Today - Saturday, November 22, 2014
- The Rayno Report states Verizon (NYSE:VZ) has launched a major trial of bare-metal (commodity) switches running on a networking OS and SDN switching software respectively supplied by startups Cumulus Networks and Pica8.
- Light Reading backs up the report, while adding Verizon "aims to determine whether bare-metal switches ... could eventually replace more expensive, proprietary Juniper Networks Inc. (NYSE:JNPR) equipment." Nonetheless, Rayno reports Juniper is a part of the trial, supplying "routing and switching technology that helps tie the network together with VXLAN [networking virtualization] technology."
- Though the trial is in its early stages, both sites report hearing it's a big deal, given the potential for bare-metal/white-box gear to replace proprietary hardware on a large scale. "[Verizon] can reduce their costs massively," says a Rayno source. The trial coincides with the deployment by Verizon's cloud services ops of an SDN solution using server-based hardware from Super Micro (NASDAQ:SMCI).
- Cisco (NASDAQ:CSCO), which maintains a 60%+ data center switch share and a leading position in the carrier router market, has already called white-box hardware its biggest threat. Internet giants have been quick to embrace SDN/white-box solutions - Facebook has even open-sourced a data center switch design - and AT&T is looking to adopt SDN through its Domain 2.0 initiative.
- Cisco's recently-launched ACI/APIC SDN/networking virtualization solution is gaining traction within the company's enterprise base, but critics call it too expensive/proprietary - pricing for an APIC controller runs from $40K-$58K, and software licenses for ACI-capable switches run from $3K-$15K. Meanwhile, Verizon, AT&T, and other carriers are hungry to cut wireline capex.
- Juniper has adopted an SDN strategy that's more friendly to open platforms, but there might be some internal dissent on that front. Rayno reports recently-ousted CEO Shaygan Kheradpir "was more pro-SDN than the existing Juniper management, which is more conservative about protecting its installed base."
Friday, November 21, 2014
- Netflix (NASDAQ:NFLX) has landed the rights to Unbreakable Kimmy Schmidt, a new Tina Fey/Robert Carlock comedy about a doomsday cult survivor living in NYC, for two seasons. The show's first season (13 episodes) arrives in March.
- The show, originally set to be aired by NBC, is the first one made by Fey and Carlock since 30 Rock. Several other 30 Rock vets are also on board.
- Recent Netflix deals: Between, Adam Sandler, The Weinstein Company
- American Tower (NYSE:AMT) is buying 6,480 towers from TIM Participacoes (NYSE:TSU) for R$3B ($1.2B), slightly more than the ~$1.1B previously reported by Reuters. AMT "intends to finance the acquisition in a manner consistent with its previously announced leverage targets."
- The towers are expected to produce R$435M/year ($171M/year) in revenue, and R$191M/year ($75M/year) in gross margin. TIM has agreed to 20-year leases for the towers, and will act as their anchor tenant.
- AMT has already bought Brazilian towers from NII Holdings, and acquired local tower owner BR Towers. The company also bought 666 Brazilian towers in 2011, a transaction Muddy Waters took aim at.
- Altogether, AMT owned/operated 69.5K towers at the end of Q3.
- Calling the company's guidance for mid-single digit 2015 revenue growth "optimistic," CLSA's Srini Pajjuri downgraded Intel (NASDAQ:INTC) to Sell today in the wake of its investor day.
- Pajjuri: "Intel’s PC segment volumes are on track to grow 9% in 2014, compared to our PC unit forecast of -2%. We believe share gains explain ~3 points of the discrepancy, which means that the remaining 8 points of difference is largely due to inventory build at customers." He expects Intel's PC CPU revenue to fall 6% in 2015 vs. guidance for a slight decline.
- Bernstein's Stacy Rasgon, who downgraded two weeks ago, also remains concerned about PC CPU inventories. In addition, he thinks Intel's mobile ops "[remain] a horror show."
- Bulls, meanwhile, are taking heart in Intel's forecast for server CPU division (DCG) revenue to grow at a 15% annual clip through 2018. Jefferies' Mark Lipacis: "We think DCG growth alone could add $1 billion to 2015 FCF and $0.15-$0.20 to EPS. We forecast FCF to increase by 30%-40% to $13 billion in 2015."
- Pac Crest's Mike McConnell notes the DCG outlook implies 20%+ Y/Y growth in non-traditional enterprise segments (Web/cloud, HPC, networking) and high-single digit growth elsewhere. "We believe improving U.S. GDP growth, coupled with Microsoft’s planned expiration of [Windows Server 2003 support] in July, is driving Intel’s more constructive outlook for demand from its traditional enterprise customer base next year.”
- The PC division had $4.1B in Q3 op. profit, and DCG $1.9B. Intel's outlook suggests the company isn't too concerned for now about ARM server CPUs; Qualcomm threw its hat into the ARM server ring on Wednesday.
- Qualcomm (NASDAQ:QCOM) has sold its Taiwanese Mirasol display plant to TSMC (NYSE:TSM) for $85M, per a TSMC regulatory filing.
- Taiwanese media previously reported Qualcomm was set to sell the plant, which it once planned to invest up to $975M in, and that TSMC wanted to use it to expands its chip assembly/testing ops.
- Meanwhile, the sell-side has been busy debating Qualcomm's analyst day guidance and commentary, with much of the attention on focused on the company's China remarks. Cowen's Tim Arcuri is somewhat encouraged. "The company provided no new substantive regulatory (NDRC/FTC/EU) updates, but seemed to strike a more definitive tone about ultimately collecting royalties on 'substantially all LTE devices.'"
- That, in turn, makes Arcuri think the most likely outcome for the China dispute is "some combination of a fine, potential changes in the royalty rate structure for all of [Qualcomm's] licensees operating in China, and/or increased investment in the local China semiconductor supply chain."
- Bernstein's Stacy Rasgon is less positive. "We do not believe the near-term regulatory issues (particularly China) are truly the primary issue anymore ... The bigger issue being how the rise of China, at scale, is changing the overarching market dynamics that Qualcomm plays."
- Following 26 rounds, total bids in the FCC's AWS-3 spectrum auction have reached $33B - up from $24B two days ago. Though the auction's pace has slowed, more than $1B worth of bids were still tallied in the latest round.
- Walter Piecyk observes the average bid is now at $2.04/MHz./POP, far above his initial estimate range of $0.75-$1.25, and that it implies DISH's existing spectrum assets are worth over $73/share alone. Dish rose 2.1% today to $73.70.
- Tim Farrar thinks Dish may have bid over $10B, as it tries to both add to its spectrum portfolio (thus increasing its strategic value to carriers) and inflate the value of its existing assets. In addition to bidding against AT&T, Verizon, and T-Mobile for paired spectrum assets (the auction's main prize), Dish is expected to be the winning bidder for 15MHz. of unpaired spectrum.
- Meanwhile, the FCC has announced it will vote on rules for its 600MHz. incentive auction (due in 2016, and expected to be even bigger) in December. If approved, the rules will then by opened for public comment.
- Sticker shock? While the S&P rose 1.2% this week, AT&T (NYSE:T) fell 1.7% and Verizon (NYSE:VZ) fell 2.5%.
4:53 PM| 1 Comment
- Compass Point's Michael Tarkan has launched coverage on XOOM with a Sell rating and $11 target.
- Tarkan: "While we favor Xoom's operating model relative to the legacy money transfer agent model, increasing competition and ongoing concentration risk create uncertainty—and with shares trading at 42x our 2015 EPS estimate and 27x our 2016 estimate, versus peers at 10x-11x and 9x-10x, respectively, valuation appears rich."
- Shares fell 2% in regular trading, and aren't far removed from a post-IPO low of $14. They tumbled last month after Xoom provided light Q4 sales guidance and reported a drop in new customer adds.
- Maxim Group has launched coverage on Violin Memory (NYSE:VMEM) with a Buy rating and $8 target ahead of the flash storage system vendor's Monday FQ3 report. Shares rose 2.6% in regular trading.
- Violin, which has made big changes under new CEO Kevin DeNuccio, is up 29% YTD, but still down 43% from its $9 Sep. '13 IPO price.
- Hanwha (NASDAQ:HSOL) shipped 373.2MW of solar modules in Q3 (+10% Q/Q and +17% Y/Y), missing guidance of 400MW. But the company is guiding for Q4 shipments of 400MW-425MW, and says it's "on plan" to expand its annual cell and module production capacity to at least 1.5GW and 2GW, respectively.
- Module ASP fell to RMB3.74/watt ($0.61/watt) from RMB4.17 in Q2 and RMB4.16 a year ago. That, in turn, led gross margin to come in at 6.8% vs. 9.5% in Q2 and 5.1% a year ago.
- Hanwha attributes the ASP drop to a greater mix of Chinese sales, and a strong dollar. China rose to 30% of module revenue from just 6% in Q2. Japan and the U.S., two higher-ASP markets, respectively fell to 43% and 5% from 53% and 11%.
- On the other hand, opex fell to 12.8% of revenue from 13.1% in Q2 and 16.8% a year ago. 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.
- Q3 results, PR
- Sigma Designs (NASDAQ:SIGM) has posted a decent rally on options expiration day. Volume was slightly above a 3-month average of 267K.
- Earlier this week, Sigma announced French carrier Orange is using its Z-Wave wireless transmitter ICs and software stack (aimed at home control/monitoring products) in its Homelive home automation solution.
- Agilent (A +1.8%) is near $42 after announcing a 24% dividend cut yesterday afternoon. The cut comes shortly after Agilent promised to return $500M to shareholders - $135M through dividends and $365M through buybacks - in FY15 (ends Oct. '15).
- Agilent also announced it's merging its chemical analysis and life sciences equipment ops, putting them both under the control of life sciences product GM Patrick Kaltenbach. The company's diagnostics and genomics equipment ops will be run by Jacob Thaysen, who was already the GM of the business.
- Fred Stroheimer, formerly in charge of Agilent's Life Sciences & Diagnostics Group, will be retiring in FQ2.
- An EU parliament draft motion seen by the FT says the "unbundling [of] search engines from other commercial services" should be considered a potential solution to dealing with Google's (GOOG +0.4%) market dominance.
- The European People's Party and the Socialists, the parliament's two main political blocs, are said to back the motion. German politicians - many of whom have been harsh Google critics - hold considerable sway within the parliament.
- The FT notes that while the parliament has no legal authority to break up a company, it has "increasing influence" on the EC, which initiates all EU legislation.
- The report follows intense local criticism of Google's search antitrust settlement with the EU. New EU antitrust regulator Günther Oettinger has signaled he'll take a harder line with Google than predecessor Joaquin Almunia.
- Eric Schmidt defended Google against its European critics in Berlin last month. Almunia, meanwhile, has suggested the backlash to his handling of Google partly stems from fears European tech companies have fallen behind U.S. rivals. "I don’t remember any case…that triggered…this kind of reaction, even of [a] smaller size."
- Believing Aruba's (ARUN -13.1%) soft FQ2 guidance reflects tough competition and slowing industry growth, BofA/Merrill has downgraded the enterprise Wi-Fi hardware vendor to Underperform. Its target is $21.
- Dougherty is defending Aruba, arguing 802.11ac adoption will drive growth - the firm notes only ~10% of Aruba's base has migrated. Dougherty also expects share gains (aided by ClearPass and Aruba Instant) and new channel partners to help Aruba's cause, and considers guidance conservative.
- After opening higher, rival Ruckus Wireless (RKUS -6.7%) is following Aruba lower. As is Aerohive, which was downgraded today by Macquarie.
- Down 3% yesterday after posting mixed Q3 results and reiterating its full-year module shipment guidance, JinkoSolar (NYSE:JKS) is shooting higher today. Volume (2.8M shares) is already above a 3-month average of 2.1M.
- SA author The Panoramic View remains bullish, citing Jinko's industry-leading manufacturing costs, growing downstream solar ops (1.8GW pipeline, with 461MW of projects expected to be connected in Q4), and low forward P/E (5.2 going into today).
- Bill Veghte, put in charge of H-P's (HPQ +0.1%) enterprise hardware ops a year ago, will now "be part of a three-person team to plan HP Enterprise’s strategy and guide it through its separation," Bloomberg reports, citing in an internal memo. Enterprise services chief Mike Mefkens and software chief Robert Youngjohns are the other team members.
- Antonio Neri, GM of H-P's server and networking units, will take over Veghte's job, albeit while still reporting to him. Chris Hsu, H-P's SVP of operational performance, will be in charge of splitting H-P's enterprise ops, and business PC SVP Enrique Lores will be in charge of splitting its PC/printing ops.
- The move comes ahead of H-P's Nov. 25 FQ4 report. Shares +5% since the Oct. 6 split announcement. As previously announced, Meg Whitman will be the CEO of H-P Enterprise, and PC/printing EVP Dion Weisler the CEO of HP Inc.
1:10 PM| 8 Comments
- Maxim Group has launched coverage on Nimble Storage (NMBL -4.1%) with a Hold rating and $28 target. The launch comes ahead of Nimble's Nov. 25 FQ3 report, and three days after the company officially added Fibre Channel support to its CS-series arrays.
- Meanwhile, founder/CTO Umesh Maheshwari has disclosed he sold 32K shares on Tuesday and Wednesday, and marketing chief Daniel Leary has disclosed the sale of 17K shares on Tuesday. Maheshwari had already unloaded a large chunk of his Nimble holdings earlier this year.
- Believing Satya Nadella has done little to address core problems, Jefferies' John DiFucci (formerly with JPMorgan) has launched coverage on Microsoft (MSFT -1.5%) with an Underperform rating and $40 target, as part of a broader software stock launch. Shares have turned negative after opening higher.
- "We believe the 'new' Microsoft will look very much like the 'old' Microsoft for some time," says DiFucci in his note. He observes the majority of Microsoft's op. profit is still tied to PCs (ed: much of it isn't directly linked to PC sales, but to Office subscriptions/volume licenses), and sees Chromebooks and cheap tablets eating into Windows' computing share.
- Going into today, shares had risen 56% since Steve Ballmer announced his retirement plans in August 2013.
12:23 PM| Comment!