Wednesday, December 17, 2014
- "It's never going to happen," says Netflix (NASDAQ:NFLX) exec Cliff Edwards.
- Other streaming video services such as BBC iPlayer have added oflline download support, as have Spotify and many other music streaming services. However, Netflix (per Edwards) believes offline downloads are just a "short term fix for a bigger problem." Namely, getting reliable, high-quality Wi-Fi access away from home.
- Netflix might have another motive for opposing offline viewing: Keeping its huge bandwidth costs down. Whereas Netflix currently incurs bandwidth charges only when a user is actually watching a show, offline support raises the possibility users would download large volumes of content they'd never get around to seeing.
- Earlier: Netflix strikes deal with Dish
- Citing stronger-than-expected iPhone/iPad accessory sales, ZAGG now expects 2014 revenue of $250M-$255M, above a $232.5M consensus. The outlook implies Q4 revenue of $91.8M-$96.8M, far above a $73.3M consensus.
- In addition, thanks to a mix shift towards high-margin screen protector sales, gross margin is now expected to be in the low-30s, better than prior guidance for the high-20s. Adjusted EBITDA guidance has been hiked to $30M-$32M from $15M-$20.
- Shares have recovered a big chunk of the losses they saw on Nov. 5 thanks to Zagg's Q3 EPS miss and soft gross margin/EBITDA guidance.
- Corning (NYSE:GLW) and Dow Chemical (NYSE:DOW) disclose their 50/50 Dow Corning JV is shutting down its Hemlock Semiconductor facility in Clarksville, TN, which makes polysilicon for solar cells and semiconductors. (8-Ks: Corning, Dow)
- The decision was made after a "review of sustained adverse market conditions and continued oversupply, the cost of operating the facility and the ongoing impact of tariffs on polycrystalline silicon imported into China." A $1.5B-$1.6B pre-tax charge will be taken.
- At the same time, Dow Corning has cut its estimate for the company's future liability related to its 1998 breast implant settlement by $1.3B; the liability stood at $1.7B at the end of Q3.
- Corning and Dow Chemical each expect to see a $500M post-tax hit from the closing of the Hemlock plant, and a $400M post-tax benefit from the liability estimate cut.
- GLW +0.9% AH.
- Oracle (NYSE:ORCL) has declined to provide guidance in absolute dollars on its FQ2 CC. In constant currency, the company expects FQ3 revenue to be up 4%-8% Y/Y, and EPS to be in a range of $0.69-$0.74. Consensus (based on absolute dollars, naturally) is for 4% revenue growth and EPS of $0.73.
- If exchange rates remain where they are, forex is expected to have 4%+ impact on absolute dollar revenue growth, and a $0.04 impact on EPS.
- In constant currency, software/cloud revenue is expected to be up 5%-8% Y/Y (~1%-4% in absolute dollars, at current exchange rates). Within cloud, SaaS/PaaS and IaaS revenue is respectively forecast to grow 30%-34% and 29%-33%; total cloud revenue was up 45% in FQ2. Hardware system growth guidance is set at -2% to +8%.
- ORCL +5.5% AH. Morgan Stanley's pre-earnings upgrade is looking good.
- FQ2 results, PR
- Moody's has cut Sprint's (NYSE:S) corporate family debt rating to B1 (highly speculative) from Ba3 (non-investment grade speculative). Likewise, Sprint's probability of default rating has been raised to B1-PD from Ba3-PD, and its senior unsecured rating to B2 from B1.
- Moody's, echoing more than a few equity analysts: "Today's rating action reflects our expectation that intense competitive challenges and Sprint's limited ability to respond effectively will lead to a sustained period of very weak earnings and cash flow. Consequently, leverage is likely to increase, which when coupled with negative pressure on cash flow from installment billing plans and its phone leasing option, is expected to lead to a steady deterioration in Sprint's liquidity position."
- The agency's outlook is negative, reflecting what it believes to be "limited ability to reverse current trends in the foreseeable future."
- SunPower (NASDAQ:SPWR) is partnering with private Sunverge to provide a combined solar/energy storage offering to U.S. and Australian residential customers by early 2015.
- The solution pairs SunPower's solar panels with Sunverge' energy storage solution - it features batteries and power electronics, and can be remotely managed through a cloud app.
- IHS recently forecast the market for integrated residential solar/energy storage systems will grow 10x from 2014-2018, reaching 900MW. SolarCity has also shown an interest in the market.
- SunPower rose 3.2% today. The Nasdaq was up 2.1%.
- Jabil (NYSE:JBL) expects FQ2 revenue of $4.15B-$4.35B and EPS of $0.39-$0.50, above a consensus of $4.12B and $0.38.
- An expected 53% Y/Y increase in Diversified Manufacturing Services (DMS) revenue has much to do with the outlook - strong iPhone-related demand is likely playing a big role. Electronics Manufacturing Services (EMS) revenue is expected to be up 3%.
- DMS revenue totaled $1.92B in FQ1, and EMS revenue $2.63B. Gross margin rose 70 bps Y/Y to 8.4%; op. margin fell 30 bps to 3.2%, thanks to a 50% increase in GAAP SG&A spend to $214.4M.
- FQ1 results, PR
- Oracle's (NYSE:ORCL) total software/cloud revenue rose 5% Y/Y in FQ2 to $7.3B, in-line with guidance for 3%-6% growth. However, hardware system revenue grew 1% to $1.3B, beating guidance for flat to -10% growth.
- SaaS, (cloud app), PaaS (cloud app platform), and IaaS (cloud infrastructure) revenue collectively rose 45% to $516M; guidance was for 39%-44% SaaS/PaaS growth and 39%-43% IaaS growth.
- On the other hand, traditional software license revenue remains pressured by the cloud migration, it fell 4% to $2.05B. Services revenue fell 3% to $935M. License update/product support revenue (50% of revenue, driven by past deals) rose 6% to $4.8B.
- GAAP opex +3% Y/Y to $6.06B, even with revenue growth. Sales/marketing spend only rose 1% to $19B; R&D rose 9% to $1.39B.
- Americas revenue +5% Y/Y to $5.2B; EMEA +3% to $2.9B; Asia-Pac roughly flat at $1.5B (an improvement from recent quarters).
- $2.1B was spent on buybacks, up slightly from FQ1's $2B. Forex had a 400 bps impact on revenue.
- ORCL +2.7% AH. CC at 5PM ET, guidance should be provided.
- FQ2 results, PR.
- Gillian Tans, the COO of Priceline's (PCLN +2.8%) giant Booking.com unit (based out of Amsterdam), has been promoted to president and "will assume responsibility for the day-to-day operations." In addition, David Vismans, who has been serving as Booking.com's front-end product director, is now the travel site's chief product officer.
- Darren Huston remains Booking.com's CEO, but he'll now have an "increased focus on talent development and driving long-term growth across Booking.com and The Group."
- Meanwhile, Priceline has named Ian Brown, until now the COO of U.K.-based Rentalcars.com, the unit's CEO. He replaces Rentalcars.com co-founder Greg Willis, who will now act as executive chairman.
- The shakeup comes six weeks after Priceline offered soft Q4 guidance that had much to do with slowing European bookings growth (caused in part by a weak euro).
- Priceline followed equity markets higher today. Shares sold off yesterday thanks to a Goldman downgrade and broader Internet stock selloff.
- Teradata (TDC +0.4%) has bought RainStor, a provider of archiving database software that leverages the Hadoop big data framework. Terms are undisclosed.
- Teradata touts the high compression rates (10x-40x) supported by RainStor's software, as well as the immutability of data copies made with it (important for compliance/security purposes).
- Earlier this year, Teradata bought big data consulting/services firm Think Big Analytics, big data management software firm Revelytix, and database software firm Hadapt (offers a platform that merges Hadoop with traditional SQL databases). Plenty of analysts have voiced concerns about Hadoop's impact on Teradata's standard data warehousing solutions.
- Teradata also has a 7% stake leading Hadoop distribution provider Hortonworks.
- Though the Nasdaq is up 1.8%, Yingli (NYSE:YGE) continues to sell off after the DOC made final decisions to impose anti-dumping (AD) and countervailing duty (CVD) tariffs on Chinese solar module exporters.
- The CVD tariffs were imposed on a preliminary basis in June, and the anti-dumping tariffs were imposed on a preliminary basis in July.
- In a PR, Yingli says it will be subject to an AD tariff of 52.1%, and a CVD tariff of 38.7%. "We are deeply disappointed in the U.S. Department of Commerce's decision to accept such a broadly defined scope for this ruling, and to levy harsh, protectionist tariffs." The company notes the ITC still needs to confirm the decision; its ruling is expected near the end of January.
- GTM Research: "[The DOC's action] removes any value chain strategy involving China that averts import tariffs ... This erodes the price advantage that Chinese suppliers have historically benefited from in the U.S. and is likely to impact their market share, as well as average module prices, in 2015."
- Analyst Imtiaz Koujalgi: "YTD, the stock is up only 1%, lower than many of its security peers. The company is still working through its execution issues, but the results of the last two quarters indicate that it is on the right track." He's upgrading Imperva (IMPV +2.6%) to Buy, and hiking his target by $24 to $58.
- Koujalgi argues Imperva's recent woes - they led shares to plunge earlier in 2014 before rebounding - are only due to sales execution troubles and "growing pains," rather than any demand issues. He's also pleased with its management shakeup. "The company is a leader in its space, and we are positive on the demand trends in its product categories."
- The security software vendor now trades for 6.1x 2015E sales exc. cash. Another Deutsche analyst, Karl Keistead, upgraded Check Point today.
- Citing a favorable valuation and a mix shift towards services revenue (carries higher margins than hardware), Argus has upgraded Motorola Solutions (MSI +2.7%) to Buy, and set a $55 target.
- Motorola, less than two months removed from closing the sale of its enterprise unit to Zebra Technologies, has traded in a relatively narrow range this year. The company added $5B to its buyback shortly after the Zebra deal closed.
- "Our broader sector call is that enterprise spending on security IT will again be very strong in 2015, if not stronger than in 2014. Throughout 2014, we flagged PANW, FTNT and PFPT as our top security picks and we’re now adding CHKP to this short-list," says Deutsche's Karl Keirstead. He's upgrading the firewall/security software vendor to Buy, and hiking his target by $20 to $90.
- Keirstead considers Check Points's (CHKP +1.9%) multiples (18x and 11.7x 2015E EPS and free cash flow, respectively) attractive given its security exposure and accelerating growth (potentially 11% Y/Y in Q4 vs. 3%-4% for much of 2013).
- With the aforementioned peers having significantly outperformed Check Point this year, Keirstead thinks "investors are likely to look more aggressively at CHKP shares as a cheaper way to play the security theme with more limited downside risk."
- Shares are $2 away from a high of $78.78. They rallied in October in response to a Q3 beat and healthy Q4 guidance. A weak euro and Palo Alto Networks' firewall share gains have been seen as potential headwinds.
- Battered in recent days as crude oil plunged and took the ruble down with it, Yandex (YNDX +6.3%), Qiwi (QIWI +5%), VimpelCom (VIP +17.9%), and MTS (MBT +9.3%) are rebounding sharply today. Yandex is up 19% from a Tuesday morning low of $15.03.
- Helping the group out: The ruble has rallied after Russia's Finance Ministry began selling foreign currency; Monday's big rate hike is undoubtedly also playing a role. The ruble/dollar exchange rate now stands at 60.6.
- Omega Advisors' Leon Cooperman just gave Groupon (GRPN +3.5%) a favorable mention on CNBC. Though stating the daily deals/e-commerce firm isn't a major holding, he nonetheless declared shares to be significantly undervalued.
- Shares have popped in response. They had given back some of their big post-earnings gains in recent weeks.
- A month after launching several new enterprise services to go with BES12, BlackBerry (BBRY +3.8%) has rolled out two app/services bundles for enterprise users.
- The Secure Productivity bundle features BlackBerry's VPN Authentication service, BBM Protected (messaging security), BlackBerry Blend (remote PC/tablet data access), and customer support.
- The Enterprise Communicator bundle features BBM Meetings (a cross-platform conferencing app), BBM Protected, and customer support.
- BlackBerry is charging $6/user/month for the Secure Productivity bundle, and $12/user/month for the Enterprise Communicator bundle, to enterprise customers with BES and BB10 phones.
- Prior BlackBerry coverage