Today - Wednesday, November 25, 2015
- During yesterday afternoon's FQ4 earnings call (transcript), HP Enterprise (HPE +3.1%) CEO Meg Whitman disclosed Microsoft Azure (MSFT -0.5%) "will become a preferred public cloud partner" for HPE, through a partnership that will be detailed next week. In return, HPE will "serve as a preferred provider of Microsoft infrastructure and services for its hybrid cloud offerings."
- The deal comes a month after HP announced it's shutting down its public cloud services ops, rather than compete head-on with well-established players such as Amazon (the market leader), Microsoft (#2), IBM, and Google. The company, whose on-premise IT service ops have been pressured by cloud adoption - enterprise services division revenue fell 9% Y/Y in FQ4 to $5B - added it's still committed to offering private and managed cloud services.
- For Microsoft, the deal gives Azure the backing of HP's still-massive enterprise sales and IT services workforces. It follows a multifaceted Azure partnership with server OS rival Red Hat. Microsoft reported Azure revenue rose over 100% Y/Y in calendar Q3, but didn't give a figure.
- HPE continues trading higher after beating depressed FQ4 sales estimates with the help of positive x86 server and networking hardware growth, and reiterating its FY16 EPS guidance (while guiding FQ1 below consensus). Analyst reactions have been mixed - bulls are trumpeting a low valuation and the potential for improved execution following HP's breakup, while bears argue sales and cash flow pressures remain substantial.
- Vodafone (VOD +2%) has decided to pull a bond offering rather than give in to investor demands over risk protection.
- The carrier planned an investment-grade deal of up to $2B, but balked as investors pressed for a change-of-control provision and wouldn't accept coupon step-ups that would come with credit agency downgrades.
- The change-of-control provision (forcing issuers to redeem bonds in case of takeover/merger) would have set an unwanted precedent at Vodafone, bankers suggested, and the carrier didn't want to do that or compensate with a wider spread.
- A similar risk-protection issue sunk a deal backing Carlyle Group's leveraged buyout of Veritas last week, as investors have grown demanding over bond terms following some high-profile change-of-control failures (as in Cablevision bondholders left dry when junk-rated Altice came in to buy the company).
- Less than a week after Pericom (PSEM - unchanged) shareholders approved Diodes' (DIOD +0.8%) planned $413M ($17.75/share) acquisition of the serial connectivity IC firm (thus turning their backs on a $19/share offer from China's Montage Technology that had financing/regulatory questions attached), the deal is officially on the books.
- Diodes CEO Keh-Shew Lu: "[T]his acquisition broadens Diodes analog footprint and adds a strong mixed-signal connectivity offering that will drive expanded product content in our target market applications. Pericom also provides an extensive timing product line that complements Diodes' standard product portfolio."
- The all-cash deal is expected to be immediately accretive. Pericom will stop trading on the Nasdaq following today's close.
- It's been nearly straight down out of the open for T-Mobile (NASDAQ:TMUS), down 2.2% after it announced a special "holiday gift" for Sprint (S -0.5%) customers: $200 to switch carriers.
- That's on top of the up to $650 T-Mobile is offering to cover early termination fees and phone payment balances, and it's $200 for each line switched.
- "I cannot think of any wireless customers in more desperate need of some holiday cheer than those Sprint customers still hanging on over there," said T-Mobile CEO John Legere. "Those poor people have put up with the nation's slowest and smallest LTE network, and their carrier throwing out a deal-of-the-month for everyone except them."
- The deal includes switching any Sprint number (postpaid, prepaid, Boost or Virgin Mobile) to a T-Mobile Simple Choice postpaid plan. It's effective starting Thursday.
- Legere promised additional "gifts" coming to Verizon and AT&T customers over the next few weeks.
- Apple (AAPL -0.3%) has bought Faceshift, a Zurich-based developer of technology for turning facial expressions into avatars and other animated material in real-time, for an undisclosed sum. TechCrunch reports several Faceshift employees are now working for Apple,
- Faceshift's technology, which can be used with off-the-shelf hardware, was used in Star Wars: The Force Awakens to make the facial expressions of non-human characters appear more human. It has also been applied towards gaming, where avatars can be altered based on a gamer's real-life expressions. (promo video)
- The acquisition follows Apple's 2013 purchase of former Kinect motion sensor tech provider PrimeSense, and its 2015 purchase of multi-sensor camera module developer LinX, whose modules enable (among other things) depth sensing and 3D image capture. It also comes two months after Apple launched (via the iPhone 6S/6S+) Live Photos, a camera feature that animates a photo when a user taps on it.
- Cellnex (along with partner F2i SGR) is getting close to making a bid that could come to $1.2B for a stake in the towers unit of Telecom Italia (TI +0.5%), Bloomberg reports.
- The companies could bid as early as the second week of December and would be seeking a stake of about 40% in Infrastrutture Wireless Italiane (Inwit), sources said.
- TI has a 60% stake in Inwit worth about €1.6B, and would aim to keep a minority stake of up to 20% of the unit along with one board seat of a potential new company.
- Cellnex was itself a towers spinoff of Abertis Infraestructuris (OTCPK:ABRTY) and holds 15,000 towers in Spain and Italy. Inwit owns 11,500 sites (about 27% of Italy's towers) and logged 2014 pro forma revenue of €314M against Cellnex's €436M.
- Previously: Bloomberg: Telecom Italia hires DB to work on towers sale (Oct. 09 2015)
- Previously: Reuters: Telecom Italia wants to close on Inwit deal by year-end (Sep. 28 2015)
- The U.S. Marine Corps has placed a $13M order for AeroVironment's (AVAV +2.4%) small RQ-20A Puma AE UAVs and related spare parts. AeroVironment notes the Marines use the Puma AE as "the long-range solution for its small unit remote scouting system (SURSS), complementing the AeroVironment (NASDAQ:AVAV) RQ-11B Raven and RQ-12A Wasp."
- For reference, AeroVironment had July quarter UAS division revenue of $40.2M (-2% Y/Y). An charging system deal with Hyundai was announced yesterday.
- VimpelCom (NASDAQ:VIP) is up 2.4% premarket on news that it's close to a near-record $775M payment to settle U.S. charges related to corruption in Uzbekistan dealings.
- A deal with the Justice Dept. and SEC could be announced in January, Bloomberg reports. Related to the Foreign Corrupt Practices Act, the payment would be second only to an $800M penalty paid by Siemens in 2008.
- The company had set aside $900M for potential liabilities. The U.S. began probing VimpelCom's dealings in Uzbekistan amid allegations that bribes were paid to companies connected to the Uzbek president's daughter in order to secure wireless spectrum rights.
- Previously: VimpelCom -7.3% as one-time items drive billion-dollar loss (Nov. 06 2015)
- Previously: VimpelCom making $900M provision amid Uzbekistan probes (Nov. 03 2015)
- Previously: U.S. telecom probe seeking to seize $1B in European assets (Aug. 13 2015)
- UBS has downgraded both SunEdison (NYSE:SUNE) and its TerraForm Power (NASDAQ:TERP) YieldCo to Sell. The former has fallen to $3.93 premarket, and the latter to $8.30.
- The downgrades come a day after SunEdison's beaten-down shares rose 37.3% following news the company has paid down $95M of a $100M margin loan, and is selling 425MW of Indian assets to TerraForm Global. Two days ago, SunEdison announced it's putting CFO Brian Wuebbels in charge of its YieldCos, and giving chairman Manny Hernandez a more hands-on role.
- Needham's Edwin Mok (Buy rating) is talking up SunEdison's recent moves. "We see the management shake-up at the board level and the yieldcos, the drop down of higher yield projects to GLBL, and SUNE's pay down of the margin loan as positive signs that SUNE is responding to investor concerns regarding its liquidity and cash flow generation ... As SUNE continues to improve the operation structure, we see potential for shares to move higher given the depressed levels."
- Pandora (NYSE:P) states the Register of Copyrights declined to express an opinion on the matter of differentiated music webcasting royalty rates. She added that since all participants in the ongoing Web IV rate proceeding had assumed a non-differentiated (uniform) rate structure, such a structure is the only reasonable outcome for the proceeding.
- Pandora has been seeking a uniform rate structure. The Register of Copyrights' opinion comes ahead of a mid-December decision by the Copyright Royalty Board (CRB) on the recording royalty rates Pandora will pay from 2016-2020. Pandora rose in September after the CRB backed the admissibility of Pandora's deal with indie music rights agency Merlin as a benchmark for broader recording royalty rates.
- Recording royalty payments account for much of Pandora's content acquisition costs, which in turn totaled $129.5M (42% of revenue) in Q3 after backing out one-time charges. Shares have risen to $13.97 premarket.
- Yingli (NYSE:YGE) expects to report Q3 revenue of $340M-$350M, a range declared to be "in-line with management's previous estimation," but which is below a $355.2M consensus.
- Module shipments are expected to total 450MW-460MW, below prior guidance of 550MW-580MW - Yingli blames "lower-than-expected utilization of production facilities for in-house PV [modules]." Gross margin is expected to rise to 8%-9% from Q2's 6.3% thanks to higher ASPs and lower unit costs.
- A $581.3M non-cash impairment charge will be recorded, primarily "due to the lower-than-expected utilization of certain production facilities" in 2015.
- Q3 results are due on the morning of Dec. 2. Shares haven't yet moved premarket. They closed yesterday at $0.70, having plunged this year due to solvency fears.
- Update (9:49AM ET): Yingli is down 4.3%.
- 58.com (NYSE:WUBA) is selling a controlling stake in its Guazi.com used car online marketplace business to co-CEO Mark Yang, the founder of classifieds site Ganji.com. The sale will leave 58.com with a 46% stake in Guazi.com.
- Yang will be stepping down as 58.com's co-CEO, leaving Michael Yao as the sole CEO. He'll remain co-chairman.
- The move comes seven months after 58.com bought a 43% stake in Ganji.com for $2.8B, a move that was applauded by investors for its potential to curb the the online classifieds rivals' heavy marketing spend.
- With the holidays incoming, Sony (NYSE:SNE) has picked today to reveal that it has sold 30.2M PlayStation 4 videogame consoles to date, suggesting that it's dominating in the console wars.
- While there have not been official sales figures for Microsoft's Xbox One since last November (when it recorded 10M unit sales), analysts say it is still lagging far behind the PlayStation 4.
- Nintendo's Wii U, which was released in November 2012 - a year before the Xbox One and PS4 - sold 10.73M units as of September 30.
- Standard & Poor's has lowered its unsolicited rating outlook on Yahoo (NASDAQ:YHOO) to negative from stable, citing prospects for poor revenue growth, management instability and higher costs for acquiring traffic.
- "We could lower our rating on Yahoo if the company's competitiveness in its display or search advertising businesses continues to decline and it is not able to reverse the negative operating trends affecting EBITDA," S&P said in a statement.
- For the three and a half years Marissa Meyer has led the company, revenues are down about 10%, EBITDA is down 45%, and 13 top executives have left the firm this year alone.
Tuesday, November 24, 2015
- Favorable trends in cloud traffic are a boon for data-center companies, says SunTrust Robinson Humphrey in a positive launch on the sector.
- Analyst Inder Singh singled out CyrusOne (NASDAQ:CONE), DuPont Fabros (NYSE:DFT) and Equinix (NASDAQ:EQIX) as picks in the space, which should benefit from growing bandwidth-intensive applications, particularly streaming video. Traffic is expected to grow at a compound annual growth rate of 23% through 2019.
- "Given that two-thirds of internet traffic is data center related, the importance of data centers both from a colocation and cloud perspective is significant," says Singh. "Data center traffic is the biggest component of Internet traffic, almost twice as much as the traffic that transverses IP WAN networks."
- Mergers and acquisitions could continue, too, as companies look to become "one-stop shops" for clients and pursue scale.
- The firm launched CONE, DFT, EQIX and Zayo Group (NYSE:ZAYO) at Buy, along with a Buy rating for Cisco Systems (NASDAQ:CSCO), as well as a Neutral rating for Internap (NASDAQ:INAP).
- Price targets: $43 for CONE (22% upside from today's $35.25); $40 for DFT (22% upside from today's $32.90); $345 for Equinix (18% upside form today's $293.21); $32 for Cisco (17% upside from today's $27.27); $7.50 for Internap (7.5% upside from today's $6.98); $34 for Zayo (41% upside from today's $24.02).
- SoftBank (OTCPK:SFTBY -1.6%) last month declared a plan to spread "several billions" each year in investments around the world, all set to be managed by president (and likely successor to Chairman Masayoshi Son) Nikesh Arora -- who certainly seems to prefer options in India over pouring more money into struggling Sprint (S +0.9%).
- In an interview with Bloomberg on his strategy, Arora says that while they're focusing on later-stage startups with proven products, there's "money to be made in any stage, as long as you identify the right company."
- While there are some 150 companies valued over $1B, Arora says there are about 1,000 companies over $500M: "That’s our universe. We believe with 1,000 companies we can interpret this universe and understand it with limited resources."
- He says the best thing they can offer startups is "operational insights," rather than investment strategy or fund-raising help.
- As for SoftBank trading at a discount to public assets: "There are three things that people worry about. One is what’s going to happen to Sprint. Two is what’s going on in China. And three is I hope Masa won’t do another Sprint." But as for Sprint, "Masa is unrelenting. He is working with [Sprint managers] almost every night for a few hours, 10 p.m. calls, or in the morning."
- Previously: SoftBank planning "several billions" in annual global investment (Oct. 22 2015)
- Previously: Sprint to target 'bloated' structure with $2.5B in cost cuts (Oct. 09 2015)
- Canada's Tellza Communication (OTC:TELLF) says it's bought 8.8M common shares of the company for cancellation.
- The sum amounts to about 5% of outstanding shares. The company bought them from executives and former executives, pursuant to an exemption from issuer bid requirements.
- The moves will leave it with 168.61M common shares outstanding.
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