>>> US After Hours

After Hours Summary: SWKS +8.9%, WAL +2.8%, GOOG +1.2%, RP -26.5%, AMD -17.9%, IBM -1.8% following earnings/guidance

After Hours Gainers: Companies trading higher in after hours in reaction to earnings: SWKS +8.9%, WAL +2.8%, CE +2.1%, GOOG +1.2%, MATW +1.1%, GRT +0.7%, COF +0.3%, SYK +0.3%

Companies trading higher in after hours in reaction to news: PRAN +2.0% (continued strength following earlier positive update on clinical development program for Alzheimer's disease), SWC +1.2% (reported production of palladium and platinum from the Company's Montana mine operations totaled 126,400 ounces in Q2 compared with total mine production of 131,500 in the same period of 2013), ABG +1.0% (increased total share repurchase authorization to $100 mln), LNG +0.9% (co and Electricite de France sign 20-year LNG sale and purchase agreement), SYY +0.5% (settled with the State of California all claims related to its past use of drop sites in the state for $19.4 mln)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: RP -26.5%, AMD -17.9%, KTCC -5.6%, ZHNE -3.3%, ROG -3%, BGS -2.3%, IBM -1.8%, CPHD -1.5%, SLB -1.2%, STX -1.2%, ATHN -0.6%

Companies trading lower in after hours in reaction to news: TGP -3.9% (announced public offering of 2.8 mln common units, which represent limited partner interests)

Barron's : Why Dow Chemical Stock Will Continue to Rally

Why Dow Chemical Stock Will Continue to Rally
Goldman says the staid chemical company, which has crushed the index, remains undervalued.

Over the past year, Dow Chemical has rallied some 50%, almost triple the total return of the Standard & Poor's 500 index. The remarkable quality of Dow's (ticker: DOW ) rally is not the magnitude of its advance but rather its stealth. With investors caught up in the latest hot-stock craze, the quiet multinational chemical company based in Midland, Mich., doesn't generate many headlines.

Dow Chemical has earned the respect of many investors, and now this dependable stock is attracting bullish attention from Goldman Sachs. The bank's derivatives strategists are advising clients to buy Dow's August $52.50 calls, which traded at 79 cents when the stock was at $51.54.

"We believe calls underprice upside potential on earnings," strategists Katherine Fogertey and John Marshall advised clients in a Wednesday trading note.

Their view reflects stock and options fundamentals. The bank rates the stock a Buy and thinks it will rally 26% over the next year as Dow has said it can double Ebitda—earnings before interest, taxes, depreciation and amortization—over the medium term.

"With cash generation expected to be strong in the near and mid-term, the company's financial flexibility will help maintain focus on organic growth. At the same time, management expects to return $4 billion to shareholders via buybacks, and $1.8 billion via dividends," Fogertey and Marshall advised clients.

In other words, Goldman Sachs thinks other analysts are too conservative with their earnings estimates. Dow has benefited both from good management—a CEO-led turnaround—and a rebound in the global economy that has driven demand for the company's products.

Goldman thinks Dow will beat the consensus earnings estimate by 5% over the next three quarters. Such fundamental strength would seemingly be accompanied by expensively priced options. Yet, the options are priced as if Dow is nothing more than a boring chemical company.

In fact, staid stocks are looking better and better these days. This reflects a sharper focus on bottom-up stock-picking as some strategists decide that top-down investing may have run its course.

Options that expire in one month are historically inexpensive, implying the stock will move 2.6%, up or down, in reaction to earnings. The stock's eight-quarter median move on earnings, however, is 3.7%, up or down. Meanwhile, the implied volatility of Dow's one-month bearish put options is higher than calls, indicating expectations the stock may decline on earnings.

"We estimate," Fogertey and Marshall told clients, "that buyers of DOW August $52.50 calls would profit if shares gain more than 1.6% between now and the day after earnings, assuming implied volatility of August options declines 17% (in-line with prior quarters)."

If the stock is at, say, $55 by expiration, the 79-cent call is worth $2.50, a meaningful return in a short time. The risk is that Goldman is wrong, the company reports lousy earnings, the stock sinks and then all the money spent on the call would be lost. Of course, there is risk in everything, but it is not everyday that the risk is limited to 79 cents.

NYT : Malaysia Jet Brought Down by Missile, U.S. Officials Say

Malaysia Jet Brought Down by Missile, U.S. Officials Say

MOSCOW — A Malaysia Airlines Boeing 777 with 295 people aboard was shot down on Thursday by a surface-to-air missile, U.S. officials have confirmed. The airliner was traveling at about 30,000 feet, according to the tracking information from a military spy satellite. The satellite, however, was unable to detect where exactly the missile was fired.

Military and intelligence analysts are using mathematical formulas, high-speed computers and other sensors to try to pin down the missile’s point of origin. Other analysts will work with Ukrainian authorities to recover and analyze pieces of the missile and the aircraft to help determine what kind of missile was fired, the officials said.

The plane crashed and burned on Thursday in an eastern Ukraine wheat field near the Russian border, in an area roiled by fighting between pro-Russian separatists and Ukrainian forces.

The Soviet leader Nikita Khrushchev denouncing the United States in a news conference in 1960. The wreckage of a U-2 spy plane shot down in Soviet territory was put on display for the press.HistorySource: Malaysian Airlines Flight: History's Lessons in Crisis ManagementJULY 17, 2014
Safety Statistics: The String of ‘Safest Airline Years’ Is OverJULY 17, 2014
Ukrainian officials called the crash an act of terrorism. Vice President Joseph R. Biden Jr. of the United States, speaking in Detroit, said the plane “apparently has been shot down. Shot down, not an accident. Blown out of the sky.”

“This is truly a grave situation,” Mr. Biden said. “Nearly 300 souls have been lost. The families need consolation and our prayers, and many questions need to be answered. And we’ll get those answers, and we’ll take action accordingly.” He added, “It’s important we get to the bottom of this sooner than later because of the possible repercussions that can flow beyond from this, beyond the tragic loss of life.”

Ukraine’s president, Petro O. Poroshenko, said in a statement that he was calling for an immediate investigation of the crash of the plane, which was en route to Kuala Lumpur, Malaysia, from Amsterdam. There were no reported survivors among the 280 passengers and 15 crew members.

Mr. Poroshenko said he had called the Dutch prime minister, Mark Rutte, to express his condolences and to invite Dutch experts to assist in the investigation. “I would like to note that we are calling this not an incident, not a catastrophe, but a terrorist act,” Mr. Poroshenko said.

Malaysia’s prime minister, Najib Razak, called for an investigation at the crash site and the unfettered cooperation of local authorities. “Malaysia is unable to verify the cause of this tragedy,” he said.

“No stone will be left unturned,” he added. “If it transpires that the plane was, indeed, shot down, we insist that the perpetrators must be brought to justice.”

President Obama spoke with Mr. Poroshenko and Russia’s president, Vladimir V. Putin, from aboard Air Force One.

Reporters arriving at the scene near the town of Grabovo described dozens of lifeless bodies strewn about, mostly intact, in a field dotted with purple flowers, with remnants of the plane scattered across a road lined with fire engines and emergency vehicles. “It fell down in pieces,” said one rescue worker as tents were set up to gather the dead.

One passenger in a black sweater lay on her back, with blood streaming down her face and her left arm raised. The carcass of the plane was still smoldering, and rescue workers moved through the dark field with flashlights. Dogs barked in the distance, and the air was filled with a bitter smell.

A regional airline official said the plane had been flying at about 33,000 feet when radar lost track of it.

For months, eastern Ukraine has been the scene of a violent pro-Russian separatist uprising in which a number of military aircraft have been downed. But this would be the first commercial airline disaster to result from the hostilities.

Despite the turmoil in eastern Ukraine, the commercial airspace over that part of the country is heavily trafficked and has remained open. Aeroflot, Russia’s national carrier, announced that it had suspended all flights to Ukraine for at least three days.

Malaysia Airlines, still reeling from the mysterious loss of another Boeing 777 flight in March, said it had lost contact with Thursday’s flight, MH17, over Ukraine but offered no further details immediately. Mr. Razak said initially in a Twitter post that he was “shocked by reports that an MH plane crashed. We are launching an immediate investigation.”

President Obama, who one day earlier had announced strengthened sanctions against Russia over its support for the eastern Ukraine separatists, spoke by telephone with Mr. Putin, who raised the issue of the reports of the downed plane, White House officials said. Josh Earnest, the White House press secretary, said Mr. Obama had been briefed about the plane crash.

Later Mr. Obama said the United States government was working to determine whether any Americans had been aboard the flight. Russia’s Interfax news agency said there had been no Russians aboard.

There was no immediate word from the Kremlin about the substance of the Obama-Putin telephone call. The Kremlin put out a short statement saying that Mr. Putin had a previously scheduled telephone conversation with Mr. Obama.

“The parties had a detailed discussion about the crisis in Ukraine,” the statement said. Mr. Putin repeated the need for an immediate cease-fire and objected to what he said was Ukrainian army fire striking inside Russia.

Russian news agencies said Mr. Putin also spoke by telephone to the president of Malaysia and offered his condolences.

Mr. Rutte, the Dutch prime minister, said in a statement said he was “deeply shocked” by the crash.

Continue reading the main story
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“A lot remains unclear about the reason, circumstances and those on board,” he said. “I have just called with the Ukrainian president.”

The Dutch state news agency quoted tour operator WTC.nl as saying that around 20 to 30 Dutch and Belgian citizens had been on board.

Andrei Purgin, deputy prime minister of the Donetsk People’s Republic, the insurgent group in eastern Ukraine, denied in a telephone interview that the rebels had anything to do with the loss of the passenger jet. He said that the rebels had shot down Ukrainian planes before but that their antiaircraft weapons could reach only to around 4,000 meters, far below the cruising level of passenger jets.

“We don’t have the technical ability to hit a plane at that height,” he said.

He said that the plane had apparently come down in an area of Ukrainian military operations and that it was not out of the question that the Ukrainians themselves shot it down.

“Remember the Black Sea plane disaster,” he said, referring to the 2001 crash of a Siberian Airlines passenger jet bound for Novosibirsk from Tel Aviv that the Ukrainians shot down by accident during a military training exercise.

Anton Geraschenko, an adviser at Ukraine’s Interior Ministry, said on his Facebook page that the Malaysia Airlines plane had been brought down by a Russian-made Buk, or Beech, antiaircraft system. Russian missile systems are named for trees.

A reference book published by Rosoboronexport, the Russian state weapons export monopoly, describes the Buk antiaircraft missile system as designed to target both low- and high-flying aircraft, to a maximum height of 72,000 feet.

Mr. Geraschenko wrote that earlier Thursday people in eastern Ukraine supporting the central government had reported seeing a Buk system moved from the town of Torez toward the town of Snezhnoye.

A commander of a rebel unit in Donetsk, said, “We could have shot down three planes over Donetsk yesterday, but we didn’t because they could have been civilians.” He said the rebel forces did not have the Buk system.

In comments broadcast on Ukrainian television, Vitali Klitschko, the mayor of Kiev and former heavyweight boxing champion, said the crash illustrated the risks to peace in Europe of the fighting in eastern Ukraine. “This is not just a local conflict in Donetsk and Luhansk but a full-scale war in the center of Europe,” he said. “I’m certain the international community this time will pay attention and understand.”

>>> IBM: Notes from conference call

IBM: Notes from conference call 

- IBM mgmt notes modest sequential improvement in growth markets.
- Operating margin improved modestly while gross profit is flat; saw margin improvement in global financing, offset by declines in global business and systemes & tech.
- Notes gross margin +50 bps, pre-tax margin +70 bps, net income margin +50 bps.
- Continue to make investments in mobility, cloud.
- Continue to expect to deliver at least $20.00 of Operating EPS in 2015.
- When asked about shortfall in software relative to prior expectations, mgmt says view 90 days ago was for acceleration, and still believes they'll see software back to mid-single digit growth in 2H.
- When asked about services signings, mgmt expects improvement and says they're getting a better yield, and expects additional Q3 signings growth.
- When asked about global demand expectations for 2H; mgmt would expect Europe to see sequential improvement going forward, but it is a challenged environment...
- Would expect Japan to see improvement, saying team in Japan does quite well on top of macro; expects growth markets to see sequential improvement.
- In 2H, mgmt sees software rev growth accelerating to mid-single digit; sees STG profit stabilization.

The call has now concluded; IBM is trading -1.2% in after-hours at 190.15


(BN) Fox’s Play for Content Throne Buoys Discovery, Scripps: Real M&A


Fox’s Play for Content Throne Buoys Discovery, Scripps: Real M&A
2014-07-17 21:34:47.510 GMT


(For a Real M&A column news alert: SALT REALMNA <GO>.)

By Tara Lachapelle and Brooke Sutherland
July 17 (Bloomberg) -- Stay tuned, because the channels are
about to change.
Time Warner Inc., the owner of HBO and TNT, confirmed
yesterday that it received a more than $75 billion offer from
Rupert Murdoch’s Twenty-First Century Fox Inc. Shares of content
providers such as AMC Networks Inc., Scripps Networks
Interactive Inc. and Discovery Communications Inc. rallied
because they may be the next to seek tie-ups. Media stocks
representing about $90 billion of shareholder value are now
speculated to be in play, without even including Time Warner.
A driving force for media consolidation is Comcast Corp.’s
pending purchase of Time Warner Cable Inc. If cleared by
antitrust regulators, that deal will combine the two largest
U.S. cable companies, leaving suppliers of content to find ways
to bolster their own scale and strengthen their power to
negotiate with distributors.
“It’s open game,” Vijay Jayant, a New York-based analyst
at International Strategy & Investment Group LLC, said in a
phone interview. “You’ve got this behemoth transaction for Time
Warner, which fortifies the concept that the smaller companies
have to get bigger or get out.”
Significant consolidation among content providers could
also put pressure on Netflix Inc., giving the online-streaming
service a reason to consider striking a deal with a company such
as CBS Corp. or Walt Disney Co., said Morningstar Inc. CBS is
also a logical counterbidder for Time Warner, and even
technology giants such as Google Inc. could be spurred to enter
the fray, said Wunderlich Securities Inc.

‘Going Wild’

Fox’s proposal, which Time Warner rejected, included 1.531
Fox non-voting shares and $32.42 in cash, Time Warner said
yesterday in a statement. The transaction would be risky for
regulatory and operational reasons, and Time Warner’s assets
will increase in value if the company continues on its own, the
$73 billion company said. Fox is willing to raise its offer
higher than $85 a share if Time Warner engages in talks and
opens its books to Fox, according to a person with knowledge of
the matter.
Shares of AMC, Scripps and Lions Gate Entertainment Corp.
rallied more than 4 percent yesterday, while Discovery jumped
more than 6 percent for its biggest increase in almost three
years. Viacom Inc. gained more than 3 percent and Starz rose 1.6
percent.
Today, shares of the media companies rose for a second day.
“Everyone is excited about the deal so everything in the
media space is up,” David Miller, a Los Angeles-based managing
director at Topeka Capital Markets Inc., said in a phone
interview. “The market is going wild.”

Too Rich

While content providers such as Scripps and AMC have been
considered takeover targets for years, they still haven’t been
bought. Their valuations may have been too rich for any
interested suitors to strike just yet, said Martin Pyykkonen, a
Denver-based analyst at Rosenblatt Securities Inc.
“Discovery, Scripps and AMC in particular have traded at a
premium multiple that just hasn’t been something any of the big
guys have wanted to swallow,” Pyykkonen said in a phone
interview. Still, “they all make sense as targets. I could see
one or two or all three getting taken out by larger
conglomerates.”
Another obstacle is that many of these companies are
controlled by founding families, so it’s up to them if they want
to sell, said ISI’s Jayant. The heirs to Edward W. Scripps have
a special class of stock in the eponymous company, which owns
HGTV and part of the Food Network. The Dolan family still
controls the voting rights at AMC, whose chairman is billionaire
Charles Dolan, the founder of Cablevision Systems Corp., from
which AMC was spun off in 2011.

Natural Target

AMC is the “most natural” target because it’s purely a
cable-networks company and has a “bite size” market value at
$4.6 billion, according to Vasily Karasyov, a New York-based
analyst at Sterne Agee & Leach Inc. In addition to its popular
shows “The Walking Dead,” “Breaking Bad” and “Mad Men,”
AMC also owns IFC and SundanceTV.
Discovery’s board already discussed a potential bid for
Scripps last year as part of a routine quarterly survey of
potential acquisitions for the $28 billion company, people with
knowledge of the situation said in December.
A representative for Lions Gate had no immediate comment on
possible deals, while representatives for Starz didn’t respond
to a request for comment. Representatives for AMC, Scripps, CBS,
Disney, Discovery and Viacom declined to comment.

Consolidation Wave

Almost $200 billion of media acquisitions have been
announced this year, including Comcast’s purchase of Time Warner
Cable and AT&T Inc.’s takeover of DirecTV, both valued at more
than $65 billion including debt.
“The scale of consolidation on the content side has not
been anything close to what has happened on the distribution
side,” Tuna Amobi, a New York-based equity analyst at S&P
Capital IQ, said in a phone interview. A sale of Time Warner
“would be a major transformational deal that could set off
another wave of major consolidation among content providers.”
Bulking up will also give content providers more
negotiating power with streaming services such as Netflix. Faced
with the prospect of higher fees for redistributing movies and
TV shows, it could make sense for Netflix to combine with a
company such as CBS or Disney that may want more of a digital
footprint, according to Peter Wahlstrom, a Chicago-based analyst
at Morningstar.

Starting Point

As far as Time Warner, this may be only the beginning of
the bidding process, said Pyykkonen of Rosenblatt.
“Everything is for sale at a certain price,” he said.
“The number Murdoch and Fox have thrown out, that’s a starting
point. You never come out with your best offer initially.”
Time Warner isn’t interested in exploring a sale while
potential suitors Comcast and AT&T are busy with other deals and
unable to bid for the media company, according to a person with
knowledge of the matter. If Fox’s offer puts the company in
play, other suitors may emerge anyway, said Matthew Harrigan, a
Denver-based analyst at Wunderlich. Google is among companies
that might be more inclined to consider a bid, he said.
A representative for Google declined to comment.
“Maybe these companies wouldn’t have liked to do anything
right away,” Harrigan said in a phone interview. But if
“people see the asset being moved from the market for eternity,
it creates a different dynamic than it otherwise would.”

Fox Bid

Fox’s bid probably also got CBS’s attention, according to
S&P’s Amobi.
“It’s hard to imagine that CBS doesn’t take a look at Time
Warner,” he said. “There’s obviously a case to be made as well
as to why both companies could be very good merger partners.”
The same wasn’t true for Time Warner and AOL Inc. The two
merged in 2001 in a deal valued at more than $100 billion that
triggered record losses, driving the shares down 68 percent. AOL
was spun back out in 2009 and Time Warner’s stock has almost
tripled since then.
Rather than Time Warner combining with Fox next, Topeka
Capital’s Miller said he thought the cable consolidation would
have started with smaller content providers such as AMC.
With all the deals among distributors, there “has to be
some kind of appropriate response on the network side,” he
said. AMC, “we thought that someone acquiring those guys would
be kind of the first response. Instead the first response has
been potentially Fox buying Time Warner. I think it’s taken a
lot of folks in the media community by surprise.”

For Related News and Information:
Murdoch Said Open to Offer More Than $75 Billion for Time Warner
NSN N8T75S6JTSGA <GO>
Time Warner-CBS Seen Candidate for Blockbuster Merger: Real M&A
NSN MLOBNY6VDKHV <GO>
Scripps Seen Luring Suitors After Discovery Weighs Bid: Real M&A
NSN MXPTPM6S972R <GO>
AMC Networks Peak Value Seen Luring Dolans to Cash In: Real M&A
NSN MI8E1S6TTDVD <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>

--With assistance from Rob Golum and Christopher Palmeri in Los
Angeles, Brian Womack in San Francisco, Alex Sherman, Jonathan
Erlichman, Jeffrey McCracken and Jennifer Surane in New York and
Anousha Sakoui in London.

To contact the reporters on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net;
Brooke Sutherland in New York at +1-212-617-0448 or
bsutherland7@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Whitney Kisling

FT : MH17 was flying in approved space

MH17 was flying in approved space

Eurocontrol, the umbrella organisation for air traffic control in Europe, said MH17 had been flying at 33,000 feet when it disappeared from radar at about 1.30pm local time.
On July 14, the Ukrainian authorities issued a ban on passenger jets flying below 32,000 feet over eastern Ukraine, after some military aircraft were attacked at relatively low altitudes, said a Eurocontrol spokesman.

However, the spokesman said airlines had been free to operate their aircraft above 32,000 over eastern Ukraine, as was the case with MH17.
The Ukrainian authorities have responded to the MH17 crash by prohibiting flights at any height over eastern Ukraine. Eurocontrol said it was rejecting “all flight plans that are filed [by airlines] using these routes [over eastern Ukraine]”.
This will have an impact about 300 flights each day over eastern Ukraine, many of them long-haul operations between Europe and Asia.
Eurocontrol has convened a crisis group of air traffic controllers from across Europe to determine how to deal with the impact of the air space closure in eastern Ukraine.
The US Federal Aviation Administration said it was in contact with US carriers following the MH17 crash, adding airlines had voluntarily agreed not to operate in air space near the Russian-Ukraine border.
A spokesman for the UK Civil Aviation Authority said the Ukrainian authorities were responsible for managing their airspace and Britain and other countries could not enforce restrictions in the area.
In April, US regulators ordered US airlines to avoid flying over Crimea after Russia assumed control of the territory, but the instructions did not cover eastern Ukraine. UK regulators issued similar advice to UK airlines.

>>> Google: Conference Call Update - additional comments

Google: Conference Call Update 

additional highlights from the Q&A portion of the earnings call:
- SMB (small and medium size businesses) growth profile? Online tools for small businesses: still a huge opportunity as more than half of SMBs do not have a website. A big part of effort is to help this go mobile as well. GOOG has very targeted programs. Really a long term strategic effort.
- Cap-Ex: spending mostly focused on building data centers, acquiring real estate etc.
- Outlook for ChromeBooks and Android? There is a great convergence here. For example, on android phone, Chrome powers the search.
- Google Shopping Express is really about local, and SMBs are a big focus for that but it's not only SMBs.
- Motorola had a great Q2 with strong momentum.

--> Stock at 579.06 (+1%)