Tag Archive | "street"

D: NFLX Prepares For Deep Spend

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D: All Things Digital, The Wall Street Journal technology conference, is in full swing in Southern California.

Netflix (NFLX) Chief Executive Reed Hastings led off the proceedings this morning talking about international expansion. The Internet movie outfit is going to launch in Toronto first, a “bold” move, going to Canada, he jested. Then, Netflix will open it’s doors in an undisclosed foreign market shortly thereafter.

The upshot: international expansion could hurt profits. “We tell investors that the better it goes, the more money we are going to lose because we are going to invest” more in expansion, Hastings says. He says it takes one to three years for Netflix to establish itself in a new country, which is relatively fast. Hastings, who is a Microsoft (MSFT) board member, would not comment about hedge fund manager David Einhorn’s call for Microsoft CEO Steve Ballmer’s ouster.

He was wiling to discuss his own open letter to short sellers to cover their negative bets, even calling short-selling “healthy” for markets.

“I’m not trying to have a battle with the shorts,” (but) if you have a friend on the short side and you think he’s losing money, and you think he’s wrong, then you want to tell him.”

The conference, now in its ninth year, got off to a rip roaring start last night when News Corp. “acting CEO” Jane Lynch, the star of the Fox Television hit Glee, recommended comic strips be added to the WSJ and other humorous mandates involving Sara Palin and talk show shock host, Glenn Beck.

Google (GOOG) Executive Chairman Eric Schmidt was the opening night keynote. The former CEO, who serves as an advisor to President Obama, says he has no intention to take a cabinet post or agency job, which had been rumored. But he will be active in the coming campaign just as he was during the President’s first election.

Note: For further ongoing coverage of D, see also former Tech Trader editor Eric Savitz’s blog at Forbes.com.

Article courtesy of Tech Trader Daily

Nokia Refutes Talk Of Microsoft Sale; Ticonderoga Likes It

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Shares of Microsoft (MSFT) have been under pressure this morning, and one thing appearing to contribute to downturn are rumors the company would step in to purchase Nokia (NOK) for $19 billion, according to remarks by Eldar Murtazin, a blogger widely credited with scooping Microsoft’s deal with Nokia earlier this year.

Murtazin’s blog appears not to have that claim today, but he is cited as stating such by Todd Haselton in a piece this morning on BoyGeniusReport.

A Nokia spokesperson, however, tells The Wall Street Journal’s Christopher Lawton a short while ago that, “These rumors are completely baseless.”

Murtazin has speculated as recently as May 16th that the two companies were talking about a deal.

Microsoft shares are down 54 cents, or 2%, at $24.47.  Nokia shares are down 34 cents, or almost 5%, at $6.68.

Well, at least one believer this morning is Brian White with Ticonderoga Securities, who follows Apple (AAPL) and has a Buy rating and a $612 price target on that stock.

“We believe reports from Boy Genius highlighting the potential for a Microsoft purchase of Nokia for $19 billion should provide Apple investors with even greater confidence that the company can continue to gain market share at the expense of legacy vendors in the mobile phone market,” writes White.

“In our view, Apple investors could not ask for a better deal, and we believe a transaction would only further Apple’s market share gains in the coming quarters.”

Sounds like White is choosing his words carefully, but it also sounds like he believes the rumor.

Article courtesy of Tech Trader Daily

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

RIM: Lazaridis or Balsillie, Who’s The Problem? Asks Globe & Mail

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The Globe & Mail’s Paul Waldie and Body Erman posted a video this morning asking if Research in Motion’s (RIMM) co-CEO Mike Lazaridis should go. (A video preceded, I would note, by an add for the BlackBerry PlayBook tablet computer!)

The question, as framed in the video, is whether the top “nerd,” Lazaridis, must go because he’s not “putting out the product.”

Lazaridis shares the CEO role with Jim Balsillie, regarded more as the marketing/financial person. One question was whether Balsillie has been distracted by his attempts to purchase hockey teams. Balsillie’s sometimes obscure language on company conference calls was contrasted with the smooth style of Apple (AAPL) CEO Steve Jobs.

Some of the guests on the video asked whether the problem is not so much either gentleman but rather the co-CEO structure itself, and whether the two CEOs still get along, as there have been rumors of a cooling in their relationship.

And then, too, it could just be more of the Street’s short-term obsession and its recent fixation on regime change.

RIM shares today are down 83 cents, or 2%, at $42.77.

Article courtesy of Tech Trader Daily

FIRE: Citi Starts At Buy; Cisco, Juniper Distracted

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Citigroup analyst Walter Pritchard this morning initiated coverage with a Buy rating on shares of SourceFire (FIRE), the maker of computer network intrusion prevention software and hardware, writing that the explosion of mobile devices is increasing the need for “countermeasures” in cyber-security.

The competition, Cisco Systems (CSCO), Juniper Networks (JNPR), and McAfee, which Intel (INTC) just bought, is distracted, he writes: “Leader Cisco continues to have challenges and Juniper appears incrementally more network-focused. McAfee was an aggressive competitor in end-point and network security, but we already see early signs of execution woes. We expect these trends will benefit smaller, more focused players such as FIRE.”

SourceFire has upside as a take-out target, he writes, and he set a $32 price target. Pritchard started coverage of competitors Websense (WBSN) and Fortinet (FTNT) with a Hold rating, and price targets of $25 and $52, respectively.

Websense is having trouble executing lately, which means there may be little upside to Street numbers, he thinks. And Fortinet’s stock is rich, and expectations for the company are already high.

This morning, SourceFire shares are up $1.34, or 5%, at $26.42, Websense is up 23 cents, or 1%, at $24.49, and Fortinet is up 49 cents, or 1%, at $48.35.

Article courtesy of Tech Trader Daily

LinkedIn: IPO Pop Was Undewriters’ Mistake, Says FT

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And you thought LinkedIn (LNKD) was fantastically overpriced?

The Financial Times’s April Dembosky yesterday wrote that Facebook investor and PayPal co-founder Peter Thiel thinks LinkedIn’s underwriters, Morgan Stanley, Merrill Lynch, and JP Morgan drastically underpriced the company’s IPO two weeks ago, which seems plainly evident given the stock price today is at $85.80, 91% above the $45 IPO price the banks set.

That means LinkedIn left a lot of money on the table for the rich clients of the banks to scoop up in the after-market.

Thiel predicts Facebook, and others, when and if they go public, will drive a much harder bargain to prevent the Street from such terrible under-valuation of their shares.

Granted, there’s a complaint here — no one likes to leave money on the table — but who’s to say the shares are worth what they trade for today — about 20 times this year’s likely revenue?

Article courtesy of Tech Trader Daily

Nvidia: Auriga Resumes At Buy, $24 Target

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Auriga Securities analyst Sandeep Shyamsukha this morning initiated coverage of Nvidia (NVDA) with a Buy rating, up from the Hold rating that had been maintained on the stock by Shyamsukha’s predecessor, Daniel Berenbaum, who left the firm this month.

Shyamsukha sees potential for “strong growth” in sales of Nvidia’s “Tegra” chip for mobile devices, and that such sales may offset weakness in the graphics chipset business for PCs. Tegra sales of just $550 million expected this year may reach $3 billion by 2016, Shyamsukha writes.

The PC graphics business will be “flattish” as tablet computers eat into PC sales, and as competing integrated graphics products “encroach on Nvidia’s lower end solutions.” And the competition in mobile devices is abundant, but Nvidia’s got “a strong brand, early lead and graphics edge,” Shyamsukha writes.

A key factor in the tablet and smartphone market is that the CPU and graphics portion of such devices will “evolve at a much faster pace than baseband” chips, which is where some competitors, such as Qualcomm (QCOM), have the edge.

Shyamsukha models Nvidia making $4.15 billion in revenue this year and $1.08 in EPS, which is slightly higher than the Street at $4.1 billion and $1.04.

Shyamsukha assigns a $24 price target to Nvidia, versus the $19 target Berenbaum had held.

Nvidia shares today are up 15 cents, or 0.8%, at $19.65.

Correction: A prior version of this post incorrectly listed a $34 price target by Shyamsukha for NVDA, when in fact he maintains a $24 price target. My apologies for any confusion caused by the error.

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

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

HP: Debt’s Cheap, Do A $10B Buyback Now, Says Bernstein

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Sanford Bernstein’s Toni Sacconaghi this morning writes that the time is nigh for Hewlett-Packard (HPQ) to speed up its share repurchase, buying as much as $10 billion in one fell swoop.

Sacconaghi, who has an Outperform rating on HP shares, and a $60 price target, writes that HP needs to pursue a similar financial approach to that of IBM (IBM), assuming 3% to 4% revenue growth, improvement in operating margins, and share buybacks, in order to deliver 10% EPS growth. (He currently assumes the company will, in fact, increase EPS between this year and next year by 10%, while the Street is assuming just 7% growth.)

HP has used buybacks extensively, purchasing $7 billion to $11 billion worth of shares in four out of the last five years, notes Sacconaghi, bringing down its share count by 4% per annum from fiscal 2005 to fiscal 2010.

In an accelerated share repurchase, or ASR, which is what Sacconaghi recommends, the company would buy the shares in one transaction from a bank, which would then acquire the shares on the open market, with the two settling the difference in price. The reduction in share count happens immediately, as a result.

The most pressing reason for the purchase would be to allay fears among investors that HP will do another large acquisition, following M&A deals last year such as the purchase of 3Par for $2.3 billion and its purchase of ArcSight for $1.5 billion.

The other reasons are that debt is cheap — the company could issue $10 billion in debt to fund the deal at 3% interest, based on recent debt issuance by IBM at 1.25% for $1 billion worth of three-year notes. With $200 million in net cash on the books, among the lowest cash balance of any large tech company, nevertheless, HP could issue $10 billion and still have a debt-to-market cap ratio of 13%, which is reasonable compared to other techs, he thinks.

And an accelerated share purchase would make it easier for the company to meet its stated goal of $7 per share in earnings come fiscal 2014. At the current rate of growth, HP needs to somehow increase earnings by 12% annually, compounded, whereas with a sharp buyback, it would need only 8% to make that target.

HP shares this morning are up 19 cents, or half a point, at $36.

Article courtesy of Tech Trader Daily