon fibre reinforced parts for BMW's (OTCPK:BAMXY) electric cars, is in talks with several other carmakers to supply carbon fibre, CEO Juergen Koehler tells Wirtschaftswoche.
- "VW (OTCPK:VLKAF), in particular through Audi (OTCPK:AUDVF) and Lamborghini are also banking on high-volume use of carbon components. General Motors (NYSE:GM) has also hinted recently that they want to use more carbon. Porsche (OTCPK:POAHF) is also very active," he said, adding that new contracts would not be as big as the BMW venture.
- BMW's i-series, which cost it billions to develop, has had weak sales. BMW had sold less than 11,000 i3s by the end of September.
- SGL's main business is making graphite electrodes used to recycle scrap metal into steel. Its carbon fibre business accounted for just 2% of sales last year.
- SGL has already cut 1,400 of its 6,000 workforce.
- Starbucks (NASDAQ:SBUX) plans to introduce Powermat wireless charging stations at close to 200 stores in the San Francisco region.
- The Powermat cuts out cords in the charging process by using a process called inductively coupled power transfer.
- A broader roll-out of the technology by Starbucks is planned across the U.S. and Europe within a year.
- General Motors (NYSE:GM) is also an early adopter of the Powermat wireless charging system with integration in the 2015 Cadillac ATS. The automaker is an investor in Powermat through its nimble VC arm.
- Duracell sits right smack in the middle of the Powermat innovation as the company with the brand and manufacturing capabilities to aim high. The swap of the business from profit-focused Procter & Gamble (NYSE:PG) to strategic-minded Berkshire Hathaway (BRK.A, BRK.B) sets up well for investments in long-term growth, note analysts.
- Harvard Business School's Bill George is troubled by the trend of activist investors shifting their wrath to some of America’s best companies, which he says may net nice profits in the short term but places the competitiveness of America’s great global companies at risk.
- An example is Amgen (NASDAQ:AMGN), whose stock has gained 185% in the past five years, but Dan Loeb still wants to split the company; George says this would destroy a productive innovator by taking away the cash it needs to develop new drugs and fuel growth.
- PepsiCo’s (NYSE:PEP) 52% increase in three years is double that of Coca-Cola, yet Nelson Peltz is agitating to split the company in two, as he did with Kraft - which has struggled, as has its Mondelez spinout.
- Peltz also is trying to break up DuPont (NYSE:DD) even though the stock has climbed 250% since Ellen Kullman became CEO in 2009; a disjointed conglomerate without a clear strategy, DuPont's stock had slipped 62% since 2000.
- Bill Ackman successfully partnered to put Allergan (NYSE:AGN) in play, which resulted in a sale, but George says the deal was unnecessary for a stock that had gained 2,400% since David E.I. Pyott became CEO in 1998.
- In each case, George says leaders were forced to focus on saving their companies instead of winning global competitive battles, creating great products and building new businesses.
- "The construction crane isn’t necessarily a symbol of economic vitality; it can also be a symbol of an economy run amok.," writes the WSJ's Bob Davis as he exits several years of his reporting assignment in Beijing.
- China, says Davis, is less economic miracle than a debt-fueled housing bubble combined with corruption-laced spending, and he wonders how it is - in such a supposedly entrepreneurial economy with boundless potential - that so many of China's young would prefer working for the State?
- President Xi Jinping has pronounced himself an economic reformer and has the requisite 60-point plan to remake the economy and cleanse the communist party of corruption, but even the most powerful of China's leaders have trouble enforcing their will, says Davis, telling the story of how a local province - under orders from Mr. Xi to cut steel production along with emissions - staged to great fanfare essentially meaningless demolitions of blast furnaces.
- "In China, I have learned, yellow isn’t just the color of development. It is also the color of a setting sun."
- ETFs: FXI, PGJ, YINN, GXC, FXP, YANG, MCHI, XPP, YAO, YXI, CHXF, CN, FCA
Friday, November 21, 2014
9:30 PM| Comment!
- Netflix (NASDAQ:NFLX) has landed the rights to Unbreakable Kimmy Schmidt, a new Tina Fey/Robert Carlock comedy about a doomsday cult survivor living in NYC, for two seasons. The show's first season (13 episodes) arrives in March.
- The show, originally set to be aired by NBC, is the first one made by Fey and Carlock since 30 Rock. Several other 30 Rock vets are also on board.
- Recent Netflix deals: Between, Adam Sandler, The Weinstein Company
- Ethanol and other biofuel groups are declaring victory, as the EPA today said a decision to finalize blending requirements for 2014 - first proposed more than a year ago - has been delayed.
- The delay gives hope to ethanol producers that the EPA will rethink how it proposes the annual biofuels levels; the draft 2014 biofuels levels were much lower than the ethanol industry wanted.
- Oil company lobbyists opposed to the law say the idea of setting a retroactive quota shows the EPA is incapable of managing the program; the American Fuel & Petrochemical Manufacturers, which represents energy companies, plans to sue the EPA for failing to issue the 2014 requirements.
- Ethanol stocks: ADM, GPRE, GEVO, MEOH, SZYM, REX, CDTI, REGI, FF, AMRS, ANDE
- Related refining stocks: VLO, HFC, MPC, TSO, WNR, ALJ, PSX, PBF, DK, NTI, ALDW
- Related coal stocks: BTU, WLT, CNX, ACI, ANR, YZC, ARLP, AHGP, NRP, PVG, PVA, OXF, CLD, WLB, SCOK
- Related solar stocks: JASO, SPWR, TSL, FSLR, CSIQ, YGE, EMKR, SOL, JKS, CSUN, SCTY, RGSE, SUNE, HSOL, DQ, ASTI, OTCQB:SOPW
- ETFs: XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, FENY, PXJ, RYE, FXN, DDG, FUE, KOL, TAN
- American Tower (NYSE:AMT) is buying 6,480 towers from TIM Participacoes (NYSE:TSU) for R$3B ($1.2B), slightly more than the ~$1.1B previously reported by Reuters. AMT "intends to finance the acquisition in a manner consistent with its previously announced leverage targets."
- The towers are expected to produce R$435M/year ($171M/year) in revenue, and R$191M/year ($75M/year) in gross margin. TIM has agreed to 20-year leases for the towers, and will act as their anchor tenant.
- AMT has already bought Brazilian towers from NII Holdings, and acquired local tower owner BR Towers. The company also bought 666 Brazilian towers in 2011, a transaction Muddy Waters took aim at.
- Altogether, AMT owned/operated 69.5K towers at the end of Q3.
6:27 PM| Comment!
- Calling the company's guidance for mid-single digit 2015 revenue growth "optimistic," CLSA's Srini Pajjuri downgraded Intel (NASDAQ:INTC) to Sell today in the wake of its investor day.
- Pajjuri: "Intel’s PC segment volumes are on track to grow 9% in 2014, compared to our PC unit forecast of -2%. We believe share gains explain ~3 points of the discrepancy, which means that the remaining 8 points of difference is largely due to inventory build at customers." He expects Intel's PC CPU revenue to fall 6% in 2015 vs. guidance for a slight decline.
- Bernstein's Stacy Rasgon, who downgraded two weeks ago, also remains concerned about PC CPU inventories. In addition, he thinks Intel's mobile ops "[remain] a horror show."
- Bulls, meanwhile, are taking heart in Intel's forecast for server CPU division (DCG) revenue to grow at a 15% annual clip through 2018. Jefferies' Mark Lipacis: "We think DCG growth alone could add $1 billion to 2015 FCF and $0.15-$0.20 to EPS. We forecast FCF to increase by 30%-40% to $13 billion in 2015."
- Pac Crest's Mike McConnell notes the DCG outlook implies 20%+ Y/Y growth in non-traditional enterprise segments (Web/cloud, HPC, networking) and high-single digit growth elsewhere. "We believe improving U.S. GDP growth, coupled with Microsoft’s planned expiration of [Windows Server 2003 support] in July, is driving Intel’s more constructive outlook for demand from its traditional enterprise customer base next year.”
- The PC division had $4.1B in Q3 op. profit, and DCG $1.9B. Intel's outlook suggests the company isn't too concerned for now about ARM server CPUs; Qualcomm threw its hat into the ARM server ring on Wednesday.
- Four years after the Deepwater Horizon disaster, giant new oil projects are returning to the Gulf of Mexico - bigger and more expensive than ever - even as U.S. oil prices are below $80/bbl at a four-year low.
- New projects alone have the combined capacity to pump ~900K bbl/day: Hess (NYSE:HES) said Monday it had started pumping crude from its deepwater Tubular Bells installation, Exxon (NYSE:XOM) and Anadarko (NYSE:APC) plan to start up two more major Gulf projects in coming months, and Hess, Chevron (NYSE:CVX) and other partners recently OK'd a $6B Gulf development.
- Even BP is returning in a big way, with two Gulf projects and plans to spend $4B/year in the Gulf for the next decade, as it works on technology to drill at greater depths.
- All this is happening even as costs are jumping, partly because companies are drilling farther from shore and in deeper waters; deepwater wells are up to 25% more expensive today than in 2010, and drilling the average deepwater Gulf well takes 13% longer than it did before the 2010 spill.
- Shell’s (RDS.A, RDS.B) 100K bbl/day Olympus, which came online ahead of schedule and under budget, began tapping oil and gas in the Gulf in February; it is also working on a new Gulf project that will tap an oil field under 9,500 feet of water, 3x deeper than Olympus.
- Qualcomm (NASDAQ:QCOM) has sold its Taiwanese Mirasol display plant to TSMC (NYSE:TSM) for $85M, per a TSMC regulatory filing.
- Taiwanese media previously reported Qualcomm was set to sell the plant, which it once planned to invest up to $975M in, and that TSMC wanted to use it to expands its chip assembly/testing ops.
- Meanwhile, the sell-side has been busy debating Qualcomm's analyst day guidance and commentary, with much of the attention on focused on the company's China remarks. Cowen's Tim Arcuri is somewhat encouraged. "The company provided no new substantive regulatory (NDRC/FTC/EU) updates, but seemed to strike a more definitive tone about ultimately collecting royalties on 'substantially all LTE devices.'"
- That, in turn, makes Arcuri think the most likely outcome for the China dispute is "some combination of a fine, potential changes in the royalty rate structure for all of [Qualcomm's] licensees operating in China, and/or increased investment in the local China semiconductor supply chain."
- Bernstein's Stacy Rasgon is less positive. "We do not believe the near-term regulatory issues (particularly China) are truly the primary issue anymore ... The bigger issue being how the rise of China, at scale, is changing the overarching market dynamics that Qualcomm plays."
- The Defense Department awards Lockheed Martin (NYSE:LMT) a contract valued at $4.7B for an eighth batch of F-35 fighter jets, marking a drop in the cost per plane of 3.5% from the last contract and a 57% reduction from the first batch.
- Lockheed's F-35 program manager said the latest contract showed the company was making steady progress in reducing the cost of the most advanced U.S. warplane.
- The Pentagon has signed a separate contract valued at $1.05B for an eighth batch of engines built by United Technologies' (NYSE:UTX) Pratt & Whitney unit to power the jets.
- Following 26 rounds, total bids in the FCC's AWS-3 spectrum auction have reached $33B - up from $24B two days ago. Though the auction's pace has slowed, more than $1B worth of bids were still tallied in the latest round.
- Walter Piecyk observes the average bid is now at $2.04/MHz./POP, far above his initial estimate range of $0.75-$1.25, and that it implies DISH's existing spectrum assets are worth over $73/share alone. Dish rose 2.1% today to $73.70.
- Tim Farrar thinks Dish may have bid over $10B, as it tries to both add to its spectrum portfolio (thus increasing its strategic value to carriers) and inflate the value of its existing assets. In addition to bidding against AT&T, Verizon, and T-Mobile for paired spectrum assets (the auction's main prize), Dish is expected to be the winning bidder for 15MHz. of unpaired spectrum.
- Meanwhile, the FCC has announced it will vote on rules for its 600MHz. incentive auction (due in 2016, and expected to be even bigger) in December. If approved, the rules will then by opened for public comment.
- Sticker shock? While the S&P rose 1.2% this week, AT&T (NYSE:T) fell 1.7% and Verizon (NYSE:VZ) fell 2.5%.