MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Monday, May 21
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7:50 PM A former Yahoo (YHOO) executive and a former fund manager at Ameriprise Financial have pleaded guilty today to insider trading. Robert Kwok, formerly Yahoo's senior director of business management, and Reema Shah, formerly a mutual fund manager at Ameriprise Financial, agreed to settle civil charges with the SEC, in addition to guilty pleas on related criminal charges for which they will be sentenced later. Comment!
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7:03 PM Of the four "concerns" the EU has about Google's (GOOG) business practices, the company has taken steps to address two of them, and a third - the transferring of AdWords campaigns to other search engines - is one rivals don't seem to be worried about. But the issue that worries competitors the most - the preferential placement given to links for Google services within its search results - is one the company hasn't yet addressed. Comment!
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7:02 PM According to AOL (AOL) CEO Tim Armstrong, the company plans to continue to partner with Yahoo (YHOO), but says a merger between the two is unlikely. It's a rumor that has been discussed multiple time over the years, but Armstrong wants to maintain the option to tout the abilities of both companies individually. Comment!
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6:49 PM Microsoft (MSFT) has quietly launched a social networking site called So.cl. Rather than directly competing with Microsoft partner Facebook (FB) a la Google+, So.cl focuses on the sharing of searches and the aggregation/discovery of multimedia content. The launch comes shortly after Microsoft revamped Bing to provide deeper Facebook/Twitter integration. (previous) 2 Comments
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6:29 PM A CIA report drives home the huge role smartphones will play in driving Internet usage in emerging markets. While nations such as India, Russia, and Indonesia have seen mobile penetration rates surge well above 50%, their Internet penetration rates remain mired below 20% (or in India's case, 10%). However, smartphone sales to emerging markets are soaring - particularly for Android (GOOG) devices - and that creates an opening for broader Internet adoption. 1 Comment
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6:07 PM Sony (SNE) recently began mass production of "in-cell" touch panels that will be used in Apple's (AAPL) next iPhone, the Taipei Times reports. It's added Sharp (SHCAY.PK), Toshiba (TOSBF.PK), and LG Display (LPL) will also supply Apple with in-cell panels, which can reduce a device's thickness and weight relative to conventional touch panel tech. 1 Comment
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5:57 PM Leveraging the patents the companies acquired last year from Nortel, AAPL, MSFT, RIMM, SNE, and ERIC have officially entered the patent-trolling business via the Rockstar Consortium. Funded by the aforementioned companies and owning 4,000 ex-Nortel patents, Rockstar examines tech products for evidence of infringement, and demands licensing fees when it's found. Since Rockstar, unlike its owners, doesn't make anything, it can't be countersued. 2 Comments
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5:41 PM SAP faces a backlash from major enterprise clients over recent efforts to demand millions in back-payments from customers it accuses of violating its licensing terms by transferring data created by SAP apps to third-party software. Cloud software vendors, always quick to portray incumbents such as SAP and Oracle (ORCL) as heavy-handed and out-of-touch, will be glad to use SAP's actions as a talking point. Comment!
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5:22 PM Henry Blodget sets a target range of $16-$24 for Facebook (FB -11%), based on a valuation of 20x-30x a 2013 EPS estimate of $0.80. Blodget's retort to those bullish due to Facebook's growth potential: Facebook has already been working on monetization for years; Mark Zuckerberg cares more about Facebook's "social mission" than its business; and the company's next billion users, weighted towards emerging markets, will be much less valuable than its first billion. (previous) 22 Comments
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5:01 PM Google+ (GOOG), already plagued by low engagement rates, is now seeing businesses jump ship. Companies report seeing very little traffic for their Google+ pages, and claim Pinterest, which sports much higher engagement rates and a big share of web referral traffic, represents more fertile ground. "The broad consensus is that Google+ is an empty city where the masses go to set up a profile but then seldom return." (previous) Comment!
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4:38 PM IBM engages in a bit of debt refinancing. Big Blue offers to exchange over $2B worth of long-term debt sporting interest rates of 5.6%-8% for a combo of 4% notes due 2042 and cash. An early exchange premium is offered to debt holders who tender their existing notes by June 4. As of March 31, IBM had $32B of debt on its balance sheet. (PR) Comment!
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4:26 PM An ITC administrative law judge rules against Eastman Kodak (EKDKQ.PK) in its patent infringement suit against Apple (AAPL) and Research in Motion (RIMM). The ruling (.pdf), subject to review by the commission, declares Apple and RIM to be infringing only one claim within Kodak's image-preview patent, and calls that claim invalid due to "obviousness." (previous) 3 Comments
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4:06 PM Zebra Technologies (ZBRA -2.9%) finishes lower after being downgraded to Neutral earlier today at JPMorgan. The firm says hardware sales will be negatively impacted by moderating enterprise IT investment spending. The firm also lowers its price target lowered to $41 from $44.50. Comment!
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4:01 PM Though it sold off from the day's highs, Envivio (ENVI +3.8%) closed with a decent gain after underwriters launched coverage with bullish ratings. Stifel thinks the TV Everywhere hardware/software vendor will see its addressable market grow at a 34% CAGR through 2015 with the help of new products, and Goldman argues deals with Time Warner Cable, Verizon, and Cablevision validate Envivio's technology lead. Comment!
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3:48 PM Ubiquiti Networks (UBNT +7.9%), which had 60.3% of its float shorted as of April 30, is finishing up strongly. Possibly helping is the company's announcement it has filed for a restraining order and injunction to prevent a former distributor from allegedly counterfeiting its products. Ubiquiti also accuses the distributor of spreading false rumors - likely a reference to a Chinese report CEO Robert Pera was relying on mafia ties to crush competition. 1 Comment
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2:41 PM Mellanox Technologies (MLNX +8.1%), which soared last month thanks to a giant Q1 beat and strong Q2 guidance, jumps again after announcing its InfiniBand and 10G/40G Ethernet modules are available for use with H-P's ProLiant Generation 8 servers. A pickup in sales to H-P, the world's #2 server vendor, would help Mellanox reduce its heavy dependence on Oracle's high-end systems. (PR) Comment!
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2:29 PM Bill Gurley defends Facebook's (FB -9.3%) weak post-IPO showing by pointing out Amazon (AMZN) fell below its IPO price shortly after its 5/17/97 offering, and didn't move above until 7/6. Of course, Amazon was worth less than $1B at the time, whereas Facebook is worth $95B today. TechCrunch founder-turned-VC Mike Arrington says he just bought some Facebook shares. (earlier) 5 Comments
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2:21 PM Riverbed (RVBD +8.1%), crushed a month ago due to a Q1 revenue miss and poor Q2 guidance, bounces off its 52-week lows after announcing it's doubling its stock buyback authorization to $300M, of which $237M remains for future purchases. At current levels, that's good for acquiring 9% of all outstanding shares. (PR) Comment!
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2:11 PM Splunk (SPLK +1.5%) receives more positive analyst coverage (previous) courtesy of Barclays' Raimo Lenschow, who argues the potential market for Splunk's software, used to analyze machine data, could be much larger than is currently believed. In Lenschow's view, Splunk's solutions for analyzing petabytes (thousands of terabytes) of data per day, are "creating a whole new market." (earlier) Comment!
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1:52 PM Morgan Stanley's Adam Parker provides some Chuck Norris-like facts about Apple's (AAPL +4.4%) stock, up sharply as investors declare it a value relative to Facebook. Among Parker's facts: Apple will soon likely have the S&P's largest market weight since 1986; it accounts for 9% of the S&P's trading volume (highest of any company since '82); and it accounts for over 1% of the portfolios of 26% of large hedge funds, as well as over 10% or more of the portfolios of 4% of hedge funds. (earlier) 5 Comments
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1:40 PM BMC Software (BMC +2.8%) follows the tech sector higher after 5.5% activist shareholder Elliott Associates issues a PR questioning recent comments from BMC about the health of its business, and the company responds with a short PR defending its remarks. BMC rallied a week ago on news of Elliott's stake in the company, even though it adopted a poison pill in response. Comment!
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1:22 PM Youku.com (YOKU +9.8%) and Tudou (TUDO +10.1%), whose planned merger will create a Chinese online video giant, rally strongly following Tudou's Q1 beat. Tudou's revenue surged thanks to a 63% Y/Y increase in online ad sales, and a 53% increase in mobile service sales. However, in a sign monetization may be lagging traffic growth, bandwidth costs amounted to 51% of revenue, up from 39% in the year-ago period. (PR) Comment!
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1:20 PM Stifel Nicolaus says recent channel checks indicate that FEI's (FEIC +1%) fundamental picture hasn't changed, so the recent decline in the company's stock creates a good buying opportunity. The firm maintains a $58 target and Buy rating. Comment!
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1:06 PM The global IT outsourcing market grew 7.8% in 2011, Gartner estimates, with market leader IBM's share holding steady at 10.9%. H-P (HPQ) only grew its sales 2%, and that resulted in its share falling to 6.1%. Troubled Computer Sciences (CSC) saw its share fall to 4.2%, while Accenture's (ACN) grew to 2.6%. Gartner continues to see (previous) the adoption of cloud services as a threat to the outsourcing market's future growth. (also) Comment!
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12:56 PM With the final hurdle to its acquisition of Motorola Mobility (MMI +2%) having been cleared, Google (GOOG +2.2%) plans to conduct a "listening tour" of Motorola's ops, a source tells TechCrunch, with layoffs expected to follow soon afterwards. Though Motorola's profits are a tiny fraction of Google's, it has 20.5K employees to Google's 33K. Comment!
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12:43 PM Taiwan's MediaTek, long a top baseband chip supplier to Chinese and white-label OEMs, has landed 2G baseband chip orders from Nokia (NOK), Digitimes reports. This could be a negative from Broadcom (BRCM +2.5%) and STMicroelectronics (STM +3.5%), who have grown their baseband chip sales to Nokia as former top supplier Texas Instruments gradually exits the market. Comment!
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12:38 PM The Nasdaq surges 2.1%, led by a monster move in Apple, +4.5%. The stock has been beaten mercilessly over the past month as the hype in Facebook boiled over. Now the investor choice (among others!) is Facebook at 75X earnings or Apple at 13X. 4 Comments
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12:37 PM Facebook's (FB) IPO marks the end of Silicon Valley's golden age, laments Berkeley/Stanford prof. Steve Blank. His argument: with Facebook and other social media/mobile plays delivering huge returns in a short amount of time, VCs now have little interest in funding companies tackling major science and technology challenges that have a longer payoff. Only Google (GOOG - previous) and Tesla's (TSLA) Elon Musk seem up to the task. 1 Comment
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12:26 PM BGC upgrades Yahoo (YHOO +0.8%) to Buy after it finally concludes (I, II) its share-repurchase deal with Alibaba (ALBCF.PK). In addition to the deal, BGC is upbeat about Yahoo's new board, which includes Dan Loeb and 2 other Third Point nominees, arguing it will speed up decision-making, increase Yahoo's media focus, and reduce the likelihood of dilutive acquisitions and questionable product forays. Comment!
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12:04 PM YouTube (GOOG) users are now uploading 72 hours of video every minute, the site boasts. That's up from 48 hours a year ago, and 24 hours in March 2010. YouTube's average monthly usage is also soaring, thanks to its efforts to promote channel subscriptions and professional content. Comment!
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11:58 AM Hulu continues to add to its arsenal of original content (previous). The latest additions include movie-review show Spoilers, travel series Up to Speed, and U.K.-based comedy Rev. Netflix (NFLX) has been investing in plenty of original content of its own. Comment!
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11:49 AM Off in early trading in sympathy with Facebook, Groupon (GRPN +7.4%) is now up sharply, and has recouped most of Friday's losses. At $12.44, shares remain well below the company's IPO price of $20. Comment!
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11:41 AM Activision (ATVI) is creating a new U.K. mobile games studio with the help of Martyn Brown, former head of game developer Team17. Compared with archrival Electronic Arts (EA), which paid top dollar to purchase PopCap Games, Activision has taken a cautious approach to its mobile gaming investments. Comment!
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11:26 AM Polycom (PLCM +4.1%) bounces off multi-year lows with the help of a bullish Wells Fargo note. The firm argues the impact of Polycom's recent CFO transition should be minimal, and that the company's financial health is strong. Comment!
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11:22 AM VC legend Michael Moritz, who can count Google and Yahoo amongst his many successes, is stepping down from the daily management of Sequoia Capital due to a "rare medical condition which can be managed but is incurable." He will remain as Chairman. Comment!
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11:12 AM Silicon Labs (SLAB) has acquired Ember, a developer of low-power wireless mesh networking chips based on the ZigBee standard, for $72M in cash. SLAB predicts Ember, whose chips are used in smart grid and home automation systems, will contribute $10M-$12M in 2H revenue, and be accretive to 2013 EPS. The purchase comes as SLAB weighs an exit from the competitive touchscreen controller market. Comment!
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11:05 AM Envivio (ENVI +5.9%) gains on a trio of initiations this morning, as Goldman, Deutsche and Stifel Nicolaus all start coverage with with a Buy rating. Comment!
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10:51 AM Google Chrome (GOOG) has passed Internet Explorer (MSFT) to become the world's most popular browser, according to StatCounter's latest data. Chrome's 32.76% share for the week of May 14-20 puts it above IE's 31.94% and Firefox's 25.47%, and compares with a mere 19.37% in the year-ago period. NetMarketShare's data suggests IE still has a major lead. (previous) 2 Comments
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10:45 AM Piper's Gene Munster declares there's an 80% chance Apple (AAPL +3.4%) will hit his sales forecasts for the next-gen iPhone, in spite of Qualcomm's (QCOM) 28nm chip supply issues. In typical form, Munster adds the next iPhone will trigger the biggest "upgrade cycle in smartphone history." Meanwhile, Jefferies' Peter Misek predicts Apple will lower the unsubsidized price of the iPhone 3GS to $250-$300, to help it better compete with Android in emerging markets. (previous) 2 Comments
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10:24 AM Nvidia (NVDA) rolls out a line of low-end graphics processors - the GeForce GT 610, GT 620, and GT 630. Unlike recently-launched high-end products, the chips aren't based on Nvidia's cutting-edge 28nm Kepler architecture, but on its older 40nm Fermi architecture. The chips could face stiff competition from the graphics processors built into Intel's Ivy Bridge and AMD's Trinity CPUs. Comment!
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9:54 AM Facebook (FB -13.2%) tumbles in early trading to $33.20; even after the selloff, the company trades at nearly 23x sales and 75x trailing EPS. Not helping is BTIG's decision to launch coverage at Neutral; in-line with earlier comments, the firm is worried about Facebook's valuation, decelerating growth, and ad monetization issues. Also lower: RENN -8.3%. ZNGA -7.1%. YELP -6.8%. LNKD -6.1%. GRPN -4.8%. SVVC -7.4%. GSVC -10%. 13 Comments
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9:39 AM EMC announces a product refresh that its PR department declares to be focused on cloud and big data environments. Some highlights: high-end VMAX storage systems that promise up to a 3x performance boost; a mid-range VNX system (previous) that promises lower flash memory costs; new backup and recovery software, and a partnership with 80%-owned VMware (VMW) to develop storage analytics solutions for the latter's systems management software. 1 Comment
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9:17 AM Don't expect Apple's (AAPL) patent negotiations with Samsung (SSNLF.PK) to result in a complete settlement, says Phillip Elmer-Dewitt. While Apple has indicated a willingness to cross-license some IP, both Steve Jobs and Tim Cook have suggested Apple will maintain a hard-line stance on patents deemed critical to its inventions. The comments come as some HTC phones held up by customs due to its ITC dispute with Apple are released. Comment!
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8:21 AM Google (GOOG) says it disagrees with the EU that it may have abused its dominant position but expresses willingness to "discuss any concerns they might have." Which is good, because Google probably doesn't really have a choice, does it. Comment!
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8:17 AM Splunk (SPLK) announces that Scott Thompson has resigned from its board of directors. (Previous: F5 Networks, Yahoo saga) Comment!
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8:14 AM Facebook (FB) falls through $38 in premarket trade, -2.7% to $37.20. Have the underwriters - who unleashed incredible firepower to hold $38 on Friday - gotten to their desks yet? 9 Comments
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8:13 AM A group of Elpida Memory's bondholders oppose Micron's (MU +2%) bid to buy the bankrupt Japanese firm as too low, Reuters reports. The creditors have therefore contacted South Korea's Hynix (HXSCF.PK) - which dropped out of the auction - and U.S.-based GlobalFoundries about selling the company to them. 1 Comment
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7:53 AM EU Competition Commissioner Joaquin Almunia offers Google (GOOG) the opportunity to suggest remedies that would address the EC's antitrust concerns. If the proposals prove acceptable following a market trial, the EU will drop its investigation, which it started following complaints from Microsoft (MSFT) and several others. 2 Comments
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5:13 AM Samsung (SSNLF.PK) is concerned the "worrying" weakness in Chinese consumer spending is hurting tech spending, and expects the market for tech goods in China to grow by only 7% this year, down from 10% last year. Comment!
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12:50 AM Alibaba agrees to repurchase a 20% stake in itself from Yahoo (YHOO) for ~$7.1B. Yahoo will receive at least $6.3B in cash and up to $800M in newly-issued Alibaba preferred stock. At the time of an IPO, Alibaba will be required to ultimately buy back 25% of Yahoo's current stake, or let Yahoo sell those shares in the offering. Alibaba will make an upfront royalty payment of $550M and continuing royalty payments for up to four years. (PR) (previously) Comment!
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