Tag Archive | "global"

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

RIM Off 6%: More Nokia Tea Leaves

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Shares of Research in Motion (RIMM) are taking it on the chin this morning, down $2.60, or 6%, at $40.25, as analysts continue to ponder the implications for the company following Nokia’s (NOK) reduced outlook yesterday.

As I wrote yesterday, some analysts see opportunity for RIM in Nokia’s flagging sales, but there’s also a concern Nokia’s turmoil at the hands of Android-based phones could be an omen for RIM as well.

For example, Jefferies & Co.’s Peter Misek today writes that average selling prices for the company’s wares could “collapse,” leading to an erosion of gross profit margin from 35% fiscal Q4 to 30% in the current quarter. And if operating profit on device sales falls to break-even, which he thinks it might, then the company’s profit would be dependent on subscription profits, which lag actual hardware sales.

Misek thinks Nokia’s deterioration highlights how difficult it is to transition operating systems — of particular concern to RIM as it moves from its “OS 7″ to the “QNX” operating system.

“We believe the transition from Blackberry OS to QNX will cause RIM to see the same pressures and challenges as Nokia is seeing, including ASP decline, margin erosion, and weakened carrier and consumer mindshare.”

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.

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

Polycom Buys HP’s Video Conference Biz

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Shares of videoconferencing technology maker Polycom (PLCM) are up $1.34, or 2%, at $58.75, after the company this morning said it would purchase from Hewlett-Packard (HPQ) the company’s “visual computing” assets for $89 million, to add to Polycom’s unified communications business.

The HP products have not been part of the main segments of HP’s business — the personal systems group, services, enterprise, software, and imaging and printing. Instead, they have been contained within the segment of the business dubbed “Corporate Investments,” which also contains the company’s networking equipment products, and its Palm computer assets.

Polycom will also serve as an “exclusive partner” to HP for “telepresence” and “unified communications.” Polycom will also provide video applications for the forthcoming WebOS-based devices HP is developing from its Palm acquisition. Those devices include the TouchPad tablet computer that many expect will go on sale in coming weeks.

Polycom said the deal would be “slightly accretive” to its earnings immediately upon closing the deal.

HP shares are down 42 cents, or 1%, at $36.96.

Article courtesy of Tech Trader Daily

Apple: iCloud To Increase iTunes Value, Says Sterne Agee

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Following word from Apple (AAPL) yesterday morning that the company will discuss its “iCloud” initiative next week at its Worldwide Developer Conference in San Francisco, Sterne Agee’s Shaw Wu this morning writes that the service is “a very big deal,” with the potential to further enhance the utility of the company’s iTunes program.

“We believe reaching cloud music deals would be a great start and further distance AAPL from GOOG, AMZN, MSFT, and others, which in the last 10 years or so have failed to put even a minor dent to iTunes.”

Wu maintains a Buy rating on Apple shares and a $460 price target.

Apple stock this morning is up $3.39, or 1%, at $351.22.

Article courtesy of Tech Trader Daily

Apple, Google: ISI Sees Stronger Q2 On Nokia Erosion

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ISI Group’s Abhey Lamba this afternoon writes that Apple‘s (AAPL) iPhone, as well as the constellation of Google (GOOG) “Android” -powered smartphones, should both see stronger Q2 results as Nokia’s (NOK) phone business suffers.

Regarding Nokia management’s remarks that it faced particular difficulty in China and in Europe, Lamba writes that the company’s phones based on the Symbian operating system had already been in trouble in those areas: IDC data showed a drop in Asia-Pacific Symbian market share from 72% in 2009 to 54% in 2010, and just 42% at the end of Q4. (I would note, however, that Symbian is a platform that’s used by multiple vendors, not just Nokia; I have a feeling these data points refer to all Symbian licensees.)

Android market share of smartphones should be over 40% this quarter, he estimates, giving a lift to HTC, among others.

For Apple, “Nokia’s management team admitted to strong competition from Apple as well.” Lamba expects Apple will build on this momentum when it hosts its developer conference next week in San Francisco.

Previously: RIM: RBC Sees Risk, Opportunity In Nokia Fall, May 31st, 2011.

Article courtesy of Tech Trader Daily

RIM: RBC Sees Risk, Opportunity In Nokia Fall

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RBC Capital’s Mike Abramsky, who has a Sector Perform rating on shares of Research in Motion (RIMM), and a $53.45 price target, writes that the deterioration of Nokia‘s (NOK) business, expressed in Nokia’s financial update this morning, could present opportunity for RIM.

With 16% market share in Europe, RIM “has the opportunity to replicate the success that BBM [the BlackBerry messenger software] has had in the U.K.,” where RIM has the top spot in smartphones with 24% share.

Abramsky had downgraded RIM shares from Outperform back in April.

However, Nokia’s erosion could be an omen, too, of what happens to platforms that are “in transition”:

NOK’s warning, along with RIM’s Q1 warning, shows the risks investors face from handset vendors transitioning to new platforms. Just like carriers de-committing from Nokia’s legacy Symbian platform, carriers may be reluctant to maintain significant channel inventory of upcoming BlackBerry 7 devices which could result in more moderate interim sell-through ahead of next-generation QNX-based smartphones that are expected to launch in early 2012. The difference however is that RIM’s fan base appears more loyal to its core Blackberry experience (helping upgrade cycles) vs. Nokia’s base which has defected to HTC, Samsung (SSNLF), RIM, and Apple (AAPL).

Article courtesy of Tech Trader Daily

Nokia: Worse Before It Gets Better?

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More commentary is coming in as regards Nokia’s (NOK) cut in its outlook this morning, with bears warning that things will get worse before they get better. It’s not just the continued deterioration of the Symbian-based phones, but also some risk still in the company’s ability to make its partnership with Microsoft (MSFT) pay off:

Jennifer Fritzsche, Wells Fargo: Reiterates a Market Weight rating on Nokia, while cutting her range of possible stock values to $6.90 to $7.40, from a prior $9 to $10. “While NOK has continued to say that 2011 is a transition year, we believe today’s announcement highlights how quickly the shift is occurring in the competitive environment. While we believe the Windows phone could be a transitional even for NOK there is still much to prove, in our view and much integration risk that comes with such an event.” Fritzsche cut her estimate for this year to 21 cents from a prior 59 cents per share in earnings, and cut her 2012 outlook to 49 cents from 77 cents.

Alkesh Shah, Evercore Partners: Reiterates an Underweight rating and cuts his price target to $6 from $8, writing that the company is not yet in the “transition trough,” arguing that the stock is “not cheap at 28 times our fiscal 2012 EPS forecast,” or 18 times, when factoring in cash per share. Smartphones are going to be under pressure from low-end smartphones, while Nokia’s feature phones will face competition from “white box manufacturers.” Things may “worsen over the next few quarters,” shah thinks, and “consensus estimates may still not be low enough.” Shah lowered his own EPS estimate for this year to 22 cents from 48 cents, and cut his 2012 estimate from 61 cents to 25 cents.

Meantime, Nokia shares have rallied from the lowest point of the day, now down just $1.18, or 14.5%, at $7.01, versus an intraday trough of $6.79.

Article courtesy of Tech Trader Daily