Re/code.net : Friday’s huge internet outage, explained

Friday’s huge internet outage, explained
Security expert Brian Krebs says the Internet of Things is to blame.

For hours yesterday, a slew of major websites — including Reddit, Twitter and Amazon, not to mention multiple Vox Media sites — were inaccessible to much of the United States and parts of Europe.
You may have already heard that this was the result of a massive “denial of service” attack, a well-established practice where attackers flood a target with so much fake traffic that real people can’t get in. But what’s unusual here is that Friday’s attackers were not focused on those specific sites, but rather on Dyn, an organization that helps other companies reroute their web traffic.
And adding to the weirdness: Your home security camera might have been partially responsible.
Security expert Brian Krebs has an excellent detailed breakdown of the outage on his website, but here’s the short version: That fake traffic has to come from somewhere.

According to several security firms, the attackers were using a type of malware that enlists insecure Internet of Things devices — reportedly, cameras and DVRs with components from the Chinese firm XiongMai — to do their bidding. Those devices, Krebs writes, could be turned into a zombie army even if their users had supposedly set a custom password to protect them:
That’s because while many of these devices allow users to change the default usernames and passwords on a Web-based administration panel that ships with the products, those machines can still be reached via more obscure, less user-friendly communications services called “Telnet” and “SSH.”
Telnet and SSH are command-line, text-based interfaces that are typically accessed via a command prompt (e.g., in Microsoft Windows, a user could click Start, and in the search box type “cmd.exe” to launch a command prompt, and then type “telnet” to reach a username and password prompt at the target host).
Krebs concludes that these insecure devices won’t be fixed unless a global recall to prevent them from connecting to the Internet. And this warning comes as the cost of stuffing web connectivity into all sorts of devices is getting cheaper by the day.

In other words, unless XiongMai (and anyone else whose components may be at fault here) steps up, this could very well happen again.

Reuters - Egyptian investor, bondholders mull bid for Brazil's Oi -sources

Egyptian investor, bondholders mull bid for Brazil's Oi -sources


Oct 21 Egyptian billionaire Naguib Sawiris and some creditors of Oi SA are considering pouring up to $1.5 billion into the debt-laden Brazilian telecoms carrier, whose in-court reorganization has failed to gain traction amid rows between bondholders and shareholders, two people with knowledge of the matter said.
Under the terms of the plan, which remains preliminary, the equity injection into Oi would aim to cut its 65.4 billion reais ($21 billion) in debt and give Sawiris and his partners a stake of about 85 percent, said the sources. Partners include about 70 bond firms that are advised by Moelis & Co .
The purpose of the Sawiris-bondholder plan is to wrest control from Oi's current shareholders, including Portugal's Pharol SGPS SA and investment firm FIA Société Mondiale, and prepare a potential sale of the company within three years, said one source.
Moelis said on Oct. 11 that joining forces with Sawiris would allow bondholders and the Egyptian tycoon to "discuss and evaluate an alternative recovery plan for Oi" during and after it emerges from bankruptcy.
Oi filed for bankruptcy protection in a commercial court in Rio de Janeiro in June.
Two other sources familiar with the strategy of Oi's two main shareholders said Sawiris and his camp have not yet approached them, adding that the bidding amount under consideration is too low.
Both sources said the success of the Sawiris-led bid hinges on convincing the government that their proposal would ease friction between creditors, shareholders and suppliers and maintain high-quality service.
All of the sources declined to be identified because of the sensitivity of the matter.
Messages to the media office of Sawiris' investment firm, Orascom TMT SAE, were not answered.
A representative for Moelis in Brazil declined to comment, as did Pharol and Société Mondiale, controlled by Brazilian distressed-debt investor Nelson Tanure.
The byproduct of a government-sponsored merger at the end of last decade, Oi succumbed to a heavy debt burden, onerous government-mandated investments in money-losing activities and shareholder problems.
The government has expressed concern over the reorganization, saying it would intervene if creditors and stakeholders failed to reach a "market solution" for the company, or if a suitor seeks to break the company into parts.
A series of disputes between Pharol, FIA Société and creditors, and protracted negotiations have delayed discussions about a recovery plan, which was presented on Sept. 5 to creditors. The Moelis-led group of bondholders deemed Oi's September recovery proposal "unacceptable."
Sawiris had been linked with a potential takeover of Oi last year and in June, days before Oi filed for bankruptcy protection.

>>> Unipol may take stake in BMPS – report (translated)

Unipol may take stake in BMPS – report (translated)

Unipol, the listed Italian financial services group, could take a stake in BMPS, the listed Italian bank, Italian language daily Il Sole 24 Ore reported. The report cited financial sources who said that Unipol could take part in the data room for BMPS' recapitalisation after BMPS presents its new business plan on 24 October.
Unipol would have to find the business plan credible in order to participate in the recapitalisation. The report said that one of the underlying motives for taking a stake in BMPS would be for Unipol to merge Unipol Banca, its lending arm, with BMPS.
A report in Italian language daily Il Corriere della Sera claimed that the Kuwait Investment Authority (KIA) is also looking at the dossier.
An unsourced report in Italian language daily Il Messaggero said that the business plan is likely to have targets of ROE of 10-11% and a profit of EUR 1bn by 2019.
The report also claimed that the Qatar Investment Authority (QIA) has hired Morgan Stanley to advise it on taking part in BMPS' recapitalisation while the Abu Dhabi Investment Authority (ADIA) has hired Rothschild.
Chinese investors are also interested in the recapitalisation and are believed to have hired an international investment bank on the matter, the report said.
All the reports noted that a number of private equity firms backing an alternative recapitalisation by Italian banker Corrado Passera are also likely to take part in the due diligence process. The report said that among the private equity firms believed to be taking part are Warburg Pincus, General Atlantic, Atlas Capital and BC Partners
Il Sole article sourced from print copy: page 25
Il Messaggero article sourced from print copy: page 21
Il Corriere della Sera article sourced from print copy page 40

WSJ : AT&T Reaches Deal to Buy Time Warner for More Than $80 Billion

AT&T Reaches Deal to Buy Time Warner for More Than $80 Billion
Agreement for between $105-$110 a share could be officially announced as soon as Saturday evening

AT&T Inc. has reached an agreement to buy Time Warner Inc. for between $105 and $110 a share, with a deal likely to be announced as soon as Saturday evening, according to people familiar with the plans.
The boards of the two companies are meeting on Saturday to approve the transaction, the people said. The deal is half cash and half stock, according to one of the people.

The acquisition is valued at more than $80 billion and pushes the carrier deeper into the traditional entertainment business at a time of stalled wireless growth. For Time Warner, the deal represents a victory for Chief ExecutiveJeff Bewkes, 64, who took some heat from investors for rebuffing a takeover bid two years ago from 21st Century Fox at $85 a share. (21st Century Fox and Wall Street Journal-ownerNews Corp share common ownership.)

The pairing brings together AT&T’s millions of wireless and pay-television subscribers with Time Warner’s deep media lineup including networks such as CNN, TNT, the prized HBO channel and Warner Bros. film and TV studio.
A merger of the companies would be the most ambitious marriage of content and distribution in the media and telecom industries since Comcast Corp.’s purchase of NBCUniversal and would create a behemoth to rival that cable giant. A rigorous regulatory review is expected and the acquisition of Time Warner likely wouldn’t close until late 2017, people close to the process said.
Regulators have indicated misgivings about the prior Comcast-NBCU deal—in particular, whether obligations placed on Comcast were tough enough and enforceable—so it is unclear if they will be willing to bless another such merger. At the very least, former regulatory officials say there could be significant conditions placed on the combination.
The transaction would be far and away the biggest media deal of recent years. Time Warner had a market capitalization of $68 billion before The Wall Street Journal reportedon the advanced talks Friday, while AT&T’s was $233 billion.
On Friday, Time Warner shares closed at $89.48, up 8%.
AT&T has been shifting its sights to media and video in recent years, diving deeper into television after its nearly $50 billion deal to acquire satellite television provider DirecTV last year. That made AT&T, which traces its roots to the old ‘Ma Bell, the country’s biggest pay television provider as well as its second-largest wireless operator.
Time Warner “is the last scaled content play that’s acquirable,” said Michael Nathanson, an analyst at MoffettNathanson, noting that the rest of the major media companies are either so valuable they would be difficult to acquire, like Walt Disney Co., or family controlled, like 21st Century Fox, CBS and Viacom. “HBO, Turner and Warner Bros. are really good assets for a future of nonlinear consumption.”

>>> Weekly Market Update: ECB Punts; Earnings Reports Mixed

Weekly Market Update: ECB Punts; Earnings Reports Mixed

With Q3 earnings releases ratcheting up and a plethora of M&A stories hitting the tape, investors poured over a steady flow of corporate news throughout the week. Banks and financial companies continued to report generally strong quarterly results, highlighted by Bank of America and American Express. Generally, managements struck a cautiously-optimistic tone on their conference calls pointing to a December rate hike as a likely catalyst. Major industrial names were much more subdued in their commentary as sluggish global growth and a resurgent US dollar remain impediments. General Electric and Illinois Tool Works saw share price declines as investors were underwhelmed with their guidance. Early season technology reports painted a divergent picture for several industry bellwethers. Netflix, PayPal, and Microsoft surged on growth prospects for the cloud and digital media consumption, while old line names like IBM and Intel continued to see their share prices lag behind. Finally, by Friday talk of major industry consolidation was rampant as reports circulated that AT&T was closing in on a deal to acquire Time Warner. The news came amidst a flurry of M&A announcements and speculation across a variety of industries including consumer staples, retail, pharmaceuticals, and of course technology.

The US dollar spent the better part of the week pushing to multi-month highs. The Euro touched its lowest level since March after the ECB left rates and QE unchanged, and kicked the decision on extending QE down the road to the December meeting. The British Pound continues to be hounded by Brexit implementation concerns: Cable remained under pressure, ending the week around 1.22. The Chinese Yuan has stayed near 6-year lows following a week economic data that suggested not much has changed for the trajectory of the world's second largest economy. US economic data was generally in line to slightly better than expectations while the final Presidential debate appeared to do little to change the calculus for next month's election. Treasury prices moved up modestly but the benchmark US 10-year yield has stayed pegged around 1.75%, pre Brexit levels. Crude prices moved up mid-week on more bullish inventory statistics but fell back towards the end of the week to finish little changed. Stocks went sideways, and for the week the S&P500 added 0.4%, the DJIA was flat, and the Nasdaq gained 0.8%.


MONDAY 10/17
(EU) EURO ZONE SEPT FINAL CPI M/M: 0.4% V 0.4%E; Y/Y: 0.4% V 0.4%E; CPI CORE Y/Y: 0.8% V 0.8%E
BAC: Reports Q3 $0.41 v $0.34e, R$21.6B v $20.8Be
(US) SEPT INDUSTRIAL PRODUCTION M/M: 0.1% V 0.2%E; CAPACITY UTILIZATION: 75.4% V 75.6%E
IBM: Reports Q3 $3.29 v $3.21e, R$19.2B v $19.0Be
F: Plans shutdown at four plants in next weeks to align production with demand and inventory goals - press

TUESDAY 10/18
BN.FR: Reports Q3 Rev €5.54B v €5.55Be
BRBY.UK: Reports H1 Rev £1.16B v £1.17Be
(CN) CHINA SEPT NEW YUAN LOANS (CNY): 1.22T (3-month high) V 1.00TE
(UK) SEPT PPI INPUT M/M: 0.0% V 0.4%E; Y/Y: 7.2% V 7.4%E
(UK) Govt attorney Eadie: New Brexit treaty likely to be voted on by both Houses
GS: Reports Q3 $4.88 v $3.86e, R$8.17B v $7.56Be
S: Reports prelim Q2 Net loss $142M v loss $585M y/y, R$8.25B v $7.97Be
(US) SEPT CPI M/M: 0.3% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA INDEX: 241.428 V 241.498E
(US) OCT NAHB HOUSING MARKET INDEX: 63 V 63E
(US) AUG TOTAL NET TIC FLOWS: $73.8B V $140.6B PRIOR; NET LONG-TERM TIC FLOWS: $48.3B V $103.9B PRIOR
INTC: Reports Q3 $0.80 (adj) v $0.73e, R$15.8B v $15.6Be
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED
BHP.AU: Reports Q1 iron ore production 57.6Mt v 56.3e, flat y/y
(CN) CHINA Q3 GDP Q/Q: 1.8% V 1.8%E; Y/Y: 6.7% V 6.7%E
(CN) CHINA SEPT INDUSTRIAL PRODUCTION Y/Y: 6.1% V 6.4%E; YTD Y/Y: 6.0% V 6.1%E
(CN) CHINA SEPT RETAIL SALES Y/Y: 10.7% (8-month high) V 10.7%E; YTD Y/Y: 10.4% V 10.3%E

WEDNESDAY 10/19
ASML.NL: Reports Q3 Net €396M v €407Me, Rev €1.81B v €1.73Be
CA.FR: Reports Q3 Rev €21.8B v €21.7Be
(UK) AUG AVERAGE WEEKLY EARNINGS 3M/Y: 2.3% V 2.3%E; WEEKLY EARNINGS 3M/Y (EX BONUS): 2.3% V 2.1%E
(UK) SEPT JOBLESS CLAIMS CHANGE: +0.7K V +3.2KE; CLAIMANT COUNT RATE: 2.3% V 2.2%E
(UK) AUG ILO UNEMPLOYMENT RATE 3M/3M: 4.9% V 4.9%E
(US) SEPT HOUSING STARTS: 1.047M V 1.18ME; BUILDING PERMITS: 1.225M V 1.17ME
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
LHA.DE: Reports 9-month adj EBIT €1.68B v €1.69B y/y, Rev €23.9B v €24.3B y/y
GOOGL: Reportedly in advanced talks with Fox and Disney for web TV service; has already signed up CBS for the service - CNBC
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC RATE BY 25BPS TO 14.00%; AS EXPECTED
RIO.AU: Reports Q3 Pilbara iron ore production 68.5Mt (attributable) v 70.6Mte; 83.2Mt (100% basis), +2% y/y; shipments 80.9Mt (100% basis), -5% y/y
(AU) AUSTRALIA SEPT EMPLOYMENT CHANGE: -9.8K (2nd straight decline, biggest decline since Apr 2015) V +15.0KE; UNEMPLOYMENT RATE: 5.6% (3-year low) V 5.7%E

THURSDAY 10/20
ROG.CH: Reports 9M Rev CHF37.5B v CHF37.7Be
NESN.CH: Reports 9M Rev CHF65.5B v CHF66.0Be
(UK) SEPT RETAIL SALES (EX AUTO FUEL) M/M: 0.0% V 0.2%E; Y/Y: 4.0% V 4.4%E
(UK) SEPT RETAIL SALES (INC AUTO FUEL) M/M: 0.0% V 0.3%E; Y/Y: 4.1% V 4.7%E
(ID) INDONESIA CENTRAL BANK (BI) CUTS 7-DAY REVERSE REPO BY 25BPS TO 4.75%; NOT EXPECTED
941.HK: Reports 9M Net CNY88.1B v CNY85.4B y/y, EBITDA CNY200.4B v CNY192B y/y, Op Rev CNY542.7B v CNY513B y/y
(EU) ECB LEAVES MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; reiterates view on rate guidance and QE program
(US) INITIAL JOBLESS CLAIMS: 260K V 250KE; CONTINUING CLAIMS: 2.06M V 2.05ME
(US) OCT PHILADELPHIA FED BUSINESS OUTLOOK: 9.7 V 5.0E
(EU) ECB chief Draghi: Reiterates ECB interest rates to remain at present or lower levels for an extended period of time; monthly asset purchases of €80B are intended to run until the end of March 2017, or beyond - Prepared remarks
(EU) ECB chief Draghi: ECB will announce what its plans for future months are at its Dec meeting after considering council technical work Q&A
(US) SEPT EXISTING HOME SALES: 5.47M V 5.35ME
BAC: CEO: consumers spending 5% more YTD y/y; we feel good about the US - TV interview
MSFT: Reports Q1 $0.76 adj v $0.68e, R$22.3B v $21.5Be
SLB: Reports Q3 $0.25 v $0.22e, R$7.02B v $7.13Be
(US) NORTH AMERICA Sept SEMI BOOK/BILL RATIO: 1.05 V 1.03 prior (above parity for 10th straight month)

FRIDAY 10/21
SAP.DE: Reports Q3 Net €725M v €895M y/y, Op profit €1.64B v €1.66Be, Rev €5.38B v €5.30Be
DAI.DE: Reports Q3 Net €2.73B v €2.42B y/y, EBIT €4.01B v €3.77Be, Rev €38.6B v €38.4Be
(UK) SEPT PUBLIC FINANCES (PSNCR): £13.3B V £0.7B PRIOR; PUBLIC SECTOR NET BORROWING: £10.1B V £8.2BE
CNBC's Faber: sources say NXPI and Qualcomm in handshake deal for $110/shr; some details remain to be worked out
TWX: AT&T reportedly in "advanced" talks to acquire Time Warner - financial press
(US) Weekly Baker Hughes US Rig Count: 553 v 539 w/w (+2.6%) (5th straight weekly increase)

>>> US Close Dow -0.09% S&P -0.01% Nasdaq +0.30% Russell -0.14%


Closing Market Summary: Stocks End Flat with M&A and Earnings in Focus

The stock market ended an upbeat week on a flat note as the S&P 500 (UNCH) retraced most of an 11-point opening drop to finish little changed. The rebound effort featured its fair share of M&A chatter and leadership from the heavyweight consumer discretionary (+0.8%) and technology (+0.6%) sectors. The Nasdaq Composite (+0.3%) settled ahead of both the benchmark index and the Dow Jones Industrial Average (-0.1%). For the week the three indices gained between 0.04% and 0.83%.

The major averages began the day under pressure as strengthening in the dollar and the latest batch of quarterly earnings contributed to opening hour weakness. 

The U.S. Dollar Index (98.64, +0.33, +0.33%) extended its winning streak last evening as the pound and the euro each lost ground to the greenback. The buck continued to receive support from an improved U.S. rate hike picture and recent safe-haven flows. Furthermore, the move lower in European currencies came ahead of this weekend's EU Economic Summit, which may provide some Brexit-related headline volatility. The euro and the pound finished down a respective 0.4% (1.0882) and 0.2% (1.2226) against the dollar. 

A stronger dollar served as a headwind for dollar-denominated commodities and the earnings prospects of multinational companies. This was on display when General Electric (GE 28.98, -0.09) beat bottom-line estimates for the quarter, but narrowed its guidance range. Meanwhile, Honeywell (HON 108.96, +0.82) gained 0.8% after reporting bottom-line results that fell in-line with the company's earnings warning.

The broader market reversed course after the first hour as a fresh dose of M&A chatter helped boost investor sentiment. The Wall Street Journal reported that AT&T (T 37.49, -1.16) is in advanced talks to acquire Time Warner (TWX 89.48, +6.49). The headline came on the heels of a similar report from Bloomberg in the prior session. Separate rumors indicated that Softbank (SFTBY 31.68, -0.29) could be interested in acquiring Twitter (TWTR 18.09, +1.19). The social media name finished higher by 7.0%. 

The benchmark index settled in the top of today's trading range, but was unable to reclaim its flat line. Seven sectors ended in the red with telecom services (-2.3%), health care (-0.9%), and energy (-0.7%) rounding out the leaderboard. On the flipside, consumer discretionary (+0.8%), technology (+0.6%), consumer staples (+0.5%), and financials (UNCH) led the pack. 

In the health care space (-0.9%), biotechnology narrowed its weekly gain as Biogen (BIIB 290.65, -9.01) fell 3.0%. The stock was under pressure amid rumors suggesting the company might acquire ACADIA Pharmaceuticals (ACAD 25.34, +1.39). Mylan (MYL 37.02, -0.59) declined by 1.6% after Senator Elizabeth Warren called Mylan's EpiPen settlement with the Department of Justice "shamefully weak."

The commodity-sensitive energy sector (-0.7%) settled at the bottom of the board as oilfield service names weighed. Schlumberger (SLB 80.47, -2.52) declined 3.0% after reporting a mixed quarter last evening. However, it is worth noting that crude oil finished the day in positive territory. WTI crude settled higher by 0.4% ($50.85/bbl, +$0.20).

In the consumer discretionary sector (+0.8%), media names demonstrated relative strength after speculation that Time Warner (TWX 89.48, +6.49) was a takeover target arose. Vicaom (VIAB 37.51,+1.01) and CBS (CBS 57.66, +1.17) finished higher by 2.8% and 2.1%, respectively. Separately, Dow component McDonald's (MCD 113.93, +3.36) finished ahead of the price-weighted average after beating quarterly estimates. 

The heavily-weighted technology sector (+0.6%) outperformed as Dow component Microsoft (MSFT 59.69, +2.44) carved out a new all-time high (60.45). The stock rallied 4.3% after beating analysts' estimates for the quarter. Elsewhere, Qualcomm (QCOM 67.93, +0.59) rose 0.9% after CNBC reported that the company is close to acquiring NXP Semiconductor (NXPI 101.71, -2.78) for $110 per share.

Treasuries finished on a higher note as the long end of the curve outperformed. The yield on the 2-yr note settled flat at 0.83% while the yield on the benchmark 10-yr note finished down two basis points at 1.73%.

Today's trading volume was above the average of 853 million as 863 million shares changed hands at the NYSE floor.

There was no economic data of note released today and Monday's economic calendar is similarly vacant.

  • Russell 2000: +7.2% YTD
  • Nasdaq Composite: +5.0% YTD
  • S&P 500: +4.8% YTD
  • Dow Jones: +4.1% YTD

>>> US Gapping up

Gapping up

In reaction to earnings/guidance:
  • PFPT +11.2%, MSFT +5.8%, PYPL +4.8%, KLAC +3.8%, APOL +3.2%, SYF +2.5%, CLS +2.0%, HON +1.7%, SAP+1.6%, MXIM +1.1%.
M&A news:
  • RAI +21.3% (receives merger proposal from British Am Tobacco (BTI); values RAI at $56.50 per share or 20% premium to yesterday's closing price),
  • COH +4.6% (M&A blog Betaville reports that Coach could be in talks with Burberry (BURBY) about a possible merger);
  • KATE +3.0% (up in sympathy with COH),
  • MO +2.3% (up on RAI/BTI merger news),
  • PM +1.3% (up on RAI/BTI merger news),
  • NXPI +1.3% (traded higher by ~4% yesterday on reports that Qualcom (QCOM) acquisition of NXPI could be announced next week at $110-120/share);
  • WLH +2.4% (ticking higher, M&A blog Betaville reports on vague market rumors that Meritage Homes is said to be looking at a deal to acquire William Lyon),
Other news:
  • CERC +56.1% (move higher in after hours with strength being attributed to Alkermes sympathy; CERC focuses on developing neurological and psychiatric disorders' treatments),
  • ALKS +40.8% (announces positive topline results from FORWARD-5 for major depressive disorder; meets primary endpoint),
  • VRSN +5.0% (discloses amendment to Cooperative Agreement with the U.S. Department of Commerce; amendment to the Registry Agreement with ICANN),
  • PTCT +3.3% (announces that its joint development program in Spinal Muscular Atrophy with Roche and the SMA Foundation initiated a Phase 2 study in pediatric and adult Type 2/3 SMA patients),
  • ALIM +6.6% (ticking higher, amended its $35 mln term loan agreement to provide Limited up to $10 mln in additional financing upon the achievement of certain revenue milestones),
Analyst comments:
  • CHK +2.8% (upgraded to Neutral from Underperform at BofA/Merrill)

>>> Early pre-market gappers

Early pre-market gappers:

Gapping up: ALKS +40.8%, RAI +21.3%, MSFT +5.8%, PYPL +4.8%, COH +4.6%, KLAC +3.8%, PTCT +3.3%, KATE +3.0%,CHK +2.8%, SYF +2.5%, MBLY +2.4%, MO +2.3%, CLS +2.0%, WLL +1.7%, HON +1.7%, SAP +1.6%, CLF +1.5%, PM +1.3%,NXPI +1.3%, STM +1.2%, RIO +1.0%, MXIM +1.1%.
Gapping down:SGY -46.3%, SKX -15.9%, AMD -7.5%, HIVE -7.2%, GEVO -7.2%, ERIC -4.3%, DATA -2.5%, SDRL -2.1%,RYAAY -2.0%, IHG -1.9%, SHPG -1.8%, LUX -1.7%, AU -1.6%, BBVA -1.5%, BMY -1.4%, CROX -1.4%, HOS -1.3%, GWPH-1.3%, IAG -1.3%, PUK -1.3%, SNN -1.2%, NOK -1.2%, CS -1.2%, GE -1.1%.

Burberry/Coach Merger Would Mostly Have Problems, Exane Says

Burberry/Coach would “primarily be a merger of problems,” Exane (neutral on Burberry) says in note.
  • M&A history in luxury has shown mergers “don’t obviously help in regaining brand traction and desirability,” while cost efficiency in the face of declining brand momentum are“just a way to run in order to stand still”
  • Contrary to Coach, most of Burberry’s focus in past 20 years has been toward elevating the brand and moving it into “mega-brand” price territory instead of into accessible luxury
  • A more aggressive commercial strategy could be running Burberry “harder;” would raise risk of future “brand trivialization” and compromise long-term growth
  • Appears “perplexing” that Coach moves on Burberry as stock has rebounded significantly on a devalued GBP
  • Earlier: Burberry Gains; Betaville Says Coach Said to Eye Possible Deal
    • Stock up as much as 5.9%, tops Stoxx 600, vol. 1.6x 3-month daily avg.
    • Stock has risen 11.2% month-to-date vs a -0.6% fall in the Stoxx 600 Personal & Household Goods index; is up 28.4% YTD vs a 1.3% rise in the SXQP index