Seeking Alpha
  • Friday, December 19, 2014

  • 7:02 PM
    • While Red Hat's (NYSE:RHT) revenue rose 15% Y/Y in FQ3 and its deferred revenue balance 16%, its billings proxy (based on cash flow) was up 19%, notes Barclays (Overweight). "Underlying momentum in the core business, emerging product groups, and better large deal activity reinforce our positive view on the stock."
    • BofA/Merrill (Buy) observes billings growth doesn't fully reflect Red Hat's public cloud growth (+50% Y/Y), given public cloud solutions (offered via partners) are billed "one month in arrears instead of one or more years in advance." It also likes the fact over half of all public cloud clients are SMBs, many of whom weren't prior Red Hat customers, and believes interest in version 7 of Red Hat Enterprise Linux (RHEL) is stronger than for prior versions due to a bevy of new features.
    • Citi (Neutral) is more cautious on account of valuation. "Upside beyond $70 (20x+ FCF) likely requires sustained high teens billings growth which looks like a stretch. We continue to like VMW best in infrastructure software due to discount versus peers and 2015 catalysts (notably vSphere 6).”
    • On the CC (transcript), Red Hat stated app development and emerging technologies revenue (covers middleware, cloud, and storage software) rose 45% Y/Y, and was 14% of total revenue. 62% of bookings came from the Americas, limiting forex pressures a bit.
    • Shares rose 10.6% in regular trading, easily taking out their bubble highs.
    • Prior Red Hat earnings coverage
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  • 6:15 PM
    • NQ closed slightly above $4 a day after finally releasing its Q1-Q3 results, providing cautious Q4 guidance, and announcing it has signed an MOU to do a reverse merger for its FL Mobile unit with apparel retailer Tack Fiori.
    • During the CC (transcript), long-time nemesis Carson Block (the founder of Muddy Waters) managed to jump in by telling the operator he was NQ investor Jim Oberweis, Jr. Block was cut off while asking whether recently-departed co-CEO Henry Lin is in jail, given media speculation to the effect due to Lin's ties to ex-CCTV anchor Rui Chenggang (detained on corruption charges).
    • Omar Khan, still a co-CEO, would only reiterate Lin's departure was for "personal reasons," and not due to "anything related to the company."
    • Khan also mentioned the NQSky enterprise mobility management (EMM) unit is now targeting larger customers, and that his shift is affecting near-term sales due to longer deployment times. He reiterated NQ's long-term revenue targets, but added the company isn't providing 2015 guidance for now.
    • In response to a question about the proposed FL Mobile deal, VP Matt Mathison suggested NQ isn't too interested in Tack Fiori's existing businesses. "This has to do with FL Mobile ... This is the greatest way for us, for experiencing certainty and the most cost effective approach to achieve our objectives of one, unlocking value and two, enabling FL Mobile to continue to expand and grow and benefit from having their own public currency."
  • 5:46 PM
    • Bloomberg reports Fitbit, the unquestioned leader in the growing health/fitness tracker market, has hired Morgan Stanley to take it public next year. A source says an IPO could raise $150M.
    • NPD estimates Fitbit accounted for 67% of all "activity tracking devices" sold in the U.S. last year, and 77% of all "full body activity trackers." Canalys estimates Fitbit was responsible for 50% of the global Q1 market for smart wearable bands (pegged at 2.7M units).
    • While rival Jawbone remains a threat, smartwatches are naturally viewed as the big one long-term. The Apple Watch, packed with health/fitness-related sensors, is set to begin shipping in early 2015. Meanwhile, a slew of OEMs have announced and/or launched smartwatches running Google's Android Wear platform. For now, Fitbit/Jawbone maintain a pricing edge.
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  • 4:55 PM
    • News Corp. (NASDAQ:NWS) has bought, a site that "aims to help Indian consumers make smarter financial decisions through interactive, decision-making tools powered by sophisticated algorithms and data." Terms are undisclosed.
    • With News Corp. stating has "helped some 40,000 users," the site appears to have a fairly small base as of now. Last month, News Corp. spent $30M to take a 25% stake in Indian real estate site
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  • 4:20 PM
    • Though he downgraded several other chipmakers today, BofA/Merrill's Vivek Arya has upgraded Nvidia (NASDAQ:NVDA) to Neutral, and hiked his target by $3 to $22.
    • Arya notes Nvidia has been "a major beneficiary of the cost-cutting" at PC GPU archrival AMD (has been losing share to Nvidia). He's also pleased with Nvidia's HPC/parallel computing GPU growth (through the Tesla line), and its "large pipeline" of Tegra wins in the automotive market. Tegra sales for auto infotainment systems nearly doubled in FQ3.
    • He refrains from being more positive on the company due to the potential expiration of Nvidia's licensing deal with Intel in early 2016 (from a cash standpoint). Intel royalties still account for 25% of Nvidia's EPS.
    • Shares rose 1% today, and are close to a 52-week high of $21.25.
  • 3:57 PM
    • Hanwha's (HSOL -3.9%) loan facility is provided by the Export-Import Bank of Korea, and carries a fairly low interest rate of 3-month LIBOR + 1.83%. Proceeds will be used for "working capital including redemption of the company's convertible senior notes with a January 15, 2015 put option."
    • A $23M term loan facility was taken out earlier this month. Hanwha ended Q3 with $142.9M in cash, $482.5M in short-term bank borrowings, $80.3M in convertible debt, and $247.8M in long-term debt.
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  • 2:52 PM
    • Geospace (NASDAQ:GEOS) is one of the Nasdaq's biggest gainers on options expiration day.
    • 2M shares (16% of the float) were shorted as of Nov. 28. With Geospace down 72% YTD going into today amid a major slowdown in seismic exploration work, many of those shorts likely have huge profits.
  • 2:43 PM
    • Deja vu: Three months after gradually moving higher after posting an FQ2 revenue miss and EPS beat, BlackBerry (BBRY -1.4%) is doing the same after delivering a similar FQ3 performance.
    • An improving gross margin contributed to the EPS beat: GM rose to 51.7% from 46.4% in FQ2. GM was at -106% a year ago (the result of a massive phone inventory charge).
    • Cost cuts also helped: GAAP R&D spend fell 17% Q/Q and 48% Y/Y to $154M; SG&A spend fell 12% Q/Q and 68% Y/Y to $538M. BlackBerry "continues to target sustainable non-GAAP profitability some time in fiscal 2016." The FY16 (ends Feb. '16) EPS consensus is at -$0.20.
    • Hardware was 46% of revenue, services 46%, and software/other 8% - the same as FQ2. End-user phone sales fell to 1.9M from 2.4M in FQ2 and 4.3M a year earlier. BlackBerry has said it needs to sell 10M phones annually to break even on hardware.
    • Cowen (Market Perform) likes BlackBerry's margin improvement and BES license growth - ahead of the BES12 launch, BES10 licenses roughly doubled Q/Q to 6.8M, aided by the EZ Pass migration program (to be ended soon). "Software growth remains the critical driver of the long-term turnaround."
    • S&P (Hold): "We are encouraged by a return to positive cash flow, reflecting margin improvement from cost cutting efforts. We see BBRY growing its mobile device management business ... We anticipate BBRY focusing on growing its software offerings and expect its hardware business to remain at depressed levels." MDM software rival MobileIron (MOBL +6.6%) is up strongly.
    • FQ3 results, details
  • 1:58 PM
    • ReneSola (SOL +12.4%) and Yingli (YGE +12.2%), beaten up along with other solar firms as oil prices plunged, are ending the week on a very strong note. Volumes for both firms are nearing their 3-month daily averages.
    • The gains come days after the DOC made final decisions to impose new anti-dumping and countervailing duty tariffs on Chinese solar module exporters, with the goal of closing a loophole that allowed exporters to avoid prior tariffs (imposed in 2012) by using non-Chinese solar cells.
    • JPMorgan and RBC have downplayed the ruling's impact on Chinese module makers: Both note Chinese firms are already relying heavily on locally-sourced cells, which are often cheaper than imported ones.
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  • 1:39 PM
    • VirnetX (NYSEMKT:VHC) and Microsoft (NASDAQ:MSFT) have ended their legal battle.
    • Microsoft has "agreed to pay $23 million to VirnetX to settle the patent dispute and expand Microsoft's license," and both parties have agreed to end current litigation and patent review proceedings between them. All other deal terms are undisclosed.
    • Back in 2010, Microsoft agreed to pay VirnetX $200M in a VPN patent settlement. VirnetX's shares remain halted for now.
    • Update (1:45PM ET): Shares have resumed trading, and are up 20.7%.
    | 1 Comment
  • 1:25 PM
    • Recent online lending IPOs LendingClub (LC -5%) and OnDeck (ONDK -7.4%) are each seeing big losses.
    • LendingClub is still up 71% from its $15 IPO price, with bulls trumpeting the disruptive impact of P2P lending and bears questioning the company's steep multiples (previous).
    • OnDeck, whose steep small business lending rates and balance sheet risk have sparked criticism, is up a relatively modest 20% from its $20 IPO price.
  • 1:10 PM
    • VirnetX (NYSEMKT:VHC) was up 17.6% on the day prior to the halt, with very strong volume.
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  • 1:01 PM
    • Though post-bankruptcy Kodak (KODK +0.1%) doesn't directly make consumer electronics gear, it has licensed its brand to a slew of third-party consumer hardware OEMs The company plans to show off some of this hardware at CES (runs from Jan. 6-9)
    • Among the showcased products: Standard digital cameras, camcorders, action cameras, baby monitoring systems, batteries, mobile device chargers, binoculars, and camera accessories. Kodak will also show off "paper imaging specialty items" and a photo-printing apps.
    | 1 Comment
  • 12:33 PM
    • The FTC had accused T-Mobile (TMUS +1.5%), along with its three nationwide rivals, of billing users for unauthorized charges related to mobile content/services (i.e. cramming).
    • The carrier will pay at least $90M to subscribers hit with the charges. It will also pay $18M in state fines, and $4.5M to the FCC.
    • AT&T has already agreed to pay $105M to settle similar charges. A $105M settlement with Sprint is on tap.
    | 1 Comment
  • 12:05 PM
    • After missing out on a market rally yesterday, GoPro (GPRO -4%) has fallen today to levels last seen in early September. The selloff is occurring ahead of the action camera maker's Tuesday lockup expiration.
    • SA author Chris DeMuth Jr. recently made a bear case: In addition to GoPro's valuation and the lockup expiration, he cited high R&D spend (10% of revenue over the first 9 months of the year) and growing competition.
    • Joe Albano has offered a more bullish take centered around GoPro's software/services investments - especially its efforts to make it easier for users to turn raw video into more polished clips that can be quickly shared online.
    • Shares now go for 44x 2015E EPS and 4.2x 2015E sales. Estimates have been gradually rising.
  • 11:36 AM
    • Bought for ~$1B by Facebook (FB +1.8%) in 2012, Citi thinks Instagram is now worth 35x as much, and even calls this estimate "conservative."
    • Citi: "While Instagram is still early in monetizing its audience and data assets, and its financial contribution to [Facebook] is minimal today, we believe that it is quickly gaining monetization traction, and would contribute more than $2bn in high-margin revenue at current user and engagement levels if fully monetized."
    • For reference, Twitter is worth a relatively modest $23.7B. In Twitter's favor: The company is much further along in monetizing its platform, and arguably has more valuable datasets to leverage. In Instagram's favor: Its MAUs just passed Twitter's (the gap will likely widen going forward), and its photo/video streams lend themselves well to brand advertising.
    • Facebook is once more trading near $80. Its all-time high is $81.16.
  • 11:17 AM
  • 11:04 AM
    • The DOJ and FBI will announce today the North Korean government was responsible for the Sony (SNE -2.8%) hack that (among many other things) led The Interview's release to be cancelled. An announcement is expected by 1:30PM ET.
    • Reuters reports hearing from an official that "there may be a Chinese link either through collaboration with Chinese actors or by using Chinese servers to mask the origination of the hack."
    • Threat-prevention hardware/software/services provider FireEye (FEYE +4.9%), hired to probe the hack and help restore Sony's systems, is adding to yesterday's gains.
    | 1 Comment
  • 10:47 AM
    • Morgan Stanley, whose internal iPhone (AAPL +0.1%) sales tracker has often (though not always) been more accurate than consensus estimates, says its tracker points to 67M calendar Q4 (FQ1) iPhone sales, above a 63M consensus.
    • Analyst Katy Huberty (recently hiked her target to $126) notes demand is especially strong in China (nearly 3x global Y/Y growth rates), where plenty of signs point to strong pent-up interest in larger iPhones. U.S. demand is said to be in-line with global trends, and Japan and France "somewhat below."
    • Huberty adds strong demand could require Apple to fill its channel inventory, particularly given its plans to grow channel inventory target range by a week to 5-7 weeks. A two-week replenish could result in another 7M iPhone sales.
    • Meanwhile, a BBC undercover probe into the labor practices of Apple contract manufacturer Pegatron is garnering attention. BBC states it "found standards on workers' hours, ID cards, dormitories, work meetings and juvenile workers were being breached," and that one undercover reporter "had to work 18 days in a row despite repeated requests for a day off."
    • BBC also says it found evidence tin from Indonesian mines using child labor "could be entering [Apple's] supply chain." In an e-mail to U.K. workers, Tim Cook is said to be "deeply offended" by the allegations. This is far from the first time labor practices at Chinese contract manufacturers have come under fire.
    • Previous: UBS hikes iPhone forecast following Google checks
  • 10:15 AM
    • RBC has launched coverage on Ellie Mae (ELLI +2.4%) with an Outperform rating and $52 target. The mortgage origination software provider is once more close to its 52-week high of $42.49 (set in November).
    • The launch comes two days after Oppenheimer hiked its target by $5 to $45. The firm cited broader industry adoption of Ellie's Encompass origination software platform, an expanding product line, and more upmarket customer wins.
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