Tag Archive | "goldman"

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

Executing Losing Trades For Libyans Put Goldman Sachs Execs At The Business End Of A Hissy Fit (Update)

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Zarti, reprising the role of Jake LaMotta

In early 2008, Libya’s sovereign-wealth fund controlled by Col. Moammar Gadhafi gave $1.3 billion to Goldman Sachs Group to sink into a currency bet and other complicated trades. The investments lost 98% of their value, internal Goldman documents show… In July 2008, Mustafa Zarti, the fund’s deputy chairman, summoned Mr. Kabbaj, Goldman’s North Africa chief, to a meeting with the fund’s legal and compliance staff, according to Libyan Investment Authority emails reviewed by the Journal. One person who attended the meeting says Mr. Zarti was “like a raging bull,” cursing and threatening Mr. Kabbaj and another Goldman employee. Goldman arranged for security to protect the employees until they left Libya the next day, according to people familiar with the matter.

Update: According to Lucas van Praag, the Libyans’ anger was misplaced:

Van Praag said the trades that resulted in a huge loss for Libya were designed and approved by the LIA and that Goldman was hired to execute the trades. He also said the Journal report doesn’t mention that in mid-2008, Goldman recommended restructuring the investments and asked the LIA if they wanted to discuss it. Van Praag said the LIA did not respond to Goldman’s query.

[WSJ]



Article courtesy of Dealbreaker

Matt Taibbi Now Resorting To Calling Goldman Sachs Fat

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Defenders of Goldman have been quick to insist that while the bank may have had a few ethical slips here and there, its only real offense was being too good at making money. We now know, unequivocally, that this is bullshit. Goldman isn’t a pudgy housewife who broke her diet with a few Nilla Wafers between meals — it’s an advanced-stage, 1,100-pound medical emergency who hasn’t left his apartment in six years, and is found by paramedics buried up to his eyes in cupcake wrappers and pizza boxes. [Rolling Stone]



Article courtesy of Dealbreaker

Yahoo: Goldman Sees No Impact From Alipay Restructuring

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Some notes have been trickling out this afternoon in defense of Yahoo! (YHOO) after the steep decline in its stock following disclosures last night there was a change in the structure of the Alibaba Group Ltd. venture in which it holds a 43% stake.

Piper Jaffray, Caris & Co. and Goldman Sachs have all defended the stock. I have the Goldman Sachs note in front of me at the moment.

Goldman’s James Mitchell reiterated a Neutral rating on the shares, writing that the changeover of ownership of “Alipay,” the payment arm of Alibaba, an ecommerce company, has little impact on Yahoo!’s valuation, in his opinion, given that he already valued Alipay at zero for Yahoo! That’s because there are “much lower merchant discount rates in China compared to the West. He also says he sees no similar risk to Yahoo!’s stake in Taobao, which is worth about $3.50 per Yahoo! share.

“We expected such a restructuring in order for Alipay to obtain a local payment processing license (which requires local ownership), though the nature and timing of the disclosure (in a 10-Q) surprised us,” writes Mitchell. “We assume the acquiring entity will ultimately compensate Yahoo! and Softbank in some fashion.”

Yahoo! shares are now down $1.34, or 7%, at $17.21.

Article courtesy of Tech Trader Daily

Goldman Reps So ‘Freaked’ Over Volcker Rule They’re Forgetting Invisibility Cloaks At Home

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“They’re totally freaked out about Volcker,” said a Goldman lobbyist who declined to speak on the record for fear of losing the contract. “People are working on that a lot, with agency staff, with lawmakers, you name it.”…”Before the crisis, Goldman was basically non-existent in Washington,” said a former Congressional staffer who now works as a policy analyst at a Wall Street bank. “Post-crisis, Goldman is everywhere.” [Reuters]



Article courtesy of Dealbreaker

Write-Offs: 05.03.11

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$$$ Senate Report on Meltdown Under Justice Department Review [BusinessWeek]

$$$ US Says Deutsche Bank Lied [WSJ]

$$$ Ex-Goldman Programmer Aleynikov Denied Bail [CNBC]

$$$ Goldman Sachs Ends Recommendation to Short Five-Year U.S. Treasury Notes [Bloomberg]

$$$ Silver Slides Again on Margin Hike [Reuters]

$$$ Osama bin Laden didn’t win, but he was ‘Barca Through to Final After 1-1 Draw with Real [Reuters]



Article courtesy of Dealbreaker

Write-Offs: 05.03.11

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$$$ Senate Report on Meltdown Under Justice Department Review [BusinessWeek]

$$$ US Says Deutsche Bank Lied [WSJ]

$$$ Ex-Goldman Programmer Aleynikov Denied Bail [CNBC]

$$$ Goldman Sachs Ends Recommendation to Short Five-Year U.S. Treasury Notes [Bloomberg]

$$$ Silver Slides Again on Margin Hike [Reuters]

$$$ Osama bin Laden didn’t win, but he was ‘Barca Through to Final After 1-1 Draw with Real [Reuters]



Article courtesy of Dealbreaker

Write-Offs: 05.03.11

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$$$ Senate Report on Meltdown Under Justice Department Review [BusinessWeek]

$$$ US Says Deutsche Bank Lied [WSJ]

$$$ Ex-Goldman Programmer Aleynikov Denied Bail [CNBC]

$$$ Goldman Sachs Ends Recommendation to Short Five-Year U.S. Treasury Notes [Bloomberg]

$$$ Silver Slides Again on Margin Hike [Reuters]

$$$ Osama bin Laden didn’t win, but he was ‘Barca Through to Final After 1-1 Draw with Real [Reuters]



Article courtesy of Dealbreaker

Write-Offs: 04.21.11

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$$$ The Journal wants to see some hustle from James Gorman and Co: “Morgan needs to pick up the pace.” [WSJ]

$$$ Blackstone Says Plain L.B.O.’s Are Too ‘Pricey’ [Dealbook]

$$$ Six Ways to Act Like a Man in the Office…If You’re a Woman [FINS]

$$$ We’ll be off tomorrow for the holiday, back to regular posting Monday AM. Enjoy the long weekend!

$$$ Communicating The Goldman Sachs Way [BW]

$$$ Evolution Of An MBA, by Wharton

$$$ The Raj Trial and Wall Street’s South Asian Elite [TDB]

$$$ JPMorgan to Settle Lehman Brokerage Claims for $800 Million [Bloomberg]



Article courtesy of Dealbreaker

Goldman’s Dirty Word: Trading

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Sssssh. Don’t talk about trading.

The first quarter results released Tuesday by Goldman Sachs showed a 21 percent drop in net earnings from the year earlier—from $3.46 billion to $2.74 billion.

But the drop was less than Wall Street’s analysts expected—thanks in large part to strong results in bond and stock trading.

But far from crowing about its trading prowess, Goldman is keeping this fact very quiet. So quiet, actually, that the word “trading” doesn’t appear at all in its press release or accompanying materials.

Last year, Goldman’s quarterly results mentioned “trading” 9 times.

Back in 2006, trading was used 11 times in one quarter. Now the word has been vanquished.

This strange new silence might be an attempt by Goldman to at least appear to be complying with so-called “Volcker Rule” limits on the firm’s proprietary trading that were included in the Dodd-Frank financial reform law.

But just because Goldman is not talking about trading, doesn’t mean it is not trading.

Goldman’s equities traders brought in $1.054 billion in the first three months of the year, compared with just $847 million over the same period last year. That’s a whopping 24 percent growth of revenues.

The bond traders staged a dramatic recovery from the last quarter, when they brought in just $537 million of revenue. This quarter they garnered $1.024 billion—a 91 percent jump.

This boom in trading revenues is especially surprising because the first quarter of 2011 has been described by most market watchers as a “difficult” one for traders. Citigroup, Bank of America, and JP Morgan Chase all pointed to a tough trading environment.

Goldman—again—somehow—seems to have outsmarted the rest of Wall Street.

Many in the financial media have missed the booming trading. “Weak trading saps Goldman results,” a headline on the BBC read.

It was easy to miss because Goldman scrapped its business structure this year following the completion of its 8-month internal study of its business practices. Gone is the old category of “Trading and Principal Investment”—which once housed both client and proprietary trading. Now that is divided into two divisions—“Institutional Client Services” and “Investing and Lending.”

Institutional Client Services is where Goldman does its market making for clients. It is made up of both the market making activity once counted under Fixed Income, Currencies and Commodities and those under Securities Services. This division did indeed see revenue losses compared to a year ago due to lower trading volumes on behalf of clients—a drop of 28 percent for bonds, commodities and currencies, and 24 percent for stocks.

But both client bond-commodities-currencies and stock trading was up from the particularly ugly third quarter. Perhaps due to volatile commodities markets, income from market making for that section was up a stunning 164 percent from last quarter. Equities market making rose 24 percent from the first quarter.

It’s the “Investing & Lending” section, however, where Goldman’s in-house market expertise really shines. This is where the prop traders who dare not speak their names now reside. Overall, the hidden traders at Goldman saw revenue grow 36 percent from last quarter, and 37 percent from the first quarter of 2010.

Just don’t call them traders, OK?

Goldman’s Dirty Word [NetNet]



Article courtesy of Dealbreaker