Seeking Alpha
  • Today - Monday, March 30, 2015

  • 1:22 PM
    • Novatel (MIFI +3%) has acquired Feeney Wireless, a provider of hardware, software, and services for M2M/IoT systems and networks, for $25M in cash and stock + up to $25M in earn-outs to be paid over 4 years.
    • With Feeney expected to generate 2015 revenue of $38M, Novatel is paying less than 0.7x forward sales; the company's 2015 non-GAAP EBITDA is expected to total $3M. Its hardware includes M2M/IoT modems, in-vehicle gateways, and power components; its software includes an M2M app framework and device management software; its services cover hardware design, systems integration, and remote monitoring.
    • Novatel, which already offers M2M modems and tracking/management software, asserts the deal allows it to be "a total IoT solutions and services leader, from hardware to SaaS to connectivity." It follows Sierra Wireless' purchase of M2M service provider Wireless Maingate, and Amazon's purchase of IoT cloud service provider 2lemetry.
    • To help finance the deal, top shareholder HC2 Holdings has exercised $8.6M worth of Novatel warrants (issued last September) ahead of plan.
    | Comment!
  • 1:16 PM
    • Vodafone (NASDAQ:VOD) is adding customer credit cards to its mobile wallet, via deals with service providers Visa (NYSE:V) and Carta Worldwide.
    • The agreements will allow Vodafone customers to add their credit card details on their mobile phone's SIM card and enable contactless payment (via near-field communications) using the cards.
    • Previously, customers had to use Vodafone's own prepaid account for such payments.
    • Vodafone's wallet is available in Spain, Germany, the Netherlands, the UK and Italy and the new card system will be available from Q2. The company declined to make many forecasts about a business with low penetration where key competitors like Apple are just beginning their own forays.
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  • 1:00 PM
    • After initially trading lower today, SolarCity (SCTY +1.5%) has caught a bid from an Elon Musk tweet stating a "major new Tesla product line -- not a car" will be unveiled on April 30.
    • Musk is the chairman of both SolarCity and Tesla. 15 months ago, the companies announced a backup energy storage solution for SolarCity solar installations that relies on Tesla battery packs. Tesla's gigafactory plans have fueled speculation the company could become a major battery supplier to third parties.
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  • 12:44 PM
    • "We've wanted to upgrade Broadcom (NASDAQ:BRCM) since the company's analyst meeting in Dec, but have been waiting for a pullback and a catalyst. We believe we got both last week," says Nomura's Romit Shah, upgrading the chipmaker to Buy and hiking his target by $10 to $50.
    • Shah: "Broadcom remains very cheap, per our estimation, trading at 15x free cash flow (minus stock comp), versus a comp average of 18x. The discount reflects distrust in management after one bad acquisition and failed attempts in baseband." He thinks management isn't getting enough credit for recent moves to cut stock compensation spend (often criticized), boost capital returns, and increase financial transparency.
    • Shares have gradually moved higher amid a 1% gain for the Nasdaq. They're within $2.50 of a 52-week high of $46.31. They moved higher during the final minutes of trading on Friday following reports Intel is in talks to acquire FPGA vendor Altera.
    • Nomura downgraded Broadcom to Neutral last May, when shares were at $30.56.
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  • 12:33 PM
    • Dex Media (DXM +1.7%) has sealed an expanded partnership with Yext, a "digital presence" provider for small businesses, to expand Internet marketing offerings for SMBs.
    • The two companies have worked together on shared products before, including Reputation Monitoring, and a product called Competitor Watch, which lets companies see reviews for up to five competitors.
    • Yext, which launched as a pay-per-call advertising service, now lets companies manage their local listings across dozens of such sites.
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  • 12:25 PM
    • Following talks with CEO Fermi Wang and CFO George Laplante, Canaccord's Matt Ramsay (Buy) has hiked his Ambarella (NASDAQ:AMBA) target by $7 to $81. The move follows a Friday target hike (to $70) from Chardan Capital.
    • Ramsay now thinks Ambarella will get a $10+ ASP on A7L video processor sales for Xiaomi's recently-launched Yi camera, while reaping gross margins above the company's 59%-62% target range. Meanwhile, self-driving cars, facial recognition, video broadcasting, drones, home security cameras, security video processing are all seen as growth opportunities.
    • He's also upbeat on Ambarella's ability to differentiate long-term (a historical concern). "Ambarella's lineup of application-specific video encoding processors is differentiated in terms of video quality, video compression efficiency and power efficiency. We believe leadership in each of these vectors is both significant and sustainable and will allow Ambarella to maintain its leading market share position..."
    • Shares are making fresh highs. They're up 45% YTD, and now trade for 33x Ambarella's FY16 (ends Jan. '16) EPS consensus; the FY16 revenue growth consensus is at 29.3%.
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  • 12:17 PM
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  • 12:07 PM
    • Four months after the company started promoting local services to its customers, Amazon (AMZN +0.8%) has launched a Home Services site with the help of partners such as TaskRabbit, Pep Boys, and TakeLesons. Market leader Angie's List (ANGI -4.6%) isn't reacting well to the news.
    • Amazon exec Peter Faricy: "We have 85 million Amazon customers who have shopped for products this past year that often require a service afterwards." 700 services are initially supported; much like Angie's List, Amazon argues it helps connect consumers with trustworthy businesses. Only 3 out of every 100 professionals in each metro are said to be accepted, with Amazon making sure each business is licensed, insured, and passes a background check.
    • The e-commerce giant also claims it only takes 60 seconds for a customer to buy a service. Faricy: "We have standardized and prepackaged all of our service offerings. So you know exactly what is going to be done and how much it’s going to cost you, up front, no surprises."
    • 41 states are currently supported; Amazon wants to provide strong coverage across the 30 biggest U.S. metro areas. The Verge notes a beta version of Amazon's site suggests the company is taking a 20% cut on standard services, 15% on custom services, and 10% on recurring services.
  • 11:37 AM
    • After rising 28.4% on Friday on reports Intel (INTC -0.3%) is in talks to buy the company, Altera (ALTR -3.8%) is paring its gains in response to downgrades from CLSA, Morgan Stanley, and Macquarie. Morgan Stanley has also downgraded Xilinx (XLNX +0.3%), which rose 5.8% on the reports.
    • Reactions to the reports, which vindicate at least a few predictions, have been largely positive. Among the perceived benefits to Intel from a deal: 1) Cost synergies from handling the manufacturing of Altera's FPGAs in-house. 2) Lowering Intel's PC dependence amid soft industry demand. 3) The potential to better cater to the likes of Facebook and Google (and keep ARM rivals at bay) by creating Xeon server CPUs with built-in FPGA circuitry to accelerate algorithm performance. 4) The potential to create system-level solutions for servers, telecom infrastructure gear, and other products that combine processors, FPGAs, and other chips.
    • CLSA: "[W]e view a potential Altera deal favorably given the manufacturing and end-market synergies ... Altera’s strong base station presence is valuable to Intel ... we see $0.05-0.10 accretion to our 2016 EPS, and additional accretion down the road as manufacturing moves in house."
    • Cowen: "[W]e surmise the deal would be heavily debt financed ... ALTR is one of the only semiconductor companies with better gross margin than INTC ... PLDs are one of the only verticals requiring leading-edge silicon in which INTC does not compete."
    • Though upgrading Altera to Market Perform, Wiliam Blair is more cautious. "[W]e believe Altera’s fundamentals have deteriorated as the company has faced multiple headwinds. These include market share loss to Xilinx, declining margins, delays in new product ramp-ups, and competitive issues ... On top of this, we believe Altera (as well as Xilinx) has been negatively affected by the increased adoption of SoC solutions, resulting in decreased demand for FPGAs for Glue Logic functions." Bernstein (still bearish on Intel) notes Altera's revenue is only equal to 3% of Intel's.
    • If a deal happens, many think Xilinx will be acquired soon afterwards. The short list of chipmakers big enough to swallow Xilinx ($11.1B market cap) and arguably having complementary products includes Texas Instruments, Qualcomm, Analog Devices, NXP/Freescale (about to merge), Skyworks, and Avago. There's also some speculation Intel, which has sat out the chip industry's recent M&A wave, will follow up on an Altera deal by making other purchases to lower its PC exposure.
  • 11:20 AM
    • ChinaNet Online (NASDAQ:CNET) is up 10.6% on very heavy volume after announcing a service partnership deal with search giant Baidu.
    • The companies will cross-sell business-to-business services -- Baidu's Direct Reach service, and ChinaNet's Business Direct 3.0 -- and ChinaNet joins the "ecosystem" of providers at Baidu.
    • The platform is centered on mobile search, accounts, maps and personalized recommendations among others.
    • "Our influence on the SME industry with franchises and chain stores will create opportunities for Baidu to leverage the ChinaNet brand," says ChinaNet COO George Chu.
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  • 10:51 AM
    • Cellcom (NYSE:CEL) is 2.9% lower today as Israel is pressing for changes to the company's network-sharing agreement with Golan Telecom.
    • There's no news on what Israel's Ministry of Communications wants to see in the deal, which has the companies working together on a 4G network and sharing previous-generation sites.
    • Also lower: peer Partner Communications (PTNR -3.8%.)
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  • 10:49 AM
    • After falling 5.6% on Friday, volatile (NYSE:WBAI) is seeing even bigger losses in early trading today. Rumors that the company is caught up in a corruption probe related to Chinese online sports lottery sales continue  to swirl in the wake of suspensions from provincial authorities.
    • SA Instablog writer/ex-banker MNS Global has written a series of posts about sports lottery suspensions and rumored anti-corruption efforts.
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  • 10:31 AM
    • Oi SA (NYSE:OIBR) is trading 3.9% lower as RBC Capital downgrades to Underperform, from Sector Perform, following a Q4 earnings report where the telecom swung to a net loss of 4.42B reais (about -$1.39B).
    • Revenues of 7.32B reais missed an expected 9.12B by nearly 20%.
    • EBITDA of 3.195B reais fell 12.5%, but beat an expected 2.84B reais.
    • Shares in Oi are down 46% YTD.
    | 1 Comment
  • 10:23 AM
    • "We believe ADI has secured multiple sockets across AAPL's iPhone/iPad lineup to enable the 3D/Force Touch feature," reports Barclays, upgrading Analog Devices (NASDAQ:ADI) to Overweight and hiking its target by $15 to $70. "[W]e believe AAPL needs and would be be willing to pay for ADI's high accuracy [analog/digital] converters."
    • The WSJ reported 3 weeks ago Apple's next-gen iPhones will support haptic sensors that allow different software commands to be sent based on how hard a user presses on a screen. Apple has already integrated its haptics solution (christened Force Touch) within Apple Watch and a new 12" retina MacBook.
    • Barclays forecasts the Apple wins will boost ADI's 2016 EPS by $0.80 or more. It thinks 1 converter chip will be needed for the iPhone and 3 for a 12" iPad, and estimates an ASP of $1.50-$2.00. "ADI is known to have the best converters in the industry and this level of performance is needed to compensate for high levels of screen noise."
    • Long-term, the firm believes multi-chip iPad solutions could be replaced by a single chip, and that ADI could even "integrate the 2D touch function into a single super chip." It also believes the company is seeing strong industrial chip demand, forecasts a pickup in auto chip sales, and sees room for further revenue and cost synergies from the Hittite acquisition.
    • Shares have blasted off to new highs on Barclays' report.
    | 1 Comment
  • 10:03 AM
    • American Tower (NYSE:AMT) says it's closed its $5.06B transaction to take over tower sites from Verizon (NYSE:VZ) -- which sought to sell off tower and wireline assets after bidding heavily in the FCC's AWS-3 wireless spectrum auction.
    • AMT drew funds from its offering of 25.85M shares of common stock and 13.75M depositary shares, as well as revolving credit and cash on hand.
    • American Tower reported $313.5M in cash in its most recent quarter.
    • AMT up 0.5%; VZ up 0.8%.
    • Previously: Verizon reaches $5B sale of towers to American Tower (Feb. 05 2015)
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  • 9:55 AM
    • Online real estate plays SouFun (SFUN +9%), E-House (EJ +4.1%), and Leju (LEJU +8.1%) are shooting higher in early trading after PBOC governor Zhou Xiaochuan stated China has "room to act" to counter deflation. The Shanghai Composite rose 2.6% overnight, and the Nasdaq is currently up 0.9%.
    • The PBOC has already carried out a series of monetary easing moves over the last several months, including multiple rate cuts and reserve requirement cuts. SouFun, E-House, and Leju all trade far below their 2014 highs thanks to worries about a weak Chinese property market and the impact of a listing fee price war.
    • Andy Rothman, a strategist at fund manager Matthews Asia, argues in the FT today fears of a Chinese real estate crash are overblown, and that prices are likely to rise Y/Y in 2H15 (aided by favorable comps). "There are no sub-prime mortgages and there are very few mortgage-backed securities [in China]. There is no secondary securitization, so no collateralized debt or loan obligations (CDOs and CLOs). China’s residential market is clearly very soft, but I believe a housing crisis is very unlikely."
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  • 9:35 AM
    • Citing optimism about the company's cloud growth and a belief Oracle 12c demand will spark a pickup in database sales, RBC has upgraded Oracle (ORCL +1.3%) to Outperform, and hiked its target by $2 to $50.
    • Oracle is coming off a February quarter (FQ3) where its cloud SaaS/PaaS revenue rose 30% Y/Y to $372M and its cloud IaaS revenue 28% to $155M, while its traditional software license revenue (including databases) fell 7% to $1.98B due to the impact of cloud software adoption (Oracle's or otherwise).
    • On the FQ3 CC (transcript), Larry Ellison was his usual optimistic self when talking about 12c, its support for multiple database tenants and an in-memory option (meant to counter SAP's Hana) "driving 12c adoption to higher rates than anything we've seen in about – for a very, very long time."
    • Previouly: FBR praises Oracle's "one-stop shop" database approach
    • Previously: Amazon goes after Oracle with Aurora database
    | Comment!
  • 9:14 AM
    • After catching a Baird upgrade to Outperform last Thursday, GoPro (NASDAQ:GPRO) has been upgraded to Buy this morning by Dougherty. The firm's target is $55.
    • Dougherty calls GoPro "one of the most valuable brands in consumer technology," and argues Xiaomi's Yi camera might prove a positive for the company in terms of stimulating demand. FBN declared Xiaomi-related fears to be overblown last week.
    • The action camera leader has risen to $43.65 premarket. Shares go for 32x 2015E EPS and 3.2x 2015E sales; estimates have trekked higher since the IPO.
  • 8:45 AM
    • YOU On Demand (NASDAQ:YOD) is off 15.3% premarket after posting a wider loss per share in 2014, but finishing with revenue strength in Q4 (up 536% Y/Y and up 55% sequentially).
    • Gross loss for 2014 of $794K was down from $2.8M in 2013 primarily due to the revenue gains coming from video on demand.
    • Net loss from continuing operations was $13M, comparable to the prior year's $13.1M.
    • CFO Marc Urbach is resigning effective tomorrow as part of the company's plans to re-center personnel in Beijing, and will work over the coming six months to help the firm seek a China-based CFO. Finance VP Grace He will take over day-to-day duties.
    • Cash and equivalents at year's end were about $10.8M, up from $3.8M at 2013's end. The company said on its conference call that cash burn is about $2M/quarter.
    • Press release
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  • Sunday, March 29, 2015

  • 7:39 PM
    • Optical component industry consolidation "was a common topic of discussion among investors and companies" at the industry's recent OFC conference, reports Piper's Troy Jensen. "The reasons for consolidation are well known and center on operational expense savings, a more rational pricing environment, and more complete product lines."
    • One deal that's viewed as especially likely: A Finisar (NASDAQ:FNSR) purchase of JDS Uniphase's (NASDAQ:JDSU) optical component/laser unit (CCOP), currently set to be spun off as Lumentum Holdings in Q3. Activist Sandell Asset Management has been urging JDS to sell CCOP, which had FY14 (ended June '14) revenue of $794M (+7% Y/Y). Jefferies' James Kisner thinks a deal could happen, but not before the spinoff occurs.
    • Jensen on industry consolidation in general: "The question isn't really an if, but more of the urgency of potential sellers and buyers and also at what price a deal would take place. In general, our feeling is that investors were slightly more anxious for a deal, while companies we spoke with sensed the need for consolidation, but were less anxious."
    • The industry has already seen a decent amount of M&A. In addition to CCOP, smaller component vendors Oclaro (OCLR - $213M market cap), Alliance Fiber (AFOP - $308M market cap), Applied Optoelectronics (AAOI - $196M market cap), and NeoPhotonics (NPTN - $217M market cap) could be targeted. NeoPhotonics has soared since delivering a big Q4 beat (fueled by strong 100G component demand) on March 3.
    | 1 Comment
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