NY Post : Amazon’s next frontier to conquer? Auto parts

Amazon’s next frontier to conquer? Auto parts

Amazon boss Jeff Bezos, whose online behemoth is likely to become the country’s No. 1 apparel retailer this year, is setting his sights on what could be his next sector to dominate: the $50 billion do-it-yourself after-market auto parts business.

In recent months, Amazon has struck contracts with the largest parts makers in the country — including Robert Bosch, Federal-Mogul, Dorman Products and Cardone Industries, sources told The Post.

And that could be bad news for the nation’s retailers — O’Reilly Auto Parts, Advance Auto Parts, AutoZone and Genuine Parts, insiders said.

The chains have prospered over the last several years as their profit margins have swelled — thanks in no small way to the iron grip they exercise on suppliers.

To further grease the wheels, it’s possible that Amazon may even snatch up some of the regional parts distributors, says Steve Handschuh, chief executive of the Motor & Equipment Manufacturers Association.

Amazon, which rang up revenue of $128 billion in the 12 months ended Sept. 30, could see its auto parts business expand more than 50 percent this year, to $5 billion, according to one Wall Street analyst’s recent, confidential prediction circulated among clients.

“I wouldn’t be surprised if [Bezos] were making some of these calls himself,” a top exec at one major auto parts supplier told The Post, noting that senior Amazon execs have led deal-making efforts in recent months.

While some Wall Street observers are skeptical that Amazon will succeed with auto parts as it has with books, electronics and toys, others aren’t taking Bezos’ moves lightly.

Lately, Amazon has widened its selection of name-brand parts — and is already selling them for less than its brick-and-mortar rivals. For example, a 34 Series RedTop Optima Battery was recently being offered at $166 on Amazon, versus $216 at AutoZone.

In a September report, investment bank Jefferies said Amazon is offering same-day delivery for auto parts in 40 major US cities — at prices that average 23 percent less than those of O’Reilly, Advance and AutoZone.

Amazon’s ability to break that hold on distribution is made a bit easier because the chains shoot themselves in the foot.

There is a widening rift between manufacturers and retailers, according to industry execs, due to an aggressive pursuit of mostly foreign-sourced private-label parts.

That fattens the retailers’ bottom lines, but at the expense of the auto parts makers.

When the retailers chased the private labels, manufacturers’ loyalty disappeared in the rear-view mirror, said one executive at an auto parts maker.

Plus, Amazon, in some cases, has been paying manufacturers as much as 30 percent more for the same parts.

Dorman was the first major parts maker to cut a deal with Amazon, sources said. Most of the others, with the exception of Standard Motor Products, have followed.

“It’s the classic tipping point,” the auto parts executive said. “The majority of us now are selling directly to Amazon.”

Amazon officials didn’t respond to requests for comment.

TechCrunch : Energy is the new new internet

If you’re not paying attention to what’s going on in energy, you should. We’ve seen this movie before. Spoiler alert: There’s massive economic opportunity ahead. How massive? Imagine standing in 1992, knowing that Google, Akamai, Netflix, Facebook, Amazon, eBay, BuzzFeed and Uber lay ahead.
This time it’s the “enernet,” not the internet, that will transform our lives. The story is the same, though the players have changed.
Here’s the tee up. Across the country, incumbent network providers operate highly centralized networks in their respective cities. Then, scrappy local outfits start serving the market with innovative, distributed technology. These startups create competition, and a new network emerges atop the legacy network.
That was the backdrop 30 years ago when a little thing called the internet emerged. Startups like CompuServe, AOL, EarthLink, Netcom and a host of other local ISPs kicked off the conversion from analog to digital by offering internet access over existing cable and telco networks.
Today, the actors are SolarCity, Sunrun and a host of others moving us off fossil fuels and into clean energy supported by smart equipment, services and software, offered atop existing utility networks. This time, it’s the enernet.
Enernet. Noun. A dynamic, distributed, redundant and multi-participant energy network built around clean energy generation, storage and delivery and serving as the foundation for smart cities.
Jigar Shah, founder of SunEdison, seeded the enernet revolution more than a decade ago. He devised a breakthrough financing model that made solar affordable and scalable. He’s the Marc Andreessen of this storyline… seminal, smart and strategic.
Today, watch Elon Musk. He presented new solar roof shingles to the world a few months ago. Solar that’s affordable and attractive. Plus, he’s integrating it into a game-changing home system with storage and EV charging. Think the world’s first iPhone. Musk’s electric car company, Tesla, is poised to be an enernet giant, the Amazon of this go-around — margin-challenged in its early years, but set to move.

It goes well beyond Tesla. There is a long list of enernet innovators now emerging. They are building nanogrids, microgrids, distributed energy resources and virtual power plants. They are creating new, intelligent building materials and smart lighting. They are deploying new networks and intelligence that are driving down costs and improving services.
At heart, the enernet is the foundation for smart-city tech, including the “Internet of Things,” distributed systems, interconnected backbones and networking technologies, EV-charging services and autonomous vehicles, to name a few. These technologies will drive dramatic change and force us to rethink our cities, municipal services and sectors like transportation, insurance, real estate and financial services.

From the enernet evolution will come smart cities that are an order-of-magnitude smarter, healthier and safer. The new network will also present quantum leaps in energy security and emergency resilience that can stand in the face of superstorms or cyberattacks.
Hold on to your seats. We’re at the early stages of something immense.
Still, I hear the seeds of fear and doubt. There is an oft-cited refrain that the transition will cost a lot and take a long time. That’s absolutely silly. We don’t look back at the internet transformation from analog to digital and think, “Wow, that was slow and cost a ton of money. We should have stuck with the typewriter and landline.” Fact is, it was blazingly fast and driven by those who understood the spend as leveraged investment, not cost center.
Likewise, the move to clean energy will seem fast and prudent as solar and energy storage continue to scale, smart cities accelerate and prices continue their fall.
I also hear “the utilities are in big trouble.” Let’s not be simplistic. Google didn’t kill Comcast. Comcast is doing just fine. The utilities that own transmission and distribution networks (the wires companies) have enormous value and opportunity ahead. There is no way that the transition happens without the participation of these companies, and there is considerable economic upside ahead for them. Forward-thinking utilities — Consolidated Edison, National Grid and others — see what’s coming and are poised to thrive in the enernet world.

Sure, fossil-fuel generators and suppliers have challenges ahead, just like the content companies were challenged by newer, more flexible, cost-effective content producers. It’ll be up to the management teams at these companies to de-risk the future with intelligent investment and acquisitions. Hats off to folks like David Crane, a visionary who worked to drive that transition at NRG Energy. We will see more of that type of leadership again over the next 10 years as market dynamics shift and outcomes become more obvious and urgent to the incumbents.
That said, enernet innovation, like innovation in every other sector, is unlikely to originate from within the incumbents. If you don’t believe me, read books like The Innovator’s Dilemma by Clayton Christensen or this article from Accenture that asserts “corporate innovation does not work.” Unless a Lou Gerstner or Steve Jobs is at the helm of an incumbent, innovation will be acquired, not grown.
This backdrop presents incredible opportunity for startups and early investors in the space. I’m excited to be part of that, and I hope that talented entrepreneurs turn their attention from the app economy to the enernet. There’s enormous upside.
As I said, we’ve seen this movie. Let’s stop acting surprised, and instead start acting. An economic powerhouse awaits the United States. We’ll be thankful we chose to become a worldwide enernet leader, as this evolution creates a new kind of healthy, robust economy.

>>> Deep in talks with J&J, Actelion’s flagship drug cruises past a pivotal tria

Deep in talks with J&J, Actelion’s flagship drug cruises past a pivotal trial failure

Deep into negotiations with J&J over a prospective buyout, Actelion (SIX: ATLN) reported today that its up-and-coming flagship therapy Opsumit flunked a pivotal test for treating pulmonary arterial hypertension due to Eisenmenger Syndrome. And while the trial failure could put a crimp in Actelion’s – as well as J&J’s – plan to continue to rapidly boost sales of Opsumit as Tracleer loses ground to generic competition, analysts seemed ready to write it off and move on.
Investigators for the Swiss biotech say they tracked the kind of biomarker impact they were looking for, but Opsumit (macitentan) did not improve patients’ six-minute walk tests when compared to a placebo. And they added that it was likely an unusual placebo response that caused the unexpected setback.
In fact, the drug arm actually performed worse than the placebo group. Placebo patients gained an average of 19.7 meters from baseline compared to an inferior 18.3 meter gain in the Opsumit arm. If you wash out three patients with missing 6-minute results, the improvement in the drug arm goes up to 30.2 meters.
Opsumit is already approved to treat PAH. But Actelion execs felt they had a good shot at boosting their market reach by going after the sickest patient population in PAH. These patients suffer from advanced PAH along with congenital heart disease. And the population includes a large number of people suffering from Down Syndrome.
Jefferies’ Peter Welford, who estimates peak sales at $2.3 billion, shrugged off the failure. He noted:
We did not specifically ascribe sales or an NPV to Opsumit for this indication but believe the adverse impact is relatively minor. Estimates suggest up to 15k Eisenmenger patients WW, <5% of the PAH population. Tracleer is approved in Europe to treat PAH due to Eisenmenger after demonstrating a significant +53m benefit on the 6-minute walk distance (6MWD).
Welford also doubts that J&J will be seriously put off by the study results. The pharma giant has been quietly engaged in exclusive talks with Actelion after initially walking away from negotiations.
Investors apparently agreed with that assessment. Actelion’s shares moved up this morning in anticipation of a deal with J&J.
Professor Nazzareno Galiè, head of the Pulmonary Hypertension Center at the Institute of Cardiology, University of Bologna and steering committee member for the MAESTRO study, commented:
The results of the MAESTRO study are very difficult to interpret. We have seen encouraging positive effects of macitentan in the response of N-terminal pro b-type natriuretic peptide plasma levels and hemodynamic measures. Although the results point towards a benefit of treatment with macitentan, we do not see a significant treatment effect on the primary endpoint of exercise capacity as measured in the 6 minute walk test. I believe this has been influenced by an unexpected improvement in the placebo arm of the study, which is unusual in a predominantly untreated PAH population. In fact, we have not seen such a persistent placebo effect in the multiple studies published so far in PAH. We need to fully analyze the data to understand what could have caused this phenomenon.

(GS) US Tax Reform & European Equities

* We consider three aspects of the potential US tax reforms: a cut n to the corporate tax rate; repeal of interest deductibility; and a territorial regime of taxation.
* We estimate a US corporate tax cut of 5 pp would add around 2% to STOXX Europe EPS. For companies with high US exposure (see our US-exposure basket, GSSTAMER), it would add c.4% to EPS.
* However, repeal of interest deductibility would offset half of this, giving an overall impact of around +1% on EPS for SXXP. The annual standard deviation of EPS growth in the last 25 years has been 21%; so this impact is negligible.
* The Republican proposal is to introduce a destination-based tax with border adjustment (DBTBA). Under this system, US firms would no longer be able to deduct import costs when calculating their tax bases. It is this aspect of the tax
reform which most interests European investors.
* The likelihood of this being enacted however is low; our Economists think around a 20% chance. However, there are various alternatives which have some degree of equivalence – VAT taxes and Import tariffs.
* For importers into the US it would have a very material impact. On conservative assumptions a company with 50/50 US/Europe exposure that imports just 10% of COGS into its US operation would see group profits fall 8%.
* But large listed European companies do not in general manufacture in Europe and sell into the US. Most with large US exposure are either in services or just happen to own a US-based business which operates largely as a separate entity.
* The 45 stocks in our US-exposure basket (GSSTAMER) have an average US sales exposure of 50%. But they also have c.40% of their total employees in the US, and 50% of total assets (see Appendix for stocks).
* Moreover, if the aim is to bring jobs back to the US, a large proportion of US imports of goods with a high labour component are from Asia (c.70%) whereas the EU represents only 8% of US imports of labour-intensive goods.
* EU exports to the US are far higher in high-tech and skill-intense industries. This mix is likely to mean European imports into the US are higher margin, with better pricing power and greater ability to pass on a tax or tariff adjustment.

>>> Fosun looking for acquisitions in sports fashion, underwear and jewelry sect

Fosun looking for acquisitions in sports fashion, underwear and jewelry sectors in Italy
Fosun, the Chinese financial group, is interested in acquisitions in Italy, according to the Italian newspaper CorrierEconomia.
The report cites Etant Cao, the fashion fund general manager at Fosun, who said that his group is looking for acquisitions in sports fashion, underwear and jewelry sectors.
Fosun recently acquired the Italian fashion group Caruso, noted the item.
Sourced from print copy, page 20

Barron's : Luxottica, Essilor Merger Will Create Global Powerhouse



From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: 01/22/17 18:21:02
Subject: Barron's : Luxottica, Essilor Merger Will Create Global Powerhouse
Luxottica, Essilor Merger Will Create Global Powerhouse
Deal between Italian frame maker and French lens maker should have plenty of upside for investors

French optical lens manufacturer Essilor International and Italian frame maker Luxottica Group announced plans for a $50 billion merger last week, marking one of Europe’s biggest cross-border deals and creating an eyewear business that promises to generate plenty of upside for investors.

The tie-up was remarkably well-received, considering that it’s both large and international—factors that usually signal potential execution risks. On Monday, when it was announced, both companies’ stocks soared. Essilor (ticker: EI.France) ended up 12%, while Luxottica (LUX.Italy) gained more than 8%. Both corporations have New York–traded shares. Essilor’s change hands under the symbol ESLOY; Luxottica’s, under LUX.

The good start was testament to the clear strategic logic behind the idea of creating a combined new business named EssilorLuxottica. Both companies are leaders in their fields. And with one making the lenses and the other the frames, there’s very little overlap.

Says Sean Thorpe, international portfolio manager at Aristotle Capital Management: “We have always admired the outstanding collection of brands at Luxottica, which include Ray-Ban, Persol, and Oakley, just to name a few. These brands, combined with Essilor’s technological leadership in lens manufacturing, will create a global powerhouse in the 100 billion euro [$107 billion] eyewear industry. The potential revenue and cost synergies, combined with already attractive margins and returns, will, in our opinion, create a high-quality company which is very well-positioned in an exciting industry.”

Essilor has brand names of its own, including Crizal, Transitions, and Varilux.

THE ALL-SHARE TRANSACTION, which will face antitrust scrutiny, will see Luxottica founder and Executive Chairman Leonardo Del Vecchio’s Delfin holding company swap its 62% of the Italian company for 31% to 38% of the new business, making it EssilorLuxottica’s biggest single shareholder. Delfin’s voting rights will be capped at 31%.

The exchange ratio of 0.461 of an Essilor share for one of Luxottica’s represents a roughly 5% discount to the Italian outfit’s closing price before the merger plan was disclosed, says Bryan Garnier analyst Cédric Rossi. Calling it “a game changer within the eyewear industry,” he describes it as a perfect fit in categories and distribution channels.

Del Vecchio and Essilor CEO Hubert Sagnières plan to share power equally at the head of EssilorLuxottica, with a 16-member board divided evenly between the two sides. This may allay succession fears that weighed on Luxottica’s stock in 2014, amid reports that the now 81-year-old Del Vecchio had clashed with some of his top aides, seeing off two CEOs in less than two months.

The companies estimate that the combined business will generate €3.5 billion in annual earnings before interest, taxes, depreciation, and amortization, on more than €15 billion in revenue. Essilor and Luxottica both currently sport price/earnings ratios around 30, based on expected 2017 profits.

UBS analysts reckon that 37% of the new company’s sales will come from lenses, 35% from retail sales, 27% from wholesale sales, sunglasses, and reading glasses, and 1% from equipment. UBS analyst Nicolas Langlet has Essilor as a Buy, with a €130 price target. His colleague Fred Speirs rates Luxottica at Neutral, with a €45 price target, down sharply from its recent levels. The stocks closed at €110.25 and €51.25, respectively, Friday.

WSJ : U.S. Eyes Michael Flynn’s Links to Russia

U.S. Eyes Michael Flynn’s Links to Russia
Counterintelligence agents have investigated communications by President Trump’s national security adviser, including phone calls to Russian ambassador in late December

WASHINGTON—U.S. counterintelligence agents have investigated communications that President Donald Trump’s national security adviser had with Russian officials, according to people familiar with the matter.

Michael Flynn is the first person inside the White House under Mr. Trump whose communications are known to have faced scrutiny as part of investigations by the Federal Bureau of Investigation, Central Intelligence Agency, National Security Agency and Treasury Department to determine the extent of Russian government contacts with people close to Mr. Trump.

It isn’t clear when the counterintelligence inquiry began, whether it produced any incriminating evidence or if it is continuing. Mr. Flynn, a retired general who became national security adviser with Mr. Trump’s inauguration, plays a key role in setting U.S. policy toward Russia.

The counterintelligence inquiry aimed to determine the nature of Mr. Flynn’s contact with Russian officials and whether such contacts may have violated laws, people familiar with the matter said.

A key issue in the investigation is a series of telephone calls Mr. Flynn made to Sergey Kislyak, the Russian ambassador to the U.S., on Dec. 29. That day, the Obama administration announced sanctions and other measures against Russia in retaliation for its alleged use of cyberattacks to interfere with the 2016 U.S. election. U.S. intelligence officials have said Russian President Vladimir Putin ordered the hacks on Democratic Party officials to try to harm Hillary Clinton’s presidential bid.

Officials also have examined earlier conversations between Mr. Flynn and Russian figures, the people familiar with the matter said. Russia has previously denied involvement in election-related hacking.

In a statement Sunday night, White House spokeswoman Sarah Sanders said: “We have absolutely no knowledge of any investigation or even a basis for such an investigation.”

Earlier this month, Sean Spicer, then spokesman for the Trump transition team and now White House press secretary, said the contacts between Messrs. Flynn and Kislyak dealt with the logistics of arranging a conversation between Mr. Trump and Russia’s leader.

“That was it,” Mr. Spicer said, “plain and simple.”

U.S. officials have collected information showing repeated contacts between Messrs. Flynn and Kislyak, these people said. It is common for American officials’ conversations with foreign officials to surface in NSA intercepts, because the U.S. conducts wide-ranging surveillance on foreign officials. American names also may surface in descriptions of conversations shared among officials of foreign governments.

The Senate Intelligence Committee is also looking into any possible collusion between Russia and people linked to Mr. Trump, top senators have said. That is part of the committee’s broader probe into Russian election interference. Counterintelligence probes seldom lead to public accusations or criminal charges.

In the counterintelligence inquiry, activities of former Trump campaign chairman Paul Manafort and advisers Roger Stone and Carter Page have come under scrutiny due to their known ties to Russian interests or their public statements, people familiar with the matter said.

The line of inquiry related to Mr. Manafort grew out of a probe into people associated with the collapsed government of Russia-backed Ukrainian President Viktor Yanukovych, who counted Mr. Manafort as an adviser before being ousted by pro-Europe street protesters in early 2014.


As U.S. investigators aided Ukrainian prosecutors hunting for funds pilfered from Mr. Yanukovych’s government, they have tried to determine if any conduct also involved violations of U.S. law by Mr. Manafort or others, the people said.

Mr. Manafort denied any wrongdoing. He said his work in Ukraine focused on moving the country toward the West. He denied any relationship with the Russian government or Russian officials.

“Anyone who takes the time to review the very public record will find that my main activities, in addition to political consulting, were all directed at integrating Ukraine as a member of the European community,” Mr. Manafort said in an emailed statement.

“I have never had any relationship with the Russian [government] or any Russian officials,” Mr. Manafort added. “I was never in contact with anyone, or directed anyone to be in contact with anyone.”

Of alleged Russian cyberhacking, he said: “My only knowledge of it is what I have read in the papers.”

Mr. Stone is a longtime Republican political operative who left Mr. Trump’s campaign in mid-2015 and previously worked with Mr. Manafort at a lobbying firm.

Mr. Stone drew scrutiny after hinting in August that Mrs. Clinton’s campaign manager John Podesta would soon be in trouble. In October, WikiLeaks began releasing emails stolen from Mr. Podesta.

U.S. intelligence agencies have concluded that his account was hacked on behalf of Russian spy agencies.

Mr. Stone denied collusion with Russia or WikiLeaks. He said he hadn’t spoken to anyone in Russia “in many years.” He accused U.S. government officials in the “deep state” who oppose Mr. Trump and are angry about his election victory of peddling the theory that Mr. Stone and other Trump advisers have ties to Moscow.

“This is nonsense,” Mr. Stone said in a phone interview. He said he hadn’t been contacted by the FBI or other government officials, including Congress, about ties to Russia.

Mr. Stone said he has a conduit to Julian Assange through “an American journalist,” who he said communicates with the WikiLeaks founder, now living in the Ecuadorean embassy in London. Mr. Stone declined to identify the journalist, whose job could be jeopardized by the association with Mr. Assange, according to Mr. Stone.

Mr. Page, a businessman whom Mr. Trump identified in March 2016 as one of his foreign-policy advisers, has drawn attention for his meetings in Moscow during the presidential campaign.

An unsubstantiated dossier of opposition research compiled by a former MI6 officer said Mr. Page held meetings with Igor Sechin, a longtime aide to Mr. Putin and current head of Russian state oil giant Rosneft, as well as a top Kremlin political operative Mr. Page denied the allegations.

In a text message to The Wall Street Journal, Mr. Page said he was giving a speech at a Russian university at the time the dossier placed him at the meetings. Mr. Page said he spoke with university officials, think-tank scholars and a few businesspeople.