>>> NetApp beats by $0.08, reports revs in-line; guides Q4 EPS above consensus,

NetApp beats by $0.08, reports revs in-line; guides Q4 EPS above consensus, revs in-line (38.93 -0.59)
  • Reports Q3 (Jan) earnings of $0.82 per share, $0.08 better than the Capital IQ Consensus of $0.74; revenues rose 1.3% year/year to $1.4 bln vs the $1.39 bln Capital IQ Consensus.
    • All-flash array annualized net revenue run rate almost $1.40 billion, up 160% year-over-year.
    • Nearly 300 petabytes of flash shipped.
  • Co issues guidance for Q4, sees EPS of $0.79-0.84 vs. $0.77 Capital IQ Consensus Estimate; sees Q4 revs of $1.365-1.515 bln vs. $1.4 bln Capital IQ Consensus Estimate.
  • "Q3 marked another quarter of strong execution by NetApp," said George Kurian, chief executive officer. "The transformation of NetApp is yielding solid results and has changed the trajectory of our business. With our industry-leading portfolio of solutions and Data Fabric strategy, NetApp is well positioned to lead in the next era of IT."

>>> Cisco Systems beats by $0.01, reports revs in-line; guides Q3 EPS in-line,

Cisco Systems beats by $0.01, reports revs in-line; guides Q3 EPS in-line, revs in-line; raises dividend 12% (32.82 +0.51)
  • Reports Q2 (Jan) earnings of $0.57 per share, $0.01 better than the Capital IQ Consensus of $0.56; revenues fell 2.9% year/year to $11.58 bln vs the $11.56 bln Capital IQ Consensus, with product revenue down 4% and service revenue up 5%.
    • Revenue by geographic segment was: Americas down 3%, EMEA flat, and APJC down 3%.
    • Product revenue performance was led by Security which increased 14%. Collaboration and Wireless product revenue increased by 4% and 3%, respectively. NGN Routing, Switching and Data Center product revenue decreased by 10%, 5% and 4%, respectively. Service Provider Video product revenue decreased by 41%.
    • Non-GAAP total gross margin and product gross margin were 64.1% (vs. 63-64% guidance) and 62.4%, respectively. The decrease in non-GAAP product gross margin compared with 63.3% in the second quarter of fiscal 2016 was primarily due to pricing and to a lesser extent product mix, partially offset by continued productivity improvements.
  • Co issues in-line guidance for Q3, sees EPS of $0.57-0.59, excluding non-recurring items, vs. $0.58 Capital IQ Consensus Estimate; sees Q3 revs down 0-2% to ~$11.76-12.0 bln vs. $11.87 bln Capital IQ Consensus; adj. gross margin 63-64%.
  • Increases quarterly cash dividend 12% to $0.29

WSJ : Och-Ziff Capital Management Group, the largest publicly traded hedge-fund

Och-Ziff Capital Management Group, the largest publicly traded hedge-fund firm in the U.S., on Wednesday reported $8 billion of client withdrawals for the past year.
The latest set of net withdrawals reduced the firm’s total assets to less than $38 billion overall. Och-Ziff also disclosed in a quarterly earnings report that redemptions of funds have continued to pile up in 2017.
Founder Daniel Och told analysts on Wednesday that the “worst quarter is behind us.”

For the quarter ended in December, the company reported a profit of $2.8 million, or 2 cents a share, compared with a year-earlier loss of $22.3 million, or 12 cents a share. Excluding certain items, the company said it earned a penny a share.
The New York-based firm’s stock fell 8% to $3.35 by Wednesday afternoon, all but wiping out its gains for the year. The shares were down by 66% over the past five years.

Och-Ziff is suffering from a general disillusionment among investors regarding hedge funds—the industry has reported a record five consecutive quarters of outflows—as well as more individual issues. The firm last year agreed to pay $412 million after a subsidiary pleaded guilty to conspiracy to commit bribery in Africa.

Mr. Och’s day contrasted with that of one-time rival Fortress Investment Group. Fortress shares were up 28% after it announced a takeover by Japanese technology giant SoftBank Group.
An Och-Ziff spokesman declined to comment.

WSJ : French Election Puts Possibility of ‘Frexit’ on the Agenda

French Election Puts Possibility of ‘Frexit’ on the Agenda
Two front-runners agree that the defining issue is France’s membership of the eurozone
PARIS—What’s striking about the French presidential election is the extent to which the two front-runners share a basic analysis of the choice facing the country. Marine Le Pen, the leader of the right-wing National Front, and Emmanuel Macron, the 39-year-old former economy minister who quit François Hollande’s government to stand as an independent, are poles apart politically. But both agree that the defining issue is France’s membership of the eurozone.

Both point to the widening divergence between Germany and France’s economic performance during the past decade as evidence that the status quo isn’t sustainable. The National Front points to a recent International Monetary Fund study that suggested the euro is up to 15% undervalued in Germany and 6% overvalued in France as proof that France is at a competitive disadvantage. It argues that the only way France can remain a member of what one party official calls the “fixed eurozone exchange-rate regime” is to pursue an internal devaluation by cutting back on social protections and driving down wages. The alternative is to quit the eurozone.

Mr. Macron implicitly agrees. He wants France to stay in the euro and is campaigning for changes to the country’s public sector, welfare system and labor rules, which he says are needed to restore the country’s competitiveness. He advocates a more-flexible welfare system and labor market that protects individuals rather than jobs and allows employers to strike deals with workers at a company level rather than across sectors.

Ms. Le Pen, on the other hand, believes there is no appetite for cuts to welfare, which the National Front says provides an important economic as well as social safety net, helping to maintain household consumption. It argues that the only way to preserve the welfare system is to quit the eurozone and devalue the currency.

Of course, Ms. Le Pen’s program rests on a number of questionable assumptions. The first is that a French exit, or “Frexit,” can be managed in an orderly way. The National Front believes this is possible because under international law all government debts would be redenominated into the new national currency so there is no risk of national bankruptcy. As the fifth-largest economy in the world, it is confident that France has the clout to strike a good deal with its EU partners. There is little risk of capital flight, party officials say, because France’s post-devaluation economic prospects would be so favorable.

This will strike many as complacent. In reality, a French decision to quit the euro would likely lead to massive capital flight—and not just in France. Capital controls would likely have to be introduced across the currency bloc. France would be highly exposed to instability elsewhere via cross-border banking exposures; French banks hold nearly €300 billon ($318 billion) of Italian assets, equivalent to 10% of gross domestic product. To contain the instability, the European Central Bank would need to commit to buying assets without limits, something that it could hardly do without political cover from Berlin and other capitals, but it is hard to see this cover extending to French assets.

A second question is whether Ms. Le Pen’s policies would inspire the necessary confidence in the success of post-Frexit France. One reason why Brexit hasn’t yet had the impact that many economists predicted is that mainstream Conservatives quickly took control of the Brexit process, dumping populist Leave campaign proposals such as an extra £350 million ($436 million) a week of health spending and has instead reaffirmed the U.K.’s intention to remain an open, liberal, free-trading economy. In contrast, France’s rigid labor laws and high levels of taxation are likely to be a drag on its competitiveness regardless of what currency arrangements it might choose.

Mr. Macron’s problem is that the nuances of these economic arguments can easily be lost in an election campaign. Indeed, the resilience of the U.K. economy since the Brexit referendum can only have undermined warnings about a disorderly Frexit. Meanwhile, Mr. Macron remains vulnerable to Ms. Le Pen’s central charge that the alternative to Frexit is cutting welfare and wages. Mr. Macron’s planned announcement of his full economic plan in early March will be a crucial test for his campaign. As things stand, the manifesto is likely to be cautious and light on detail, say people familiar with his plans. Even so, his claim that he will be able to persuade Germany to deliver wider European overhauls won’t be credible unless he commits to meeting tough EU budget targets.

Mr. Macron’s hope must be that he doesn’t need to provide too much detail on his economic plans, given the way the center ground has opened up for him in the campaign, offering him a strong chance of making it to the second round. Mr. Macron may also be betting he can then go on to beat Ms. Le Pen because too many voters view her as divisive and a threat to democracy for her to win. But the risk for Mr. Macron is that under the spotlight of the campaign, even a cautious, detail-lite plan might be enough to frighten voters. Ms. Le Pen’s best chance might come if Mr. Macron were beaten into second place by Socialist candidate Benoît Hamon—a not impossible scenario, say some experienced French political observers. Faced with a choice between the hard left and hard right, it isn’t clear which way voters will jump.

>>> US Close Dow +0.52% S&P +0.50% Nasdaq +0.64% Russell +0.54%

Closing Market Summary: Averages March to Another Record Close

Equity indices marched through a stockpile of economic data to new record highs on Wednesday as the S&P 500 (+0.5%) posted its seventh consecutive advance. The Dow (+0.5%) finished in line with the benchmark index while the Nasdaq (+0.6%) closed a step ahead.

The day's record close appeared somewhat doubtful following this morning's release of January CPI. The report came in hotter than expected with total CPI increasing 0.6% (consensus +0.3%) and core CPI, which excludes food and energy, rising 0.3% (consensus +0.2%). While the Fed's preferred inflation gauge is the PCE Price Index, Wednesday's CPI reading confirms that consumer inflation pressures are rising, which in turn should increase the potential for a rate hike at the March meeting.

Sure enough, the fed funds futures market showed an increase in the implied probability of a March rate hike (to 31.0% today from 17.7% yesterday). Additionally, the fed funds futures market now points to the next FOMC rate hike taking place in May with the corresponding probability rising to 53.1% from yesterday's 40.6%.

U.S. Treasuries slipped immediately following the January CPI release and held the bulk of those losses into the close, finishing lower for the fifth consecutive session. The benchmark 10-yr yield finished three basis points higher at 2.50%. 

After the morning's wave of economic data, which included much more than just CPI (see data review below), the stock market found its footing and began a slow but steady climb into the green. Financials (+0.7%) led the advance throughout the morning, but health care (+1.2%) took the reigns in the afternoon. 

While the health care space showed broad strength, biotechnology and pharmaceutical names demonstrated notable vigor as a handful components were recently disclosed in new, increased, and/or maintained portfolio positions. The iShares Nasdaq Biotechnology ETF (IBB 294.95, +5.15) advanced 1.8% while pharmaceutical heavyweights like Pfizer (PFE 33.51, +0.76), AbbVie (ABBV 61.65, +0.83), and Eli Lilly (LLY 80.25, +1.44) finished higher between 1.4% and 2.3%.

The top-weighted technology sector (+0.4%) finished a step behind the broader market as Apple (AAPL 135.51, +0.49) resisted the sector's bullish disposition. However, chipmakers somewhat balanced the tech giant's underperformance, evidenced by the 0.8% uptick in the PHLX Semiconductor Index. Analog Devices (ADI 81.60, +3.76) led the chipmaker advance after beating top and bottom line estimates and increasing its quarterly dividend.

Consumer staples (+0.8%) finished just behind the health care space despite the negative response to PepsiCo's (PEP 106.73, -0.19) latest earnings report. The company slipped 0.2% after below-consensus guidance outweighed above-consensus earnings. Also of note, PEP decided to raise its dividend.

Utilities (-0.4%) finished the day at the bottom of the leaderboard, while energy (-0.4%) did only slightly better as crude oil closed 0.2% lower at $53.08/bbl. The energy component counter-intuitively ticked up into positive territory following the latest Energy Information Administration (EIA) inventory report, which dwarfed consensus estimates (+3.5 million) by showing a build of 9.5 million barrels. However, the uptick was short-lived as crude oil soon returned to negative territory.

Wednesday saw a slew of economic reports including January CPI, January Retail Sales, January Industrial Production and Capacity Utilization, February Empire Manufacturing, December Business Inventories, February NAHB Housing Market Index, and the MBA Mortgage Index:

  • Total CPI rose 0.6% (consensus +0.3%) in January while core CPI, which excludes food and energy, increased 0.3% (consensus +0.2%). On a year-over-year basis, total CPI is up 2.5% and core CPI has increased 2.3%.
    • While the Fed's preferred inflation gauge is the PCE Price Index, the key takeaway from the report is that consumer inflation pressures are rising, which in turn should increase the potential for a rate hike at the March meeting.
  • January retail sales increased 0.4%, which compares to the consensus of 0.1%. The prior month's reading was revised higher to 1.0% from 0.6%. Excluding autos, retail sales rose 0.8% while the consensus expected an uptick of 0.4%. The prior month's reading was revised higher to 0.4% from 0.2%.
    • The key takeaway from the report is that discretionary spending on goods picked up in January, which will compute into a positive input for first quarter GDP forecasts.
  • January Industrial Production decreased 0.3% (consensus 0.0%) while Capacity Utilization declined to 75.3% (consensus 75.5%) from a revised reading of 75.6% (from 75.5%) in December.
    • The key takeaway from the report is that the decline in industrial production stemmed entirely from a drop in utilities output, which is to say the headline number is not as bad as it appears.
  • Business Inventories rose 0.4% in December which is in line with the consensus. The prior month's reading was revised to 0.8% from 0.7%.
    • The key takeaway from the report is that the inventory-to-sales ratio is at its lowest point since December 2014. That's elevated from pre-financial crisis levels, when it was below 1.30, yet a further downtrend could restore some much needed pricing power.
  • Empire Manufacturing Survey for February rose to 18.7 from the prior month's reading of 6.5. The consensus estimate was pegged at 7.0.
  • The NAHB Housing Market Index for February fell to 65 (consensus 68) from an unrevised 67 in January.
  • The weekly MBA Mortgage Index decreased 3.7% to follow last week's 2.3% uptick.

Thursday will also see a batch of economic data with January Housing Starts (consensus 1.22 million), Initial Claims (consensus 245K), and the Philadelphia Fed Index for February (consensus 17.5) all crossing the wires at 8:30 am ET.

  • Nasdaq Composite +8.1% YTD
  • S&P 500 +4.9% YTD
  • Dow Jones Industrial Average +4.3% YTD
  • Russell 2000 +3.4% YTD

FT : Demand for power price cuts puts UK nuclear plants’ viability in doubt

Demand for power price cuts puts UK nuclear plants’ viability in doubt
Government seeks electricity supply deals 20% cheaper than Hinkley Point

Companies vying to build nuclear power stations in the UK have been told they must offer a price for their electricity sharply lower than that approved for the Hinkley Point plant last year, raising further questions about the viability of Britain’s plans for a new generation of reactors.

Government officials have indicated that future projects will be expected to deliver a discount of at least 15-20 per cent on the price of electricity from the £18bn Hinkley plant in Somerset, a settlement was widely criticised for its high cost.

Lower prices compared with Hinkley are seen as crucial to maintaining political support for new nuclear plants, which are at the heart of UK plans to maintain energy security while lowering carbon emissions.

However, the prospect of less lucrative contracts will add to the financing difficulties facing reactor developers and intensify their demands for government help to meet multibillion-pound construction costs.

Uncertainty surrounding the UK’s nuclear “new build” programme — one of the biggest in the developed world — was highlighted this week when Toshiba said it wanted to sell its controlling stake in the NuGen consortium planning to construct three reactors at Moorside, Cumbria. The announcement, which left NuGen in need of new investors to survive, followed a $6.3bn writedown on Toshiba’s US nuclear business — another example of the high costs and risks involved in reactor construction.

NuGen is one of two Japanese-led developers expected to begin negotiations with government in the coming months over a “strike price” for electricity from new UK nuclear plants. The other is Horizon, owned by Hitachi, which is planning to build two reactors at Wylfa in Anglesey, Wales.

Strike prices represent a premium over the wholesale cost of electricity — which has averaged about £45 per megawatt hour over the past year — guaranteed to power plant developers as an incentive for urgently needed new capacity.

One senior figure in the nuclear industry said government had made clear that NuGen and Horizon must agree a “significantly” lower price than the £92.50/Mwh promised to EDF, the French utility, for electricity from Hinkley Point for 35 years. The Hinkley strike price is now worth about £100/Mwh because it was set in 2012 and linked to inflation.

“They don’t want a number beginning with nine. They would like a number beginning with seven,” said the industry figure, implying a price below £80/Mwh. Another senior industry figure said he expected a figure around £85/Mwh.

Both these people said NuGen and Horizon accepted the need for a “more competitive” price than Hinkley, which is being fully-financed by EDF and CGN of China. But they argued government help was needed to achieve this.

“One of the biggest factors pushing up the strike price is the cost of capital. If government wants a low strike price, it is pretty clear that government has to think about a different kind of [financing] solution,” said one of the industry leaders.

Both people acknowledged that government remained cautious about the idea of investing taxpayers’ money in nuclear power but they hoped some form of public support, such as loans or credit guarantees, would be forthcoming.

One of the people said there were signs the government wanted to pit NuGen and Horizon against each other in a competitive process, with no guarantee that both would go ahead. A third industry figure said such an approach would be a mistake.

“Developers have already spent billions preparing their sites and clearing planning and regulatory hurdles,” he said. “If developers are told you have to spend all that money just to enter a competition, that would have a profoundly negative impact of perceptions of the UK nuclear market.”

This person said developers would also balk at demands for a fixed discount over Hinkley. “The strike price has to come from bottom-up, reflecting the costs of the supply chain, technology and site development, rather than something imposed from top down,” he said.

Another of the industry figures said the government had to clarify its approach soon or risk investors walking away. “Government should be very nervous about losing one of these projects,” he said. “We’re at a crossroads moment and the government has to make a decision [on financing] soon.”

The Department for Business, Energy and Industrial Strategy declined to comment but an official said: “The government will always look to drive the best deal possible for UK consumers.” Horizon and NuGen declined to comment.

Hinkley Point C, approved last September and due to open in 2025, is set to become Britain’s first new nuclear power station since the opening of Sizewell B in Suffolk in 1995. Five further plants are at varying stages of development, with Moorside and Wylfa the most advanced.

They are intended to help fill the gap left by the phasing out of dirty coal-fired power stations by 2025 and the decommissioning of the UK’s existing fleet of ageing nuclear reactors.

Oilprice.com : A Bloodbath Looms Over Oil Markets

A Bloodbath Looms Over Oil Markets


Oil prices have traded reliably in the $50s per barrel since OPEC agreed to cut production last November, but having failed to break through a ceiling in the upper-$50s, crude prices are in danger of falling back again.
The oil market had wind in its sails on expectations of substantial drawdowns in inventories following the pending cut of a combined 1.8 million barrels per day (1.2 mb/d from OPEC plus nearly 0.6 mb/d from non-OPEC countries). Indeed, the IEA reports that oil inventories in OECD countries have declined for five consecutive months, although they still stand above the running five-year average. Meanwhile, in the U.S. oil inventories have actually increased significantly so far in 2017.
The shockingly high compliance rate that OPEC has thus far achieved this year, one would think, should have pushed oil prices up much higher. But crude prices have barely budged since several key market watchers, including S&P Global Platts, the IEA and OPEC, put out similar numbers that show OPEC countries have achieved a roughly 80 to 90 percent compliance rate, much higher than analysts thought would be possible from the contentious group. If OPEC took 1 mb/d off the market in January, why are prices struggling to move from the low- to mid-$50s?

Of course, rising U.S. production is part of the story. The latest weekly EIA data puts U.S. output at 8.978 mb/d, a touch below 9 mb/d, which is up more than 400,000 bpd from a few months ago. In addition, the EIA’s Drilling Productivity Report estimates that production from the major shale basins will rise in March by nearly 80,000 bpd, the largest increase in five months. Nearly all of that increase is expected to come from the Permian Basin.Related: Oil Prices Head Lower In Spite Of Bullish OPEC Data
(Click to enlarge)
But on top of rising U.S. output, OPEC’s cuts are less impressive than they might seem. Output from Libya is up more than 100,000 bpd from November and up nearly 0.5 mb/d from its lowest point last year, with more gains to come. Nigeria also threatens to sabotage the OPEC deal if it restores around 0.5 mb/d of disrupted supply.

Moreover, Saudi Arabia ramped up output just ahead of the deal, blunting the impact of its cuts – it cut from a historically high levels. Also, Iran was allowed to increase production slightly, and Iraq, the other major producer in OPEC, is falling short of its pledged cuts. As for non-OPEC countries, Russia has only lowered output by 100,000 bpd compared to its promise of a 300,000 bpd reduction. At any rate, Russia cut from post-Soviet record highs as well.
In short, OPEC has indeed achieved a very high level of compliance, but the underlying math is not all it seems to be. OPEC succeeded in sparking a highly bullish mood in the oil market, but oil traders and investors are starting to catch on to the fact that there are still supply overhang problems in the market.Related: Wind Energy Is Now The Largest Source Of Clean Energy In The U.S.
That creates a downside risk to prices in the very near future. Hedge funds and money managers have amassed the most bullish combined position in years, with everyone going long on oil, betting that $60 was around the corner. With prices now being met with resistance, the danger is that more traders start to bail out of those long bets, sparking a sudden correction in prices on the downside. "There’s starting to be fatigue about the range we’ve been trading in," John Kilduff, a partner at Again Capital LLC, said in a Bloomberg interview. "It won’t be summer until we break out to the upside."
Looking forward, everyone will watch how the same dynamics will continue to play out – bulls will watch for steady OPEC compliance and inventory declines while pessimists will keep an eye out for rising U.S. output and questionable demand from China and India. The market continues its slow and painful adjustment process, which should see more price gains at some point in the future, but the short-term looks more shaky.
“There’s a lot of complacency out there. If these bets start to unwind, it will be a bloodbath,” Doug King, chief investment officer at RCMA Asset Management, told the Wall Street Journal in an interview.