Tag Archive | "price"

Nokia Continues Slide: Three Downgrades; Moto Death Spiral?

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Nokia (NOK) shares continue to fall this morning as the downgrades pour in following the company’s cut in its outlook yesterday.

I count three downgrades today, in all, from Goldman Sachs, Sanford Bernstein, and Canaccord Genuity.

As I wrote following that announcement, the bears warned that the worst may not yet be over in terms of the deterioration of the existing business, and that the partnership to develop phones with Microsoft (MSFT) still carries risk.

That’s generally the viewpoint of today’s actions as well. I’ll get to the Goldman and Bernstein notes in a moment.

Mike Walkley at Canaccord Genuity cut his rating to Hold from Buy and cut his price target to $8 from $11, writing that he is “increasingly concerned about sales for Nokia’s Symbian devices during the transition period.”

The vaunted Nokia distribution channel has in fact broken down in China, the company indicated, and the head of operations there has been let go. “Nokia indicated it had mismanaged inventory levels in China and has fired and replaced the head of its China distribution operations.”

Walkley cut his 2011 EPS estimate to $20 cents from 54 cents, and cut his 2012 EPS estimate to 28 cents from 83 cents, but he still thinks Nokia’s phones based on Windows Phone could become a viable third platform, after Apple’s (AAPL) iOS, and Google’s (GOOG) Android, and he models a profit of 83 cents in 2013, on a rebound in sales to €44.9 billion from a likely €39.7 billion in 2012.

Bernstein’s Pierre Ferragu, meanwhile, cut his rating from Market Perform to Underperform, with a $4 target price on the American Depository Receipts, down from $7.33 previously. His target price on Nokia’s ordinary shares goes to €3 from a prior €5.50.

Ferragu notes that he had upgraded the stock on March 11th, when there were 13 Sell ratings on the Street, thinking that investor expectations were low enough to offer some upside on the shares. But yesterday’s cut means the “worst case” scenario that he had imagined is, in fact, crystalizing.

The introduction of the Windows-based phone “will be challenging,” he thinks, “given the likely loss of traction and visibility of the Nokia brand, as well as the speed at which the opportunity for a third ecosystem to emerge is vanishing.”

In fact, Ferragu thinks something is happening to Nokia akin to what befell Motorola back when it lost its grip on the number two spot in the phone market:

This new guidance is to us a strong indication that the company is falling into the Motorola-type scenario we have been worried about for some time. We expect Nokia’s smartphone and mobile phone shipments to shrink sequentially in the second quarter, leading to market shares of 19% and 30%, down 19 pts and 5 pts year on year. This precipitous acceleration of market share loss has two major implications. Nokia is now losing visibility in Europe. The brand lost its first spot to Samsung in the first quarter and our recent store visits indicated a dramatic loss of visibility for Nokia: In some stores, we couldn’t see Nokia phones on display above knee level. Nokia’s emerging market share is not well protected. It now seems clear that Nokia’s more stable position in emerging markets and especially in China was artificial. Management advocated that major inventory build-ups artificially increased shipment volumes in the last quarters. We now believe Nokia will face pressure in these markets similar to what it has been experiencing in Europe.

Goldman’s Tim Boddy cut his rating to Neutral from Buy, writing that the company’s “rapid market share loss threatens Nokia’s distribution advantage.”

Boddy writes that his prior convocation that the stock offered upside if new Windows phones succeeded failed to anticipate how quickly the business would deteriorate.

“With Nokia unlikely to have a full Microsoft- based smartphone line-up across all price points before mid-2012, risks to revenues remain material, threatening Nokia’s ability to retain its distribution relationships and retail footprint when new products arrive.”

Boddy cut his EPs estimate for this year to 17 cents from a prior 53, and cut 2012′s estimate to a loss of 1 penny, versus a prior estimate of 70 cents per share.

And like Ferragu, he draws parallels with the old Motorola’s troubles when it lost its position in phones:

We believe the parallels between Nokia’s situation and Motorola in 2007/8 are becoming more similar. We still argue that Motorola’s position was more precarious, given its dependence on a slim number of high end ‘hit’ models for its profitability, a structurally unprofitable EM business and a weaker balance sheet, but a clear lesson from Motorola’s challenges (or, for that matter, Sony Ericsson’s) is that it is both difficult and time-consuming to rebuild distributor, retail and supplier confidence in your brand once market share has collapsed.

Things that were an advantage for Nokia, moreover, such as in-house manufacturing, may come to be a liability, Boddy believes. For one thing, of the company’s 59,000 employees in its handset operations, about half are based in developed markets. That might make it tough for the company to restructure if it wanted to shift resources to emerging markets where the upside is greater.

Article courtesy of Tech Trader Daily

Apple: iPhone Should Bolster Margins, Says Jefferies

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Jefferies & Co. analyst Peter Misek this morning seeks to allay fears of a gross profit erosion at Apple (AAPL), writing that “concerns on serious gross margin deterioration are overdone,” and reiterating a Buy rating and a $500 price target.

Apple’s overall corporate gross profit margin will likely find a “floor” at 35%, he thinks, and perhaps range as high as 40% over the course of the next year. (Apple’s gross margin as a percentage of sales was 41.4% in the quarter ended in March, and 39.9% for the six-month period ending that month. Those numbers were down slightly from 41.7% and 41.2% for the corresponding periods a year earlier.)

Misek points out Apple is able to add $100 to the price of an iPhone for flash memory content that costs the company only $20 to $30 per part, leading to iPhone margin of 50%, the highest for any of its products. He expects a re-acceleration of iPhone sales based on the prospect Apple will have a “mid-marketiPhone in the $300 range (in other words, cost to the wireless operator, before subsidy), in addition to the expected iPhone 4S and the iPhone 5, which he expects in June of next year.

A cheaper iPhone at the mid-market would increase Apple’s addressable market by 500 million phones per year, and if such a device were made with a $180 cost of goods, every 10 million of them sold would add $1 to Apple’s per-share profit.

Misek also thinks Apple can maintain gross margin on the iPad at around 35% to 40% “over the medium term,” thanks to the higher-priced, more feature-rich models of the device.

Article courtesy of Tech Trader Daily

Deferred Bonuses On Wall Street Really Screwing Greenwich, CT Housing Market

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Time was, you put a house on the market in Greenwich, Connecticut and you got your $35 million asking price in a matter of days- and it didn’t even have to come with 26-toilets, a property that would cause a serious bidding war. Greenwich could count on Wall Street to make it rain ka-ching! on people’s faces come bonus time and those people would in turn say sure, here’s $35 mill in cash, buy yourself something nice and all was right in the world. Now? With this bull shit about putting “greater emphasis on deferred compensation” and “incorporating risk management into performance measures”? It’s making would-be buyers think things through and not jump at relative bargains at $15.95 million.

It’s been more than 500 days since Stanley Cheslock put his 26,000-square-foot Greenwich, Connecticut, “dream home” on the market for $17.95 million. The house and its surrounding estate — custom built by Cheslock in 2003, with a movie theater and 3,700-bottle wine cellar — is waiting for a buyer who sees the current asking price, $15.95 million, as a bargain. “It’s a steal,” said Cheslock, a co-founder of an investment firm, who has knocked almost 50 percent off the price he was asking when he first tried to sell the property five years ago. “It’s way underpriced.”

Homes priced at $10 million and above are accumulating on the market in Greenwich. They’re moving so slowly that it would take more than four years to sell them all, the biggest backlog since at least 2004, according to Mark Pruner, an agent with Prudential Connecticut Realty. Wall Street’s greater emphasis on deferred compensation, in which a portion of an annual bonus will be paid in the future, has stifled demand, he said. “Our market moves very closely with the financial markets,” Pruner, based in Greenwich, said in an interview. “Deferred compensation has totally hammered the over-$10 million market because people just aren’t getting large amounts of cash, and that market has traditionally been a cash market.”

“Previously, if you got a $10 million bonus, buying a $5 million house wasn’t that big a deal” said Pruner, who estimates that about half of all homebuyers in Greenwich work in the financial industry. “If you get $20 million — $3 million in cash and 17 in deferred compensation — are you going to borrow another $2 million in cash to buy a house? I don’t think so,” he said.

Thanks- for nothing.

Priciest Homes Languish In Greenwich, Connecticut [Bloomberg]



Article courtesy of Dealbreaker

Deferred Bonuses On Wall Street Really Screwing Greenwich, CT Housing Market

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Time was, you put a house on the market in Greenwich, Connecticut and you got your $35 million asking price in a matter of days- and it didn’t even have to come with 26-toilets, a property that would cause a serious bidding war. Greenwich could count on Wall Street to make it rain ka-ching! on people’s faces come bonus time and those people would in turn say sure, here’s $35 mill in cash, buy yourself something nice and all was right in the world. Now? With this bull shit about putting “greater emphasis on deferred compensation” and “incorporating risk management into performance measures”? It’s making would-be buyers think things through and not jump at relative bargains at $15.95 million.

It’s been more than 500 days since Stanley Cheslock put his 26,000-square-foot Greenwich, Connecticut, “dream home” on the market for $17.95 million. The house and its surrounding estate — custom built by Cheslock in 2003, with a movie theater and 3,700-bottle wine cellar — is waiting for a buyer who sees the current asking price, $15.95 million, as a bargain. “It’s a steal,” said Cheslock, a co-founder of an investment firm, who has knocked almost 50 percent off the price he was asking when he first tried to sell the property five years ago. “It’s way underpriced.”

Homes priced at $10 million and above are accumulating on the market in Greenwich. They’re moving so slowly that it would take more than four years to sell them all, the biggest backlog since at least 2004, according to Mark Pruner, an agent with Prudential Connecticut Realty. Wall Street’s greater emphasis on deferred compensation, in which a portion of an annual bonus will be paid in the future, has stifled demand, he said. “Our market moves very closely with the financial markets,” Pruner, based in Greenwich, said in an interview. “Deferred compensation has totally hammered the over-$10 million market because people just aren’t getting large amounts of cash, and that market has traditionally been a cash market.”

“Previously, if you got a $10 million bonus, buying a $5 million house wasn’t that big a deal” said Pruner, who estimates that about half of all homebuyers in Greenwich work in the financial industry. “If you get $20 million — $3 million in cash and 17 in deferred compensation — are you going to borrow another $2 million in cash to buy a house? I don’t think so,” he said.

Thanks- for nothing.

Priciest Homes Languish In Greenwich, Connecticut [Bloomberg]



Article courtesy of Dealbreaker

Deferred Bonuses On Wall Street Really Screwing Greenwich, CT Housing Market

Tags: , , , , , , , , , , ,


Time was, you put a house on the market in Greenwich, Connecticut and you got your $35 million asking price in a matter of days- and it didn’t even have to come with 26-toilets, a property that would cause a serious bidding war. Greenwich could count on Wall Street to make it rain ka-ching! on people’s faces come bonus time and those people would in turn say sure, here’s $35 mill in cash, buy yourself something nice and all was right in the world. Now? With this bull shit about putting “greater emphasis on deferred compensation” and “incorporating risk management into performance measures”? It’s making would-be buyers think things through and not jump at relative bargains at $15.95 million.

It’s been more than 500 days since Stanley Cheslock put his 26,000-square-foot Greenwich, Connecticut, “dream home” on the market for $17.95 million. The house and its surrounding estate — custom built by Cheslock in 2003, with a movie theater and 3,700-bottle wine cellar — is waiting for a buyer who sees the current asking price, $15.95 million, as a bargain. “It’s a steal,” said Cheslock, a co-founder of an investment firm, who has knocked almost 50 percent off the price he was asking when he first tried to sell the property five years ago. “It’s way underpriced.”

Homes priced at $10 million and above are accumulating on the market in Greenwich. They’re moving so slowly that it would take more than four years to sell them all, the biggest backlog since at least 2004, according to Mark Pruner, an agent with Prudential Connecticut Realty. Wall Street’s greater emphasis on deferred compensation, in which a portion of an annual bonus will be paid in the future, has stifled demand, he said. “Our market moves very closely with the financial markets,” Pruner, based in Greenwich, said in an interview. “Deferred compensation has totally hammered the over-$10 million market because people just aren’t getting large amounts of cash, and that market has traditionally been a cash market.”

“Previously, if you got a $10 million bonus, buying a $5 million house wasn’t that big a deal” said Pruner, who estimates that about half of all homebuyers in Greenwich work in the financial industry. “If you get $20 million — $3 million in cash and 17 in deferred compensation — are you going to borrow another $2 million in cash to buy a house? I don’t think so,” he said.

Thanks- for nothing.

Priciest Homes Languish In Greenwich, Connecticut [Bloomberg]



Article courtesy of Dealbreaker

Write-Offs: 05.23.11

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$$$ Spain and Italy Turn Against Greece Over Reform Efforts (NYT)

$$$ Dominique Strauss-Kahn told the New York hotel maid, “Don’t you know who I am! Don’t you know who I am?” while pinning her down during the alleged sexual assault, law enforcement sources close to the investigation told FoxNews.com…“Please stop. I need my job, I can’t lose my job, don’t do this. I will lose my job. Please, please stop! Please stop!” she told Strauss-Kahn, according to law enforcement sources. Strauss-Kahn allegedly responded: “No, baby. Don’t worry, you’re not going to lose your job. Please, baby, don’t worry,” Strauss-Kahn responded, according to investigators. (Fox)

$$$ Belgium’s Debt Outlook Revised to Negative by Fitch on Political Stalemate (Bloomberg)

$$$ ‘Fear Gauge‘ Tops 20 for First Time in Two Months (WSJ)

$$$ How An Inquiry Of Goldman Might Play Out (Dealbook)

$$$ LinkedIn site has security vulnerabilities-expert (Reuters via Easy Street/Heidi Moore)

$$$ David Stockman: “The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they’re saying we want the U.S. government to default. Because there isn’t enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you can’t touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well.” (YouTube)

$$$ AIG Underwriters Signal Deal May Price at Close to $30 (CNBC)

$$$ Walker: US Worse Off Financially Than Euro Nations (CNBC)

$$$ Greece to start selling domestic assets to ease debts (BBC)

$$$ More banks targeted in US probe (FT)

$$$ Carlyle Returns Record $6.4 Billion in First Quarter on Strong Dealmaking (Bloomberg)

$$$ Former Fed Monetary Chief Madigan Hired by Barclays Capital (Bloomberg)

$$$ Steven Cohen wants a five-year-old stock manipulation lawsuit filed by Canadian insurer Fairfax Financial Holdings to go away. (Reuters/Unstructured Finance)

$$$ Hintz Says Smith Barney Is ‘Checkmated’ by Krawcheck, McCann (Bloomberg)

$$$ China’s Buffett plays the long game (FT)

$$$ Senate Banking chair Tim Johnson discusses hedge funds [AR]

$$$ IBM passes Microsoft’s market cap after 15 years (Reuters)

$$$ Lady Gaga Breaks Amazon (MarketBeat)

$$$ Barack Obama’s car, nicknamed ‘the beast‘, gets stuck (BBC)



Article courtesy of Dealbreaker

LinkedIn’s day in the sun: Share price doubles, worth nearly $9B in IPO

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linkedin-reid-hoffmanShares of LinkedIn, a social network for business professionals, ended their debut on the New York Stock Exchange up 109 percent at $94.25 as the first high-profile Web 2.0 initial public offering made a huge splash in public trading.

It’s a sign of the excitement around social networking and its promise, although the results were enough for some people to say it was part of a ridiculous bubble.

That means LinkedIn now has a market cap of around $9 billion — well above the valuation of $4 billion it claimed when it priced the shares of its initial public offering between $42 and $45. Shares of LinkedIn traded as high as $122 earlier today, giving the company an implied valuation as high as $11 billion. LinkedIn’s valuation is the first official record of the hyper-valuations many Web 2.0 companies like Twitter and Facebook have seen in recent years.

LinkedIn’s shares hovered at around $103 for most of the afternoon before finally dipping down below that level of support toward the end of daytime trading. The company also saw a quick decline in its share prices in the ten minutes before the markets closed, dropping as low as $91 before leveling off at around $94 minutes before the final bell. The shares were trading at $94.24 most recently in extended trading.

The company’s stunning debut on the stock market could end up creating additional chatter about whether several Web 2.0 companies are overvalued. LinkedIn’s closing share price and valuation mean the company is worth somewhere north of 36 times its revenue for 2010, which was around $243 million. There’s also the chance that share prices of LinkedIn could turn south over the next several days, like shares of Chinese social networking company RenRen. That company turned out to be a flop on public trading markets and has fallen below the IPO price of $14 to $13.75 it saw earlier this month.

A number of highly successful Web 2.0 companies like Facebook and Zynga — and LinkedIn — have seen ballooning valuations as investors have rushed to snatch up as many shares as possible ahead of what could be some of the most high-profile tech IPOs to date. Facebook, for example, was valued at $50 billion after its most recent round of funding — though it is trading at a higher price than that on secondary markets.

LinkedIn is based in Mountain View, Calif., and has more than 1,000 employees. The company, founded by Reid Hoffman (pictured above), is a business network that’s designed to help professionals connect with other potential business contacts and get a “warm introduction” through people in their network.

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Article courtesy of VentureBeat » deals

Tesla Up 6% As Pac Crest Says Buy, DOE Forms Partnership

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Shares of electric car maker Tesla (TSLA) are up $1.60, or 6%, at $27.95, a combination of a positive note today from Pacific Crest’s Erik Olbeter, and also word that the U.S. Department of Energy said it will cooperate with Tesla and other firms to accelerate the development of energy-efficient vehicles.

Pacific Crest’s Olbeter started the stock at Outperform and a $38 price target, writing that it is “well positioned to be a highly profitable, niche luxury car company.”

Everything, he writes, rests on a successful introduction of Tesla’s “Model S” and “Model X” cars, beginning in mid-2012.

“Tesla’s primary advantage, and part of the reason they are considered an innovator in this nascent market, is its proprietary battery and powertrain system,” writes Olbeter. The choice of a familiar form factor for the battery — it’s about the size of a AA battery — means the company should have much lower development costs than it would otherwise, on the order of $400 million to develop the Model S, he thinks.

The Model S, which may cost $60,000 to $90,000, depending on subsidies, “is very appealing and the price is within the range of luxury ICE competitors,” writes Olbeter. He expects it may become, “the new ‘green status symbol‘ in places like Northern California and elsewhere.” Question is, even if venture capitalists buy ‘em, will the broader public. The question is not how well the initial 20,000 units of the Model S do next year, but what comes after, whether, as he puts it, “the executives in Shanghai, Beijing and Vancouver, B.C., be driving them.”

The financial performance of the company for the next five quarters, until the Model S comes out, is irrelevant, he writes, because only then will the Street get a good handle on what Tesla may be able to sell in high volume.

As for the DOE announcement, it said the Department will form something called “U.S. Drive,” combined what had been “FreedomCAR” and “Fuel Partnership” programs in one, in order to “bring together top technical experts,” and identify “critical R&D needs.”

Article courtesy of Tech Trader Daily

HP: JP Morgan Cuts To Neutral; That Makes 11

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These go to 11: The downgrade party continues on Hewlett-Packard (HPQ), with JP Morgan’s Mark Moskowitz overnight cutting his rating on the shares to Neutral from Overweight, and cutting his price target to $42 from $55. That follows the ten downgrades I reported yesterday.

Yesterday’s cut in outlook is likely not the last for the company, he argues, given that the problems in the services business were unforeseen.

We believe investors had been expecting continued weakness in consumer PCs and potential supply chain disruptions due to the Japan disasters, but the elongating services overhaul and the second guidance reset in a row stand to depress investor sentiment in the near to mid term, weighing on the P/E multiple.

Moskowitz also thinks management has some explaining to do:

Beyond the new CEO transition, we think that investors are disappointed with three dynamics of unfriendly shareholder activity. First, there were the relatively expensive acquisition prices for ArcSight and 3PAR last summer. Second, there is the September 28 analyst meeting and its message of F2011 guidance being a “lay-up.” Third, there is the series of two-consecutive resets to numbers (Feb. 22 and May 17), when the company appeared resolute and adamant on February 22 that the revised outlook at the time was very conservative.

HP shares today are down 82 cents, or 2%, at $36.09.

Article courtesy of Tech Trader Daily

RIM: Bernstein Ups To Hold; Management Still In Denial

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Shares of Research in Motion (RIMM) are up $1.45, or 3%, at $45.23, after Sanford Bernstein analyst Pierre Ferragu this morning raise his rating on the shares to Market Perform from Underperform, setting a 40$ price target, and arguing “things can’t get worse in the foreseeable future.”

With the 39% drop in the stock since a high in February, he writes, the price is reflecting “a medium term evolution of the company far worse than management guidance of even sell-side consensus implies.”

Ferragu himself has what he terms “the bleakest possible outlook,” modeling $5.84 per share in EPS this year, and $5.51 next year, down from his prior estimates of $6.21 and $5.86, respectively. That’s certainly well below the average estimates of $6.48 for this year and $6.96 the following year.

But although “the stock is particularly cheap on any metric,” Ferragu’s not recommending the shares, mind you, because “we believe management remains in denial of challenges facing the company and therefore do not recommend buying the stock yet, or at least not beyond a short term play on a likely rebound.”

What are the challenges, you ask?

The BlackBerry “brand is broken,” he writes, with the sales of higher-end models shrinking in the last 12 months. The corporate business “is under attack,” with some major accounts having already swapped-out BlackBerry. The company’s profit stream was built on email in the last decade, but the Apple (AAPL) iPhone’s “innovation cycle,” and the commoditization of email, mean “RIM’s high level of profitability is at risk.”

And the one bright spot, international growth, will “progressively stall,” as consumers overseas become more aware of “the superiority of the Apple and Android phones.”

Article courtesy of Tech Trader Daily