Friday, March 7, 2014
- Citing "slowing consumer purchases" amid high penetration rates in mature markets, IDC now forecasts tablet shipments will grow 19.4% in 2014 (to 260.9M units), down from a prior estimate of 22% (271M units).
- Tablet growth steadily slowed in 2014: Shipments rose an estimated 142% in Q1, but just 28% in Q4. IDC puts full-year growth at 52%.
- Two silver linings for high-end/enterprise leader Apple (AAPL - 33.8% Q4 share): 1) ASPs are only expected to drop 3.6% in 2014, after falling 14.6% in 2013, as more consumers embrace "higher-end devices." 2) Commercial buyers are expected to account for 14% of shipments, up from 11% in 2013.
- IDC also thinks Windows (MSFT) tablets, struggling to gain a strong consumer foothold, will take over a quarter of the commercial segment thanks to rising convertible adoption.
- The revised forecast still puts tablet sales within striking distance of eclipsing PC sales: IDC expects PC shipments to drop 6% this year to 295.9M. Smartphone shipments are expected to grow 19% to 1.2B.
- Major tablet OEMs (besides Apple): SSNLF, LNVGY, AKCPF
- After falling 3.5% Y/Y in Q3, external disk storage system sales rose 2.4% in Q4, says IDC. The growth came even though sales of the servers that interact with these systems fell an estimated 4.4%.
- Total disk storage sales, which include storage subsystems found within servers, rose 1.3% in Q4 after dropping 5.6% in Q3. IDC attributes the turnaround to "traditional year-end budget flushes, improved economic sentiment, and a strong desire to address long-standing storage infrastructure inefficiencies."
- Market leader EMC, which posted strong Q4 numbers to go with light guidance, saw its external disk share rise 220 bps Y/Y to 32.9%, and its total disk share rise 200 bps to 25.8%. The gains largely came at the expense of restructuring IBM, whose shares respectively fell 190 bps and 200 bps to 13% and 14%.
- H-P's (HPQ) external disk share rose 30 bps to 9.6%, and its total disk share 40 bps to 16.3%. NetApp (NTAP), which delivered nearly in-line revenue and soft guidance last month, saw its external share fall 10 bps to 11.5%, and its total share stay flat at 9%. Private Dell's total share fell 140 bps to 9.9%.
- Hard drive/assembly suppliers: STX, WDC, HTCH
- Verizon (VZ) has signed off on a buyback program good for repurchasing up to 100M shares through Feb. 28, 2017. The program, arriving two weeks after the Vodafone/Verizon Wireless deal officially closed, is in theory good for repurchasing nearly 2.5% of outstanding shares.
- However, CFO Fran Shammo stated last month he doesn't expect Verizon to buy back any shares for at least 2-3 years, as it works to pay off the $60B+ in debt it took on to help finance the Vodafone deal.
- Verizon has largely refrained from buybacks in recent years, keeping its options open as it made giant Verizon Wireless dividend payments to Vodafone. The carrier repurchased only 3.5M shares through a 100M-share, three-year program that expired last month.
- Having already launched a wealth management platform for Chinese depositors, Baidu (BIDU -1.4%) is now heading a partnership that's applying for a private banking license. "Of the businesses the Internet will topple they naturally include finance," declares CEO Robin Li.
- Baidu, Alibaba, and Tencent have all launched wealth management products, hoping to cross-sell consumers in a country with sky-high savings rates on investment vehicles that deliver much higher returns than those provided by state-owned banks.
- Alibaba's (ABABA) Yu'e Bao platform has been especially successful, attracting 81M users who have collectively deposited nearly RMB500B ($81B).
- The efforts haven't come without a backlash from incumbents: Three state-owned banks halted interbank deposit transactions with fund manager Tianhong Asset Management after Alibaba applied to buy 51% of the firm for $193M.
- But Premier Li Keqiang, who has pushed for a slew of financial reforms, says he supports the "healthy development" of Internet banking services.
- Palo Alto Networks (PANW +10.9%) is within striking distance of its post-IPO high of $79.99 after a mistrial was declared for rival Juniper's (JNPR -0.6%) infringement suit against the company. The judge presiding over the suit has instructed lawyers from both parties to meet to determine their next moves.
- FBR calls the decision a big "sigh of relief" for Palo Alto investors. Ahead of the mistrial announcement, Citi was already arguing the odds of a settlement had grown, given a judge's ruling that no second trial covering indirect infringement would occur.
- Citi even thinks a cross-selling deal between Palo and Juniper is possible, given Juniper's recent struggles in the branch office firewall market.
- Palo Alto's official statement
- DuPont Fabros (DFT -5.5%) discloses Yahoo (YHOO -2.4%) plans to sub-lease premises it directly leases at two DuPont data center facilities in Ashburn, VA. DuPont says the leases "represent 11% of the Company's operating property portfolio."
- Other data center owners have also sold off: DLR -3.7%. COR -2.3%. CONE -1.7%.
- Yahoo directly owns four data centers - they're in New York, Washington state, Nebraska, and Singapore. The company announced last October it's investing $170M to expand its New York facility.
- While Internet giants and cloud service providers remain among the top clients of independent data center owners, they've also been making huge investments in custom, energy-efficient data centers of their own.
- AdAge reports Instagram (FB -1.5%), which only began showing ads last fall, has scored a year-long commitment from top ad agency Omnicom (OMC -0.1%) to spend up to $100M. The magazine also reports Instagram is talking with Starcom MediaVest, another leading agency.
- Instagram has confirmed the tie-up, but not its specifics. "Our teams are going to work hand in hand to develop and execute campaigns that provide people with amazing imagery."
- The mobile photo-sharing platform has been cautious with its efforts to monetize its ~180M MAUs. Select brands and their agency partners are currently able to buy photo/video-based ads that appear in a user's stream, but the ads have to meet Instagram's stringent quality standards.
- Previous: Instagram chief focused on discovery, international growth, ecosystem
- Nokia (NOK +2.4%) has been added to Credit Suisse's U.S. and European focus lists. CS is optimistic about Nokia's ability to grow its high-margin patent licensing ops following the Microsoft deal - other firms have aired similar opinions - and also thinks major cash distributions could be on the way.
- Dan Loeb has argued a Nokia buyback or special dividend could happen post-Microsoft. The company stands to have ~€8B in net cash once the deal closes, and has suggested it's eying smaller acquisitions rather than a big one. Nokia suspended its regular dividend a year ago.
- CEO Rory Read appeared on CNBC's Fast Money (video) yesterday evening to talk up AMD's (AMD +6.3%) efforts to lower exposure to a PC market featuring soft industry demand, short product cycles, and intense competition from Intel/Nvidia.
- Read, in reference to his company's PS4/Xbox One design wins: "What we're trying to do is create these long-term strategic relations .... Those are the plays that are going to create the long-term transformation of AMD." In addition to consoles, AMD is looking to create partnerships in the server and embedded computing markets.
- He asserts only 4% of AMD's revenue came from non-PC applications when he joined the company, and that over 30% do so now. Long-term, AMD wants to derive half its revenue from non-PC markets.
- At the same time, Read argued AMD, whose PC CPU ops have historically been heavily exposed to the low-end consumer notebook market (hit hard by tablets), has "greenfield" opportunities in the desktop and commercial markets. The company recently launched low-end desktop CPUs based on its 28nm Kabini architecture (previous), with the goal of enabling high-volume sub-$300 systems for emerging markets.
- With over 1/6 of the float shorted as of Feb. 14, Friday short-covering is likely contributing to today's gains.
- Ahead of its March 19 lockup expiration, FireEye (FEYE -9.7%) is offering 14M shares - 5.6M newly-issued shares, and 8.4M from existing shareholders - at a price of $82 (8% below yesterday's closing price). Underwriters have a sizable 2.1M-share overallotment option (all for new shares).
- FireEye, which has forecast a $2.00-$2.20/share loss for 2014 due to massive sales investments, stands to reap gross proceeds of $458M from the offering. The new shares stand to increase FireEye's diluted count by 5%.
- Twitter's (TWTR -1.3%) first 10-K filing reveals the company's "ad engagements" rose 74% Q/Q and over 6x Y/Y in Q4. At the same time, this surge in ad impressions/inventory led the company's average cost per engagement to fall 18% Q/Q and 69% Y/Y.
- Twitter notes the launch of its promoted tweet/trend/account ad products on mobile served to grow inventory, as did their launch in new international markets. The company unveiled a slew of new ad products in Q4, including ones specifically aimed at TV viewers and mobile app users.
- Also disclosed: Twitter's U.S. ad revenue per 1K Timeline views is still more than 6x international levels ($3.80 vs. $0.60). The U.S. figure rose 48% Q/Q, and the international figure 67%. This gap is the reason international sales accounted for only 27% of Q4 revenue, even though Twitter's international active user base is more than 3x as large as its U.S. base.
- Twitter says it paid $36M to buy 900 patents from IBM, and thus end an IP dispute with the IT giant.
- Jury deliberations are continuing for Juniper's (JNPR -0.6%) huge patent infringement suit against Palo Alto Networks (PANW +4.6%). Palo Alto shares have spiked higher on hopes of a favorable outcome.
- Juniper has alleged Palo Alto's next-gen firewalls (taking share from Juniper, Cisco, and others) infringe on IP developed by Palo Alto's founders when they were working at NetScreen (acquired by Juniper in 2004).
- Palo Alto shares jumped in early February after the court handling the suit denied a Juniper infringement motion, and granted two Palo Alto motions for summary judgment.
- ExOne (XONE +2.1%) has bought MWT, a German maker of industrial microwaves, and the assets of Machin-A-Mation, a Michigan-based machining shop. Between them, the acquisitions cost $9.8M.
- The 3D printer maker says MWT's microwaves will be used to strengthen its sand printing offerings, and that Machina-A-Mation, located near an ExOne production service center focused on aerospace/shipbuilding clients, will help it "address the finishing requirements for complex parts which are cast from [ExOne's] 3D printed sand molds."
- MWT's microwave ops will be folded into ExOne's Augsburg, Germany manufacturing ops.
- Sources tell Reuters (translation) Vodafone (VOD -2.8%) has raised its bid for Spanish cable giant ONO, and has reached a preliminary deal with ONO shareholders collectively possessing a controlling stake.
- No word on the specific offer price. Vodafone was previously reported to have made a rejected €7B ($9.6B) bid for ONO.
- One source states Vodafone plans to formally present its offer before ONO's board meets on March 13 to approve recently-announced plans to pursue an IPO.
- Vodafone is selling off on the report. A successful Vodafone bid for ONO, coming on the heels of its $14.2B Kabel Deutschland acquisition, could lower the odds AT&T (T +0.3%) will make an offer for the company once its 6-month waiting period ends. AT&T CEO Randall Stephenson has reportedly told investors further cable acquisitions by Vodafone would complicate a deal.
- Ambarella (AMBA -5.4%) guided on its CC (transcript) for FQ1 revenue of $39M-$41M, in-line with a $40M consensus. However, the company also forecast its gross margin would fall to 61%-63% from an FQ4 level of 64.1%.
- The reason: Amabarella expects a mix shift towards the lower-margin Chinese security camera market, as sports camera chip sales decline Y/Y due to the launch of three GoPro camera a year ago. Security and sports camera-related sales were roughly even at the end of FQ4.
- In addition, automotive chip sales are expected to be down Y/Y in FQ1, and broadcast infrastructure chip sales are expected to remain under pressure in FY15 (ends Jan. '15). Automotive growth is still expected for FY15
- FQ4 gross margin rose 80 bps Y/Y, as growing sales of Ambarella's higher-margin A7LA and A7LS video-processing SoCs (used in sports/automotive cameras) offset slumping high-margin infrastructure SoC sales. Opex rose 22% Y/Y to $19.9M, trailing revenue growth of 27%.
- FQ4 results, PR
- GT Advanced (GTAT +4.8%) has been upgraded to Outperform by Credit Suisse, and is making new 52-week highs. Goldman started shares at Buy on Tuesday.
- JA Solar (JASO +2.6%) has been started at Buy by Sidoti. The company was one of several Chinese solar names to post big gains yesterday.
- Polycom (PLCM +3.3%) has been upgraded to Buy by Citi.
- AppliedMicro (AMCC +1.1%) has been started at Buy by Roth.
- Quality Systems (QSII +3.6%) has been upgraded to Market Perform by FBR.
- Imagination (IGNMF) has been cut to Sell by Canaccord. Shares are down 1.7% in London.
- Sprint (S) network infrastructure chief Bob Azzi and product development/operations chief Steve Elfman are leaving the company, as SoftBank (SFTBF, SFTBY) continues shaking up the carrier's executive ranks. Ex-Clearwire CTO John Saw has been named Sprint's chief network officer.
- Sprint's sales and marketing chiefs left last October. A possible factor behind the latest moves: Sprint has seen widespread service quality complaints - Consumer Reports ranked it last among U.S. carriers in 2013 - as it moves aggressively to migrate users to its 4G LTE network.
- Another potential trigger: Sprint's LTE buildout is slightly behind schedule. The carrier originally planned to offer LTE coverage to 250M POPs by the end of 2013, but later lowered its target to 200M.