(Barron's) Still-Pricey GoPro Shares Could Go Even Lower

Still-Pricey GoPro Shares Could Go Even Lower
As its action cameras face stiffer competition, the company’s growth prospects are getting dimmer.

Pity any company that falls under Apple’s shadow, even a fast-growing name like GoPro. Last week, shares of the action-camera company tumbled 22%, on news that Apple had secured new patents related to wearable cameras.

The importance of the patents is anyone’s guess, but the impact on GoPro shares (ticker: GPRO) couldn’t be more clear: The highflying stock is vulnerable to all forms of competition.

GoPro pioneered the lucrative market for action cameras, and its mountable cameras have become a hit with athletes, particularly those in more extreme activities, where cameras normally aren’t practical. Think of the tip of a surfboard or the helmet on a skier. GoPro’s devices can produce stunning high-definition video. The problem is that video is becoming more commoditized. With every iteration, the iPhone’s camera gets a major improvement.

GoPro no longer has the action category to itself, either. At last year’s Tour de France, bikes were equipped with cameras made by Japan’s Shimano (7309.Japan) and Switzerland’s Garmin (GRMN). Sony (SNE), meanwhile, is becoming a player, too, and the electronic giant uses its own high-quality sensors. GoPro also puts Sony sensors in its cameras—a reliance that could put GoPro in a tough spot if Sony gets aggressive in the category. Rob Lopez at Vertical Group points out that, at this month’s Consumer Electronics Show, Sony launched an action camera that outspecs GoPro’s top-of-the-line Hero4.

Barron’s has repeatedly argued that GoPro’s valuation isn’t justified by the fundamentals. Last year, shortly after its initial public offering, we wrote that investors were overpaying for the stock, while ignoring a historical pattern of groundbreaking gadgets eventually being subsumed by newer devices. (See “GoPro’s Thrill-Filled IPO Adventure May End Badly,” July 14, 2014).

At $47.51, GoPro shares are up 22% since our cautious story ran. But the stock has been cut in half since hitting $98 in October. And it still looks expensive, trading at 38 times this year’s expected earnings. With the momentum having shifted, GoPro shares could continue their decline.

Lopez at Vertical Group rates GoPro a Sell with a fair value of $36.50. The target assumes a P/E of 25, which Lopez notes is 25% above the multiple for Apple (AAPL) during the iPhone and iPad boom from 2010 to 2012, when that company’s sales were rising 70% annually. Even the most bullish analysts aren’t that optimistic about GoPro’s future.

(Barron's) Samsung Could Rally 30%

Samsung Could Rally 30%
Memory chip and smartphone giant is becoming more shareholder-friendly. Investors are responding.

Samsung Electronics’ profits seem to have bottomed, and that could lead to more upside in its shares. The cash-rich maker of cellphones, memory chips, flat-screen TVs, and other consumer electronics recently released preliminary fourth-quarter results showing profit of 5.2 trillion Korean won ($4.8 billion). That’s down 37% from the year-earlier total—but 10% ahead of expectations. Full fourth-quarter results for Korea’s largest company are expected later this month.

Samsung’s shares (ticker: 005930.Korea) have gained nearly 20%, to KRW1.316 million ($1,221.65), since our cover story ran last fall (“Samsung Rising,” Oct. 13) despite little change in the Korean stock market. “Samsung had a tough year in 2014 when just about everything that could go wrong did,” says Mark Newman, a Bernstein analyst who carries an Outperform rating on the shares; his price target is KRW1.7 million. “Things should improve from here. The valuation is cheap; there’s a huge cash balance, and the company is showing a clear willingness to return more cash to shareholders.”

Even with the well-known pressure in its mobile-phone business from Apple (AAPL) on the high end and Chinese manufacturers on the low end, Samsung remains highly profitable, thanks largely to its dominant memory-chip business. The company is a top producer of both DRAM and flash memory, or NAND. Other businesses, including nonmemory semiconductors and display screens, are around break-even. Newman says both are operating below capacity and could be significant profit contributors in the coming years. While handset profits are down sharply, the division still is in the black.

“The vast majority of the margin hit in handsets has already happened,” says Rob Cihra, an analyst with Evercore ISI. “Current margins in the high single digits are sustainable.” He argues that Samsung’s memory business, plus its $65 billion of net cash and investments, equal its $200 billion stock-market value. That means investors effectively get the handset, consumer electronics, and display businesses free.

Cihra also notes that a rumored $7.5 billion offer for BlackBerry (BBRY), reported last week by Reuters, could be a “decent deal,” given BlackBerry’s patents and its enterprise software. Both Samsung and BlackBerry deny they’ve discussed a deal.

Even with the share-price gain, Samsung has a depressed valuation at 10 times estimated 2015 earnings, giving it one of the lowest price/earnings ratios among major tech companies. Excluding its stash of net cash and investments, Samsung trades at just seven times earnings.

One reason for Samsung’s low P/E is its stingy capital-return policy. Dividends have totaled less than 10% of its net income since 2010, and no repurchases have been made since 2007. However, under shareholder pressure, Samsung, controlled by Korea’s Lee family, is getting somewhat more generous. It recently projected a 30% to 50% increase in the dividend early this year, and it also announced a buyback for about 1.3% of its shares outstanding. Even with the anticipated increase, the yield would be less than 2%, based on the current price.

Rival Apple is valued at 13.6 times estimated 2015 earnings, but Apple’s profits are at peak levels, while Samsung’s are down about a third from their 2013 total.

Samsung shares trade in South Korea and in London, complicating their purchase by U.S. retail investors. There are no American depositary receipts. Merrill Lynch and Fidelity allow their U.S. retail clients to access the Korean shares. It can be tough for U.S. retail buyers to get the London shares, which are targeted at institutional investors and trade in dollars. But those who can get their hands on Samsung stock could be rewarded.

(BFW) Channel Tunnel Closed Following Smoke Detection: Eurostar

BN 01/17 12:59 *ALL TRAINS RETURNING TO ORIGINAL STATIONS, EUROSTAR TWEET SAYS
BN 01/17 12:58 *EUROSTAR SAYS CHANNEL TUNNEL CLOSED FOLLOWING SMOKE DETECTION
MORE: Channel Tunnel Closed Following Smoke Detection: Eurostar
2015-01-17 14:03:03.315 GMT


By Mike Harrison
(Bloomberg) -- “We are sorry but we are unable to run any
further trains today because Eurotunnel has been closed due to
smoke detected in the north tunnel,” Eurostar says in statement
on website.
* Passengers planning to travel today should postpone journey
and not to come to station, co. says
* Eurostar says Channel Tunnel closed until further notice
following smoke detection
* All trains returning to original stations after Tunnel
closed, Eurostar says
* Tunnel operator Eurotunnel says services suspended in both
directions
* Eurotunnel says on Twitter that CO2 detectors were activated
in one tunnel
* Kent Police says lorry fire was cause of smoke in tunnel


Story Link:NSN NIBO6G6K50XT<GO>

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First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Mike Harrison in London at +44-20-3525-3564 or
mharrison5@bloomberg.net
To contact the editors responsible for this story:
Paul Sillitoe at +44-20-3525-3857 or
psillitoe@bloomberg.net

(BFW) Deutsche Telekom Hasn’t Ruled Out KPN Takeover: De Telegraaf

Deutsche Telekom Hasn’t Ruled Out KPN Takeover: De Telegraaf
2015-01-17 17:40:56.20 GMT


By Elco van Groningen
(Bloomberg) -- For Deutsche Telekom, EU telecommunications
network harmonization is important, making cross-border
consolidation more attractive, De Telegraaf reports, without
saying where it got the information.
* Takeover in neighboring geographies high on co.’s agenda,
deal with KPN shareholder Carlos Slim possible: De Telegraaf
* KPN spokesman Stefan Simons declined to comment on report
when contacted by Bloomberg
* NOTE Jan. 16: Deutsche Telekom Said to Be Averse to Making
Large Acquisition
* NOTE Oct. 24: America Movil Cuts KPN Stake to 21.4% From
22.6%
* NOTE Feb. 20 2013: Slim’s America Movil to Back KPN Stock
Sale With Conditions


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To contact the reporter on this story:
Elco van Groningen in Amsterdam at +31-20-589-8517 or
vangroningen@bloomberg.net
To contact the editor responsible for this story:
Simon Thiel at +44-20-3525-2814 or
sthiel1@bloomberg.net

Reuters - Euro zone ponders up to six-month Greek program extension, third bailo


Euro zone ponders up to six-month Greek program extension, third bailout

(Reuters) - Euro zone officials discussed on Thursday extending Greece's bailout program by up to six months more to allow time for talks with any new government in Athens on closing the current bailout and on what should replace it.

The current bailout, which has already been extended by two months, runs out at the end of February. Athens had hoped to replace it with an Enhanced Conditions Credit Line (ECCL) from the euro zone bailout fund that it would never have to use.

"There will have to be an extension beyond February. It will be inevitable," one euro zone official with knowledge of the talks said. "It could be six months more."

The extension would have to be requested by the new Greek government that emerges after elections on Jan. 25.

But with Greek borrowing costs skyrocketing on uncertainty about policy after the elections, Athens looks set to need further euro zone support and a credit line for insurance purposes only may not be enough, euro zone officials said.

Also, without another program, under which Greece gets cheap euro zone loans or access to a credit line in exchange for reforms, the European Central Bank said it could not provide liquidity to the Greek banking sector.

No decisions were taken and the issue is likely to be further discussed at the next meeting of euro zone finance ministers on Jan. 26, a day after the Greek vote.

"The ECCL is for a country which has in principle market access, and the ECCL is an insurance policy to calm any remaining doubts in the market," a second euro zone official said.

"With some goodwill you could say that toward the end of last year, this could apply to Greece. Now with the uncertainty, stress on the financial system, Greek long-term yield going beyond 10 percent - all that makes it much less obvious Greece qualifies for an ECCL," the official said.

"The entire Greek situation looks less favorable than six weeks ago. What they would need is just a normal program," the official said, adding that Greece could need a program extension of five to six months.

There was no discussion among the officials preparing the ministerial meeting of any amounts of a potential third bailout or any other details.

"It was brainstorming, the discussion was about scenarios rather than any concrete decisions," the first official said.

Another source of concern was the outflow of Greek bank deposits, which the first official said was at about 60 million euros a day.

The deposit outflow was among the reasons why two major Greek banks, Eurobank and Alpha, have applied to tap the national central bank's emergency funding a year after ending their reliance on it.

Euro zone officials said the deposit outflow undermined the source of funding envisaged for the Greek credit line - the 10.9 billion euros in the Greek bank stability fund, the HFSF, left over from a recapitalization loan for Greek banks.

After the ECB's asset quality review and stress tests last year, Greek banks were declared in the clear and euro zone finance ministers wanted to re-use some 10 billion of the HFSF money as the new precautionary credit line, leaving roughly 1 billion in for emergencies.

"It now looks like it is more prudent to keep more money in the HFSF," the second euro zone official said.

A Greek finance ministry spokesperson declined to comment.

WSJ : Switzerland Could Act on Currency Again, Central Banker Says

Switzerland Could Act on Currency Again, Central Banker Says
Swiss Franc Is ‘Greatly Overvalued,’ Central Bank President Thomas Jordan Says

ZURICH—The Swiss central bank is ready to intervene in the currency markets again to weaken the franc if necessary, the bank’s head said, just two days after the removal of a cap on the franc triggered a surge in the currency’s value.

Swiss National Bank President Thomas Jordan said the central bank was forced to scrap its policy of keeping minimum exchange rate of 1.20 Swiss francs a euro due to divergent economic developments and mounting risk from its euro-buying operations.

The bank will continue to monitor the situation and act if necessary, Mr. Jordan said in an interview with Swiss newspaper Neue Zuercher Zeitung.

“We have said goodbye to the minimum exchange rate,” Mr. Jordan said in the interview published Saturday. “But we will continue to consider the exchange-rate situation in our decisions and intervene in the foreign-exchange market if necessary.”

The Swiss stock market swooned and shares in companies such as food giant Nestlé SA and pharmaceuticals maker Novartis AG had billions wiped from their values as shareholders sought to cash in on the sudden appreciation of the currency.

Stocks in some Swiss companies including watchmaker Swatch Group AG slumped as analysts reduced their sales and profit forecasts as a result of the franc’s rise. The higher value of the Swiss franc reduces the value of sales made in the eurozone, which accounts for more than half of its exports.

The minimum exchange rate had been in place since September 2011 and was intended to head off deflation and protect the competitiveness of Swiss companies.

Mr. Jordan said the franc remains “greatly overvalued.” He said he expects negative interest rates introduced by the SNB to make the franc less attractive, but ruled out introducing capital controls to further weaken demand for the currency.

He also said suggestions the SNB could impose capital controls, which would restrict the inflow of foreign funds in to Switzerland, to further weaken the franc “aren’t a realistic option.”

“The market will gradually find that this overestimation is not justified,” he said.

Mr. Jordan said the minimum exchange rate was abandoned following “long, intensive discussions,” which determined it could only be enforced with massive interventions by the bank to buy euros and sell francs.

“Had the national bank simply continued with minimum exchange rate and inflated our balance sheet, then we would have risked losing control over monetary conditions in the long term,” Mr. Jordan said.

The SNB’s balance sheet has risen to around 522 billion Swiss francs ($608 billion)—just under the size of the entire Swiss economy—as a result of its interventions.

The European Central Bank is expected next week to launch a policy of quantitative easing—printing money to buy the government bonds of member states to ease the pressure on their borrowing. Such a move would likely further weaken the euro.

“Large interventions are useful as long as their purpose is justified and sustainable,” Mr. Jordan added. “That was no longer the case.”

A permanent peg to the euro was never an issue, he added, because Switzerland has an independent currency and independent monetary policy.

“The franc is our currency; to link it to another currency wouldn’t make sense,” he said.

He defended the sudden announcement, saying signaling the bank was scrapping the cap would have encouraged more market speculation and heavy buying of the currency.

TechCrunch : Google Is In Talks With Mobile Payments Company Softcard

Google Is In Talks With Mobile Payments Company Softcard

Apple has Apple Pay, and now it looks like Google may be fattening up its own wallet. According to people familiar with the situation, the search giant and maker of Android is interested in buying Softcard, the mobile payments company formerly known as Isis.

The price may be under $100 million, according to our sources. That is either a huge bargain or a testament to Softcard’s difficulties as an enterprise: sources tell us that AT&T, Verizon and T-Mobile — the three carriers that started Isis in 2010 — have collectively invested hundreds of millions of dollars in the joint venture.

Softcard earlier this month laid off about 60 employees and has been in a consolidation phase. The company would not comment on the M&A rumors or how much has been invested in the operation but provided a comment about the layoffs.

“Softcard is taking steps to reduce costs and strengthen its business. This includes simplifying the company’s organizational structure and consolidating all operations into its Dallas and New York offices, which involves layoffs across the company,” a spokesperson said. “We believe these efficiencies will best position Softcard in the marketplace while maintaining focus on serving our market.”

Google also declined to comment. “We don’t have a comment, background, deep background, off the record steer, nod, wink or any other verbal or non-verbal response to these sorts of rumors,” the company said in an emailed statement.

Softcard, created as a unified front for the big carriers to come to market with a “contactless” NFC mobile payments solution (also what Apple Pay uses), says that there are over 200,000 merchants in the U.S. (including some biggies like Subway and McDonalds) that can accept payments with its app, which is available for Android and Windows Phone devices but not Apple’s iPhone handsets.

Softcard app users can activate payment cards from American Express, Chase, Wells Fargo and other banks in the app to then use their phones to pay for things with those merchants.

It’s not clear, however, whether the service picked up a lot of traction with consumers, or what kind of a return the service was getting. Led by CEO Michael Abbott, the company in November 2014 undertook a new marketing campaign around a new mascot called “Tappy,” created by Jim Henson’s Creature Shop, the same group that created the Muppets, in “a new campaign aimed at educating consumers on Softcard and mobile payments in a fun, social, and sharable way.”

A source tells us that at one point the company’s burn rate was around half a million dollars per day, or around $15 million per month.

Google’s interest in the company had been rumored elsewhere (see here and here, where PayPal is also named). Our sources note that both PayPal and Microsoft have also approached the company.

Another possibility, if an external sale is not achieved, would be JV partners AT&T or Verizon taking it under one of their wings, although they have also been looking at developing their own wallet services for mobile devices.

Our sources say that one of the reasons for Google’s interest is Softcard’s patents, or more specifically what appear to be applications for patents. The company has just over 120 in all.

There are also existing relationships with the JV (joint venture) carriers, and there could potentially be deals in negotiation to hold on to these, and their retail channels, as part of the transaction.

Amidst the rumors, at Softcard itself, we’ve heard that morale has been pretty low at the company.

“People at Softcard have a limited view on what’s going on,” one source said. “The whole place has been in a complete depression for at least six to eight months, to the point where people weren’t coming to work, and were being told in December to take it easy through the end of the year. In general, it’s not a culture with a lot of transparency, so a lot of people are thinking the worst.”

Another ex-employee I talked to who would go on the record notes that the timing is pretty bad. “It’s unfortunate that they’ve chosen now as a time to scale back,” says Ed Busby, formerly the chief commerce officer of the company. “Externally, for the first time since I’ve been in this industry, the signs are pointing positively for mobile payments.” He notes the rise of Apple Pay as one of those boosts.

On the subject of a potential sale, he’s unsurprised, too. “I just think everyone realised that this would be a longer haul than people thought going into it, and as a result they aren’t willing to make the types of investment that would be required to sustain this.”

>>> Manitowoc (MTW) Icahn discloses current stake at 7.81% (v 7.77% in Dec) - 13

Icahn discloses current stake at 7.81% (v 7.77% in Dec) - 13D/A filing 

Icahn entities exercised call options. These call options were scheduled to expire on August 12, 2016. On January 16, 2015, the Reporting Persons exercised call options for an aggregate of 6,090,029 Shares at an exercise price of $18.00 per Share, which represents all call options relating to the Shares held by the Reporting Persons as of the date of this filing.

>>> MOODYS CUTS RUSSIA GOVT BOND RATING ONE NOTCH TO BAA3 FROM BAA2 (now lowest

MOODYS CUTS RUSSIA GOVT BOND RATING ONE NOTCH TO BAA3 FROM BAA2 (now lowest level of investment grade); remains on review for further downgrade 

The key drivers behind the downgrade are:

1) Moody's expectation that the substantial oil price and exchange rate shock will further undermine the country's already subdued growth prospects over the medium term; and
2) Moody's nearer-term concerns over the negative impact on the government's financial strength of the erosion in official foreign exchange buffers and fiscal revenues.

In the review for further downgrade, Moody's will assess the resiliency of the government's balance sheet, in particular its foreign currency reserves cushion, to both the rating agency's baseline forecast for oil prices and to the risk of a further decline in oil prices at a time when international market access is restricted for Russian borrowers due to sanctions. The review will also focus on the efficacy of policy actions that the Russian central bank and fiscal policymakers may take to address the oil and exchange rate shock in an effort to preserve economic and government financial strength.

(Barron's) Telecom’s Big Bet: How Much Will the Carriers Spend?

Telecom’s Big Bet: How Much Will the Carriers Spend?
The tech sector will supply the plumbing for our high-bandwidth future. Question is, when will the carriers resume orderin
If you’re the daring type who likes a highly speculative bet in tech, you’ll find no greater drama than the telecom equipment market, where the vast projects of building the pipes of the Internet is an adventure of promise and peril.

Companies such as Ciena (ticker: CIEN), Alcatel-Lucent (ALU), and Nokia (NOK) had a lousy 2014. A survey of 25 equipment companies listed on the Nasdaq and NYSE shows an average price change of negative 5% in the last 12 months.

What’s hampered returns for all of these vendors is that spending by telcos such as AT&T (T) and Verizon Communications (VZ), ostensibly pots of gold within easy reach, proved to be precarious in 2014 as quarter after quarter tens of billions of dollars in spending turned out to be “lumpy”—Wall Street jargon for when purchases don’t show up as quickly as expected.

JDS Uniphase (JDSU), which makes lasers that go into communications equipment sold by Ciena and others, laid the “softness” in the telecom market at the feet of “M&A distractions,” a nod to gigantic deals, like Comcast (CMCSA) trying to acquire Time Warner Cable (TWC) and AT&T in the process of buying DirecTV (DTV).

Cisco Systems (CSCO) chief John Chambers told the Street in November that the culprit was policy debates in Washington over how much carriers can charge Netflix (NFLX) and others to carry bits across the Internet. “Two to three U.S. service providers have dramatically slowed their order rates, and I mean dramatically slowed order rates with us,” Chambers said in November.

ALL OF WHICH MADE FOR A DRAMATIC 2014. But that pot of gold still tantalizes. Carriers spend an awesome amount of money: AT&T probably shelled out $21 billion last year, Verizon, perhaps $17 billion. Not to be beat, China Mobile (CHL), the world’s largest operator by subscriber count, at 790 million customers as of June, is in the midst of building out China’s faster 4G wireless network.

In June, China Mobile said it had already spent $13.5 billion on capital investments for the first half of the year.

On every continent, the spending is driven by the need to put up more cell towers and base stations closer to each smartphone user, and the need to increase Internet bandwidth to homes and offices for the transmission of more and more video content from Netflix.

Some of the beat-up names trading at the cheaper end of the spectrum are worth a look: They’re excellent companies, with businesses that are not going away, though it’s just a little difficult to predict what will occur in any given year. Ciena, trading at 16.5 times forward earnings with its shares down 16% in the last 12 months, is an excellent name. Another is Harris (HRS), a maker of radio systems installed in cell towers. Harris trades at 13.5 times forward estimates, its shares down 3%.

Although its results have been somewhat erratic, Arris Group (ARRS) is an interesting way to gamble on the expansion of the cable plant, or wiring and infrastructure, and its shares trade at a bargain-basement 9.8 times forward earnings. Arris was up 6% in the last 12 months.

Ruckus Wireless (RKUS), the maker of Wi-Fi networking equipment for use in dense urban environments, trades at 15.4 times forward estimates, yet it may generate a respectable 21% revenue growth this year after 25% in 2014, analysts estimate. Ruckus shares fell 37% in the last 12 months. A shooting star of an initial public offering in late 2012, it rose 60%, then crashed to earth.

Alcatel, and two other traditional equipment makers, Ericsson (ERIC) and Nokia, are also worth a look. Alcatel’s American depositary receipts fell 26% in the last 12 months. Along with Nokia, it’s a restructuring story. Nokia shares fell 5%. Ericsson stock was flat in that time. At 14.9 times forward earnings, Ericsson’s stock is not overly demanding.

Starting this week, investors will get updates on what the carriers intend to spend. Verizon reports results Jan. 22, AT&T Jan. 27, and Sprint (S) Feb. 5. T-Mobile US ’s (TMUS) date is not yet set.

It’s already known the carriers won’t increase spending dramatically. AT&T has said it will trim outlays to $18 billion in 2015 from last year’s $21 billion because network improvements have been completed faster than expected.

Weighing on the ability to spend on equipment are the staggering amounts the telecoms must still lay out for their other big priority: wireless airwaves.

Craig Moffett, proprietor of the boutique MoffettNathanson research firm, estimates that AT&T and Verizon may each spend as much as $18 billion on one government auction that is currently drawing to a close. Another auction in 2016 may draw bids from T-Mobile and Sprint as well.

Spectrum acquisition eventually leads to further equipment purchases, but only after the carriers figure out how to pay for their bids. Moffett thinks AT&T may need to issue another $14.5 billion of bonds this year to fund this latest round of spectrum purchases. That’s on top of an existing $71 billion in long-term debt for AT&T.

Faced with the precarious nature of spending, Ciena is emphasizing the ways in which its business is changing, as the company explained to me during a recent visit to its headquarters. Chief Financial Officer James Moylan pointed out that Ciena is getting more and more business from companies other than the phone companies. “AT&T and Verizon combined were once approximately 40% of our revenues,” he observes. “Today that’s down to maybe 25%.”

WHAT’S REPLACING THE PAIR are Webscale companies— Google (GOOGL), Amazon.com (AMZN), and other stars of cloud computing. Today, Google and others make up 10% of sales of transport equipment, the fastest fiber-optic pipes Ciena sells. That may rise to 15% in two to three years.

CEO Gary Smith argues that Ciena can in coming years lift its operating profit margins beyond the 8% to 9% target it has forecast this year by selling more software capabilities. “If you go back to the period before the recession, Ciena had operating margins in the midteens, consistently,” he tells me. “Even if you don’t believe in some brave new world for telecom equipment, the way things were not so long ago proves we could achieve those margins, and a lot of that was through our software.”

Companies such as Ciena, Nokia, and Ericsson have a good business that’s worth investing in, as long as you’re willing to stomach the uncertainty along the way.