Tag Archive | "morgan-keegan"

Apple, Google: Fraud Worries Obstacle To NFC, Says Morgan Keegan

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Folks, I must admit that in the debate over “mobile payments,” I’ve been out of touch, of late.

Today, for example, I neglected to mention a longish note — 29 pages — that came out late Monday from Morgan Keegan, assembled by Tavis McCourt, who follows Apple (AAPL), as well as some colleagues of his, Matt McKee, who follows communications technology, and Roberd Dodd and Robert Ladyman, who follow transaction processing.

The note’s interesting, so I thought I’d mention it, even though I missed my chance earlier.

The authors offer the view that there is “substantial” potential for near-field communications (NFC) chips embedded in a phone as a mobile “digital wallet.”

But the obstacle is that the status quo is likely to prevail, basically because of the risk of fraud.

Merchants are likely to take awhile before they will move to NFC. Why? Because the most likely method of funding a mobile wallet, by tapping into a bank account, called “ACH,” doesn’t actually clear the funds till an overnight update happens, unlike traditional debit cards, where money is cleared right away. Which means merchants can be left hanging when there are insufficient funds.

Unless the banks can underwrite/insure the funds to protect against fraud, in a cost-effective manner for merchants, than the status quo will prevail, which means digital wallets will just be a thin layer riding on top of the current payment system of the “networks” — Visa (V), MasterCard (MA), etc.

And in that system, Visa and MasterCard still make most of the money. Which means little actual direct share of profit for Apple, Google (GOOG), and other smartphone vendors.

“The mobile payment opportunity is more of a cost burden than a real benefit” to Apple and others, they write. Putting an NFC chip in a handset can cost $2 to 4$ per handset, they note. Apple and others might not get any share of the actual transaction dollar amount, they argue.

One real beneficiary of any NFC buildout might be VeriFone (PAY), which already sells terminals for credit-card processing. They’ll have to supply merchants with point-of-sale terminals for the buildout of NFC. Morgan Keegan rates VeriFone’s shares Outperform.

The Morgan Keegan note echoes a lot of skepticism voice Monday by Toni Sacconaghi with Sanford Bernstein, who follows Apple. Among his concerns is that putting those NFC terminals in retail locations could take five years or more to happen.

And then putting an NFC chip in the iPhone could add $450 million to $900 million to the cost of goods for the thing Apple’s 2012 fiscal year, which could lower Apple’s gross margin by 0.4 to 0.7 percentage points. Then, too, it’s unclear if Apple and others could command a meaningful cut of the transaction, as McCourt and company point out.

Sacconaghi concludes we won’t see NFC in Apple’s next iPhone: “We do not expect the iPhone 5 to feature an NFC-based payments solution, and instead expect Apple to evaluate and come to market with partners or a complete solution later, perhaps when NFC infrastructure is more established.”

Then again, BoyGeniusReport’s Jonathan Geller speculates today Apple might actually be planning already to implement NFC terminals in its own retail network.

Article courtesy of Tech Trader Daily

Morgan Keegan: QCOM Has Less Exposure to Feature Phones

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Investors have long thought of Qualcomm’s (QCOM) chip business as heavily reliant on Samsung and LG, but recent design wins are rapidly diversifying the company’s customer base, according to a report by Morgan Keegan.

Qualcomm shares were relatively weak yesterday due in part to Micrel’s (MCRL) pre-announcement, which hinted at a major Korean original equipment manufacturer canceling orders.

But Morgan Keegan estimates that less than one-third of Qualcomm’s MSM chipsets were sold into smartphones, nearly 50% into CDMA feature phones, and about 20% into UMTS feature phones.

“By fourth-quarter 2011, with design wins at Apple (AAPL), various tablet vendors, RIM (RIMM), and Sony Ericsson (SNE), we estimate that total smartphone/tablet MSM shipments will more than double to over 70 million,” wrote analyst Tavis McCourt. “This does not even include any Nokia Windows Phone builds, which should start soon thereafter.”

McCourt cautions that these numbers are simply estimates, but he says, it’s safe to say that Qualcomm is less exposed to feature phones in the developed world than it once was.

Qualcomm shares are up 0.8% at $52.65 in early trading.

Article courtesy of Tech Trader Daily

Apple: iPhone 5 Timing Irrelevant, Says Caris; It’s The Platform

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Caris & Co. analyst Robert Cihra this morning reiterates a Buy rating on shares of Apple (AAPL) and a $460 price target, writing that the company’s forecast for fiscal Q3 will be “even more conservative than usual” given constraints on parts stemming from Japan’s turmoil, but that, “Apple benefits to at least some degree from its scale as preferred customer, margin model capable of paying up for parts and history during stock-outs where Apple’s the one product customers will uniquely “wait” for rather than buying a commodity substitute.”

More to the point, Cihra’s note is mainly concerned with the speculation over a delay in the iPhone 5 introduction. Such speculation, “misses the point,” he insists. Apple is no longer a “hit product company,” so timing matters less:

Products last maybe a year, “platforms” last decades. We believe the single biggest change in Apple over the past few years is that it has moved from being something of a “hit product” movie studio dependent on each new release back to being a better-than-ever “platform” company, where its OS plus hardware plus apps ecosystem (from developer through discovery+billing) and closed-loop customer relationship (iTunes+App Store; services integration; apps curator/delivery/billing) are what truly matters and drive longevity. Want to know what the next iPhone or iPad’s going to look like?…just picture a thinner, lighter rectangle. It’s not the hardware that matters it’s the software — well actually, it’s the software+hardware+services in a fully-integrated vertical platform. As we’ve said repeatedly, iOS IS the “what’s next?” for Apple.

Previously: Apple: Morgan Keegan Shifts iPhone Estimates For Possible September Intro, April 7th, 2011.

Article courtesy of Tech Trader Daily

Apple: Morgan Keegan Shifts iPhone Estimates For Possible September Intro

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Morgan Keegan analyst Tavis McCourt late yesterday reiterated his year forecast for Apple’s (AAPL) iPhone sales, while writing that he adjusted June and September estimates to accommodate for what may be a shift of Apple’s iPhone 5 introduction from June to September.

McCourt now estimates 14 million iPhone units in the June fiscal Q3, down by 3 million, but 22 million for the September quarter, higher by 3 million. McCourt’s estimate for the March quarter just ended is 17.5 million, unchanged. He estimates 69.7 million for the full year, unchanged from before.

Apple shares this morning are up 86 cents at $338.90.

Article courtesy of Tech Trader Daily

RIM: Markets Day, Buyback Could Catalyze, Says Citi

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Citigroup’s Jim Suva this afternoon updated his estimates for Research in Motion (RIMM) after perusing the company’s annual report, which came out last week.

Mainly these are small tweaks resulting in slight changes to estimates — Suva takes his fiscal 2013 EPS estimate down by a penny, for example, to $8.87 per share. The important thing is that, on the whole, “there are no changes to the key model drivers (units, ASPs, subs, gross margins, etc.).

Suva retains a Buy recommendation on the stock and an $80 price target.

He sees RIM’s May 2nd capital markets day as the next available “catalyst,” followed by the BlackBerry World conference that same week. Capital markets day may offer some clarity on how RIM gets to a target of $7.50 per share in 2012. Around June, he expects there might be some announcement of a share buyback initiative.

“RIMM shares were trading at 10.5x next twelve months consensus EPS at the time of the June 2010 [buyback] announcement,” writes Suva, “so we would not be surprised to see another large buyback given current valuation of 7.9x consensus next twelve months EPS.”

RIM shares today fell 39 cents, or 0.7%, to $54.40.

Previously:

RIM: Morgan Keegan Encouraged By Annual Report, April 1st, 2011;
RIM: Losing Subscribers In North America? Asks UBS, March 31st, 2011.

Article courtesy of Tech Trader Daily

RIM: Morgan Keegan Encouraged By Annual Report

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Tavis McCourt with Morgan Keegan this morning reiterates an Outperform rating on shares of Research in Motion (RIMM) after digging through the company’s annual report filed this week, noting a “substantial increase in purchase obligations.”

Specifically, RIM’s was up 140% last fiscal year, compared to the year prior, which to McCourt indicates, “quite a vote of confidence in future sales.”

And in contrast to the critical report yesterday by UBS’s Amitabh Passi, McCourt takes a favorable view of the indications of subscriber shift he sees in the report: Yes, RIM lost subscribers in North America, but perhaps it’s not the end of the world:

North America lost roughly 1.25mm subscribers in the last quarter, but International has more than made up for the decline by adding about 6.5mm subs. We note that rounding has a big impact on this number, so we would view each data point as “roughly” correct. However, the trend is clear and persistent in both the international strength and US weakness. 54% of RIM’s customer base in total is now outside the US.

Other things that he finds encouraging are that, “The company shows absolutely no signs of feeling any pressure on gross margins, although clearly gross margins will begin to decline as Playbook sales increase in the sales mix”; that “customer diversification continues to improve”; and that weeks of channel inventory should decrease further from Q4′s decline, “leaving room for some channel re-stocking in the August/November quarter.”

McCourt maintains a $91 price target on RIM stock.

RIM shares today are down 38 cents, or 0.7%, at $56.16.

Article courtesy of Tech Trader Daily

CTIA: Morgan Keegan Assesses Tablets

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The CTIA Wireless 2011 show, one of the bigger annual industry confabs, opened on Monday and winds down tomorrow in Orlando, Florida, so it’s about time for some reports from the field…

Tavis McCourt of Morgan Keegan this afternoon offered an overview of several new gadgets unveiled this week. As I noted on Tuesday, there were a couple of new tablet computers, including an 8.9″ version of Samsung’s (SSNLF) Galaxy Tab, joining the already announced 10″ version. McCourt is impressed with the fact that Samsung was able to slim down both machines to a width of just 8.6 millimeters, thinner than Apple’s (AAPL) iPad 2, at 8.8 millimeters.

There was a tablet from Chinese equipment firm Huawei, too, called the “S7 Slim,” which is expected to be priced fairly cheap, he believes. HTC offered up the “Flyer,” and a version of the same with WiMax, the “EVO View 4G.” McCourt, however, writes that, “The HTC tablet felt thick given its small size and we continue to prefer the Research in Motion (RIMM) PlayBook’s form factor and UI between the several 7″ tablets.”

McCourt notes that several phones were also introduced, including the Android-based LG ElectronicsG2x” and “Thrill 4G,” and HTC “EVO 3D,” and the Microsoft (MSFT) Windows Phone 7-based “HD7S.”

Previously: Sprint: HTC ‘EVO 3D’ May Boost Appeal, Says Wells, March 22nd, 2011.

Article courtesy of Tech Trader Daily

Lawyer Representing Hedge Fund Charged With Collecting Ill-Gotten Gains Resents SEC’s Use Of The Term ‘Fraud’ As A Description Of Client’s…

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On Friday, the Securities and Exchange Commission charged former hedge fund manager-cum-selectman Forrest Fontana with illegally selling short shares of Merrill Lynch, XL Capital and Wells Fargo in 2008. Fontana’s lawyer, Lisa Wood, doesn’t deny this happened. Having said that, she does take issue with the use of the term “fraud” as it relates to her client, whose “crime,” if you can even call it that, was an accidental technical violation that only happened once.

Fontana, who started Fontana Capital LLC after having worked at industry powerhouse SAC Capital Advisors, violated Rule 105 of Regulation M, the U.S. Securities and Exchange Commission said in an order instituting administrative cease and desist proceedings. The rule prohibits investors from participating in public offerings after having shorted the same securities. According to the government, Fontana, who traded mainly in financial stocks, violated the rule on three occasions, helping his investors earn unlawful profits of about $1,101,000.

Fontana’s lawyer, Lisa Wood, said the matter is not a fraud case and relates to “isolated, inadvertent, technical violations of Rule 105.” “We disagree over the measure of damages,” Wood said.

Given that Fontana started off with a “buzz” after being seeded with $50 million from Steve Cohen in 2005 and as of 2010, managed zero dollars for clients and effectively closed its doors, maybe it’d be better to go with the poor shlub just trying to make a buck defense? In unrelated news:

This is not the first time Fontana has been embroiled in a regulatory issue. While at SAC, he had frequent contact with a research analyst at Morgan Keegan Inc before the firm issued a negative research report on Fairfax Financial Holdings Ltd. Fairfax promptly sued a group of hedge funds, including SAC, claiming they conspired to drive down the company shares.

SEC: Boston Hedge Fund Fontana Broke Rule [Reuters]
SEC Accuses Fontana Capital of Breaching Short-Sale Restrictions [Bloomberg]



Article courtesy of Dealbreaker

Cree: Morgan Keegan Upgrades; Sees Headwinds Dissipating

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Cree (CREE) shares are getting a modest lift this morning from Morgan Keegan analyst Harsh Kumar, who raised his rating on the LED lighting company’s shares to Outperform from Market Perform. Kumar upped his price target on the stock to $75, from $48.
Kumar says factors that had created a headwind [...]

Article courtesy of BARRONS.com: Tech Trader Daily

PCLN: Morgan Keegan Upgrades

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Morgan Keegan analyst Justin Patterson this morning raised his rating on Priceline (PCLN) to Outperform from Market Perform, declaring that his primary concerns about the stock – an unstable forex environment and economic uncertainty in Europe affecting travel – “look to have been for naught.” His new price target on [...]

Article courtesy of BARRONS.com: Tech Trader Daily