Seeking Alpha
  • Today - Friday, October 24, 2014

  • 6:58 PM
    • Thanks in large part to a 41% increase in taxes, America Movil's (AMX -0.9%) Q3 net income fell 39% Y/Y to 10.1B pesos ($746M). EBITDA (adjusted for the Telekom Austria deal) rose 0.4% to 69.2B pesos ($5.1B).
    • On an adjusted basis, service revenue rose 3.8% to 198.6B pesos ($14.6B), a slight improvement from Q2's 3.6% growth. Equipment revenue rose 6.2% to 22.2B pesos ($1.6B), and costs/expenses 5.8% to 151.7B pesos ($11.2B).
    • Total wireless lines +0.1% Q/Q and +0.5% Y/Y to 286.8M. Mexican lines fell 1.1% Q/Q to 70.5M amid regulatory pressure, but Brazilian lines rose 1.3% to 69.6M, and U.S. lines (via TracFone's prepaid services)1.5% to 25.9M.
    • Wireline revenue-generating units (RGUs) rose 1.8% Q/Q and 6.8% Y/Y to 77.6M. Mexican RGUs fell 0.1% Q/Q to 22.2M, while Brazilian RGUs rose 3.1% to 35.6M (~46% of total RGUs).
    • Net debt fell by $2.3B during the quarter to $36.2B.
    • AMX used its Q3 CC to state its isn't currently talking to anyone about a T-Mobile USA (TMUS +1.3%) acquisition. A German magazine speculated yesterday (while reporting Deutsche Telekom is still open to a T-Mobile sale) AMX could bid for T-Mobile.
    • Earnings Release (.pdf)
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  • 6:18 PM
    • Re/code reports Larry Page has signed off on a reorg that puts respected Android/Chrome/Google Apps chief Sundar Pichai in charge of Google's (NASDAQ:GOOG) core products.
    • Pichai will reportedly "have purview over research, search, maps, Google+, commerce and ads and infrastructure," in addition to his current responsibilities. The six execs responsible for the aforementioned product areas will now report to Pichai instead of Page. However, YouTube chief Susan Wojcicki will keep reporting to Page.
    • Page's decision is said to be driven by a wish to spend more time on the "bigger picture," and by concerns Google will be less innovative/agile as it ages. The co-founder/CEO will still be directly in charge of business and operations, as well as Nest, Calico, Google X, and a few other areas.
    • It was only last year that Pichai replaced Andy Rubin as Google's Android chief.
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  • 5:52 PM
    • "Investor pessimism doesn’t seem to dampen [Jeff] Bezos’s appetite for risk. Employees unsettled by Amazon’s (AMZN -8.2%) steadily depreciating stock price are probably the only thing that can force Bezos to slow down," writes BloombergBusinessweek's Brad Stone in the wake of Amazon's Q3 miss and soft guidance.
    • Stone, who wrote a popular book on Bezos and Amazon, notes declining employee stock grant values caused by investor angst over Amazon's losses could increase employee turnover, something management is unlikely to ignore. Thus, curbing spending (with the goal of boosting Amazon's shares) could go hand-in-hand with keeping needed employees happy.
    • How much could lower spending boost profits? In a much-discussed September post, Benedict Evans estimated Amazon's trailing free cash flow would be around $4B (rather than a current $1.08B) if its capex/sales ratio remained at 2009 levels.
    • Nonetheless, Evans defended Bezos' strategy: "Amazon has perhaps 1% of the US retail market by value ... Jeff Bezos’s view is pretty clear: keep investing, because to take profit out of the business would be to waste the opportunity ... The question to ask isn’t whether Amazon is some profitless ponzi scheme, but whether you believe Bezos can capture the future."
    • The sell-side was in a less forgiving mood today: Two downgrades arrived (from Cowen and Janney), as did a slew of target cuts. Notably, analysts often expressed more concerns about Amazon's top-line growth slowdown (particularly for media and international sales) than its bottom-line pressures.
    • Prior Amazon earnings coverage
  • 5:16 PM
    • A Brazilian site has reported acquisition-hungry Alibaba (BABA +1.4%) is looking for local M&A targets. Latin American e-commerce giant MercadoLibre (MELI +4.4%), which gets a large chunk of its revenue from Brazil, rallied today.
    • Alibaba already has a sizable Brazilian presence courtesy of its AliExpress site, which sells Chinese goods at wholesale prices to non-Chinese consumers. An estimated 12M+ Brazilians visited AliExpress (available in Portuguese) in July. Steep local prices for various consumer goods has boosted Alibaba's appeal.
    • Altogether, Alibaba's international commerce revenue rose 31% Y/Y in calendar Q2 to $237M, and made up 9% of total revenue.
    • Earlier: Alibaba thinking of buying 37% stake in Lion's Gate
    | 1 Comment
  • 4:46 PM
    • Roku is working with BofA/Merrill and Citi on an IPO that could raise up to $150M, the WSJ reports. No word yet on the ETA, or the valuation Roku is seeking.
    • Bloomberg reported in February Roku was mulling an IPO. The Web streaming set-top vendor has held its own in a market that also features Apple, Amazon, and TiVo.
    • CEO Anthony Wood recently stated Roku had 2013 sales of $190M, and is nearing profitability. The company added a $50 HDMI streaming stick to its lineup this spring.
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  • 4:30 PM
    • The WSJ reports H-P (HPQ -0.1%) wants to sell at least 51% of H3C Technologies, a Chinese subsidiary that has grown to become the country's top enterprise switch/router vendor. A source thinks the unit could fetch $5B in a full sale. P-E firms are reportedly being contacted.
    • H3C has over 5K employees. It was originally formed as a JV between 3Com and Chinese IT giant Huawei. 3Com bought out Huawei's stake for $882M in 2006, and was in turn acquired by H-P in 2010.
    • In addition to switches and routers, H3C sells Wi-Fi access points/controllers, firewalls, and cloud and network management software. A fair amount of overlap exists with H-P's  core networking unit.
    • Networking has been a relative bright spot for H-P: Sales rose 4% Y/Y in the July quarter. But the company has hinted it wants to streamline ahead of its planned split. It might also be nervous about growing Chinese government pressure on U.S. tech companies following last year's NSA spying uproar.
  • 3:57 PM
    • Citing valuation, Sidoti has downgraded 8x8 (EGHT -5.4%) to Neutral.
    • The downgrade comes a day after the VoIP/unified communications service provider jumped on account of its FQ2 beat and strong customer metrics.
    | 1 Comment
  • 2:45 PM
    • Though its Q3 revenue was only in-line (EPS beat by $0,03), Constant Contact (NASDAQ:CTCT) is forecasting 2015 revenue growth of ~17%, above a 14.3% consensus. Adjusted EBITDA margin is expected to grow by ~150 bps.
    • Q4 guidance is mixed: Revenue of $87.4M-$87.8M vs. a consensus of $87.2M and $0.32.
    • In spite of intense competition in the cloud marketing automation space from the likes of Salesforce, Oracle, and Marketo, CTCT ended Q3 with 625K customers, up from 615K at the end of Q2 and 585K a year ago. ARPU rose to $44.89 from $44.40 in Q2 and $41.40 a year ago.
    • Gross margin rose 60 bps Y/Y to 72.2%. GAAP opex rose 13% to $52.2M.
    • Q3 results, PR
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  • 2:31 PM
    • Down AH yesterday due to the light Q4 guidance offered with a Q3 EPS beat, Freescale (NYSE:FSL) has reversed course. Some bullish sell-side notes are helping.
    • Credit Suisse's Jonathan Pitzer likes the face Freescale's gross margin rose 110 bps Q/Q in Q3 (better than guidance for a 50 bps drop), and that op. margin reached a record high of 18.7% thanks to a 3.5% Q/Q opex drop. " This should alleviate investor concerns relative to margin drivers that often seemed ambiguous."
    • Deutsche's Ross Seymore: "Despite near term revenue headwind, we continue to view FSL as a company that is righting the ship on revenue, focusing on gross margin progression and opex discipline, which should result in better free cash flow to further de-lever the balance sheet and unlock earnings power."
    • Oppenheimer's Rick Schafer is more cautious, calling Chinese 4G infrastructure demand "the lone bright spot" for the chipmaker's sales as it deals with auto/industrial softness.
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  • 2:17 PM
    • Chegg (NYSE:CHGG) is turning in a strong day after Amazon partly blamed a shift in demand from textbook sales to rentals for slowing North American media revenue growth.
    • Chegg obtained $45.8M in Q2 revenue from its print textbook rental ops, and $18.7M from faster-growing digital revenue streams. Q3 results are due on Nov. 3.
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  • 2:12 PM
    • Apple's (AAPL +0.1%) global iTunes music download sales have fallen 13%-14% since the beginning of 2014, the WSJ reports. The decline is similar to the 12% Y/Y drop in 1H14 U.S. music download sales reported by the RIAA.
    • The paper adds Apple, which dominates the paid music download market, is responding with plans to launch a revamped version of the Beats Music subscription service that's a part of iTunes. That meshes with September reports stating Apple is thinking of getting rid of the Beats Music brand.
    • While paid downloads are dropping, the RIAA estimates 1H14 U.S. subscription music revenue rose 23%. Re/code has reported Apple is trying to get music labels to agree to price cuts that would enable a $5/month service, arguing $60/year in revenue would still be enough to offset any download revenue lost due to a subscription sign-up.
    • Apple's iTunes/software/services revenue rose 8% Y/Y in FQ4 to $4.6B, thanks to a 36% increase in App Store revenue. The company didn't break out music revenue.
  • 1:46 PM
    • Microsoft's (MSFT +2%) FQ1 op. margin of 30.1% was above a 27.6% consensus, notes Credit Suisse's Philip Winslow (Outperform), upping his target by $5 to $55. He chalks up the margin strength to both cost controls and better-than-expected hardware sales.
    • Winslow asserts Microsoft can return to double-digit EPS growth, and that "multiple options" still exist for boosting shareholder value. Among them: Divesting underperforming/non-core businesses, increasing capital returns, and accelerating the Office 365 shift in a manner similar to Adobe's Creative Cloud migration. 365 commercial seats were up 96% Y/Y in FQ1.
    • Oppenheimer's Shaul Eyal (Outperform) likes the margin strength, as well as the 128% growth in total commercial cloud revenue. "It appears CEO Nadella is infusing new DNA."
    • Separately, Microsoft officially announced today it will now use its own brand for Lumia hardware rather than Nokia's. The Nokia brand will still be used for some feature phones, such as the Nokia 130.
    • Yesterday's earnings coverage
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  • 1:16 PM
    • The FCC's Incentive Auction, which will auction off a giant chunk of low-frequency (600 MHz.) spectrum historically used for TV broadcasts, is now set for early 2016 instead of mid-2015.
    • The agency cites legal challenges from broadcasters, as well as the auction's complexity and "the need for all auction participants to have certainty well in advance."
    • A recent FCC study (.pdf) meant to appease broadcasters estimated the auction could raise $45B. Sprint (S -0.1%) and T-Mobile (TMUS +0.1%), whose rural and in-building coverage has suffered from a dearth of low-frequency spectrum, are expected to spend aggressively.
    • AT&T (T +0.1%) and Verizon (VZ +1%) are also expected to bid heavily, though the FCC plans to limit their purchases on account of their already-massive low-frequency assets. AT&T has said it plans to spend at least $9B.
    • Dish (DISH +1.4%), which has a large chunk of high-frequency spectrum it's still trying to find a use for, plans to participate as well.
  • 12:54 PM
    • Initially up over 15% yesterday in response to its leveraged recap plans, KLA-Tencor (KLAC +6.6%) has given back over half those gains after guiding on its FQ1 CC (transcript) for FQ2 revenue of $620M-$700M and EPS of $0.46-$0.70, below a consensus of $755M and $0.89.
    • A broad bookings guidance range of $700M-$900M has been provided. FQ1 bookings totaled $567M, below guidance of $600M-$800M. As was the case 3 months ago, KLA blamed delayed orders from a foundry customer related to FinFET (3D transistor) process investments.
    • Like many of its peers, KLA is maintaining an optimistic tone for 2015, predicting strong demand from foundry, logic, and memory clients due to investments in advanced technologies and processes (14nm/16nm FinFET, 3D NAND, etc.). After accounting for just 25% of FQ1 orders (lower than normal), foundries are expected to account for 62% of FQ2 orders.
    • Credit Suisse and B. Riley have both downgraded KLA to Neutral. Each cites valuation.
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  • 12:32 PM
    • Though Ericsson (ERIC -3%) beat Q3 estimates, the mobile infrastructure giant stated North American business activity "slowed down during the quarter as operators currently focus on cash flow optimization." It added North American spending patterns make it tough to judge near-term demand.
    • Ericsson's North American sales fell 3% Y/Y to $1.93B, partly offsetting strong growth in China, India (+56%), the Middle East (+38%), and other emerging markets. Top-line figures were boosted some by M&A.
    • AT&T and Verizon have been taking cautious approaches to capex, and Sprint (though investing heavily in 4G following the SoftBank deal) has been looking to cut costs under new CEO Marcelo Claure. The U.S. and Japan have been ahead of many other developed markets in ramping 4G coverage.
    • Juniper (JNPR -6.3%) offered light Q4 guidance two weeks after delivering a Q3 warning, and reported its service provider sales were down 6% Y/Y due to soft demand from Asia-Pac, EMEA, and (especially) U.S. carriers.
    • When the world's #2 carrier router vendor was asked on the CC (transcript) about 2015 sales, CEO Shaygan Keradpir admitted Juniper has poor near-term visibility, and that a rebound could take time. "Because we think these cycles typically take 2 to 4 quarters ... our planning assumption is that growth will return in the second half of 2015."
    • Nokia and Infinera recently offered more positive numbers/commentary. Bulls have argued strong data/video traffic growth will lift capex. Bears have argued soft (if not negative) carrier revenue growth will continue pressuring spending.
    • Decliners: ALU -1.6%. JDSU -2%. INFN -3.1%. CIEN -2.5%. CALX -2.5%. FNSR -1.8%. ADTN -1.5%. The Nasdaq is up 0.4%.
    | 1 Comment
  • 11:20 AM
    • In addition to beating Q3 revenue estimates (while posting in-line EPS), Ingram Micro (NYSE:IM) has guided for Q4 Y/Y revenue growth of 8%-12% and EPS of $0.95-$1.02, mostly above a consensus for 5.1% growth and EPS of $0.97.
    • CLSA has given the IT hardware distributor a two-notch upgrade to Outperform. A fall selloff had tempered expectations going into earnings.
    • A near-50% Y/Y increase in Mobility product sales (boosted by a new Verizon channel deal) to $2B helped drive the Q3 revenue beat. EPS was pressured by 15 bps drop in gross margin to 5.75%, which was caused by a mix shift towards mobility and systems sales.
    • Q3 results, PR
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  • 11:02 AM
    • Frontier's (FTR -0.7%) $2B purchase of AT&T's Connecticut wireline assets has officially closed. Connecticut's AG had signed off on the deal in August.
    • The purchase gives Frontier 875K voice, 415K data, and 215K video connections, and 2.5K employees. Frontier respectively had 1.93M and 393K broadband and video subs, and 13.9K employees, at the end of Q2.
    • Frontier has promised to invest $63M over the next three years to expand U-verse service coverage and increase broadband speeds in the state. The telco predicts it will "realize significant cost savings from leveraging its current infrastructure in supporting the new Connecticut business operations."
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  • 10:42 AM
    • A Chinese paper reports China Unicom (CHU +0.9%) and China Telecom (CHA +1%) plan to launch (through a JV) a local content delivery network. The JV, which would aim to profit from China's rapid mobile data and online video traffic growth, would be run by CHA's cloud services unit.
    • Leading Chinese CDN owner ChinaCache (CCIH -5.1%) isn't responding well to the news, which comes two weeks after CHA announced a CDN partnership with Akamai. Alibaba launched its own CDN services last year.
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  • 10:29 AM
    • Goldman has cut QIWI to Sell from Buy, and slashed its target by $35 to $24. The firm is worried regulators will crack down on the Russian online payments leader due to its non-compliance with user identification requirements.
    • Qiwi has already sold off more than once on fears about new regulations. Shares are close to a 52-week low of $26.14.
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  • 10:06 AM
    • The FT reports P-E firms Bain and Apax Partners are weighing offers for Portugal Telecom (PT +3.7%). Both PT and merger partner Oi (OIBR +6.1%) are rallying in early trading.
    • French cable giant Altice has also been reported have interest in acquiring PT, and thus undoing the Oi merger. Shares of both companies have cratered this year, thanks in part to the Rioforte debt scandal.
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