>>> Netflix beats by $0.28, reports revs in-line--> +12% @$390

Netflix beats by $0.28, reports revs in-line; Sees GLobal Expansion Finishing Earlier than Expected; Expects to raise 'at least' $1 bln in debt

Reports Q4 (Dec) earnings of $0.72 per share, excluding non-recurring items, $0.28 better than the Capital IQ Consensus Estimate of $0.44; revenues rose 26.4% year/year to $1.49 bln vs the $1.49 bln consensus. Please see 16:08 for additional metrics.
Key Excerpts from Newsletter:
- "In October, we judged the leading factor of the similar decline in Q3 y/y net adds to be our May price change. Since then, with additional research, we now think that the decline in y/y net adds would have largely taken place independent of the price change. We've found our growth in net adds is strongest in the lower income areas of the US, which would not be the case if there was material price sensitivity. We think, instead, the reduction in y/y net additions is a natural progression in our large US market as we grow".
- "This year we plan to increase US contribution margins from 30% in Q1 to about 32% in Q1 2016 to about 34% in Q1 2017, etc. We'll re-evaluate the margin progression model again in early 2020 when we hopefully achieve 40% contribution margins".
- "In late Q1, we'll be launching Netflix in Australia and New Zealand. Later in the year, we'll launch additional major countries, in keeping with our global strategy".
- "Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected. We then intend to generate material global profits from 2017 onwards".
- "For China, we are still exploring options — all of them modest. We'll learn a great deal if we can successfully operate a small service in China centered on our original and other globally-licensed content. That is our preference, for the next few years, if we are able to acquire the necessary permissions".
- "We finished the quarter with $1.6 billion in cash and equivalents. Given we are investing faster in content (this Q1 will show a step up in cash use with all the original projects launching in the quarter) and the current favorable interest rate environment, we intend to raise at least a billion dollars, pending market conditions, of additional long-term debt in a similar manner to last year".

>>>Cree beats by $0.11, reports revs in-line; guides Q3 EPS in-line, revs in-lin

Cree beats by $0.11, reports revs in-line; guides Q3 EPS in-line, revs in-line --> +5,5%

Reports Q2 (Dec) earnings of $0.33 per share, excluding non-recurring items, $0.11 better than the Capital IQ Consensus Estimate of $0.22; revenues fell 0.5% year/year to $413.2 mln vs the $412.08 mln consensus.

- Co issues in-line guidance for Q3, sees EPS of $0.21-0.25, excluding non-recurring items, vs. $0.21 Capital IQ Consensus Estimate; sees Q3 revs of $395-415 mln vs. $406.57 mln Capital IQ Consensus Estimate.
- "We made solid progress in Q2 with operating margin higher than targeted due to an improvement in gross margins in our lighting business," stated Chuck Swoboda, Cree Chairman and CEO. "The market for LED lighting is still in the early stages, our new product pipeline is strong, sales momentum is building and our brand is growing in the market. As evidenced by our significant share repurchases in Q2, we believe we are on the right track to continue to grow the company and increase profits over the next several years."

>> IBM beats by $0.39, misses on revs; co will guide on the call--> -1,24%

IBM beats by $0.39, misses on revs; co will guide on the call  

Reports Q4 (Dec) earnings of $5.81 per share, excluding non-recurring items, $0.39 better than the Capital IQ Consensus Estimate of $5.42; revenues fell 11.9% year/year to $24.11 bln vs the $24.8 bln consensus; down 2%, adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency.
Global Services segment revenues decreased 8% (flat adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) to $13.5 bln. Global Technology Services segment revenues decreased 8% (up 2% adjusting for the impact of the divested customer care outsourcing and System x businesses and for currency) to $9.2 bln. Global Business Services segment revenues were down 8% (down 3%, adjusting for currency) to $4.3 bln.
Revenues from the Software segment were $7.6 bln, down 7% (down 3%, adjusting for currency) compared with the fourth-quarter of 2013. Software pre-tax income decreased 11% and pre-tax margin decreased to 44.7%. Pre-tax income and margin include the impact of the fourth-quarter workforce rebalancing charge.
Total operating (non-GAAP) gross profit margin from continuing operations was 53.9 percent in the 2014 fourth-quarter compared with 53.3 percent in the 2013 fourth-quarter period.
$0.1 bln of gross share repurchases
Co will issue guidance fon the call at 16:30.

>>> US Close Dow+0,02% S&P +0,12% Nasdaq +0,44% Russell-0,57%

Closing Market Summary: Nasdaq Leads Stocks Higher

The stock market kicked off the holiday-shortened week with a shaky Tuesday session. The S&P 500 settled higher by 0.2% after finding intraday support near its 100-day moving average (2007/2008). The tech-heavy Nasdaq outperformed, climbing 0.4%.

Equity indices started the day with modest gains, but continued weakness in crude oil weighed on the overall risk tolerance and contributed to an early retreat. However, a handful of influential sectors were able to withstand the selling pressure, which in turn became a supportive factor during afternoon action.

As for crude, the energy component retreated after The International Monetary Fund cut its 2015 global growth outlook to 3.0% from 3.5%, and continued sliding throughout the session. WTI crude ended lower by 4.1% at $46.51/bbl while the energy sector (+0.1%) settled near its flat line. On the earnings front, Baker Hughes (BHI 57.26, +0.70) and Halliburton (HAL 39.83, +0.70) posted respective gains of 1.2% and 1.8% in reaction to better than expected results.

Similar to energy, consumer discretionary (-0.6%) and financials (-0.4%) trailed the broader market throughout the day. The financial sector lagged following disappointing results from Morgan Stanley (MS 34.75, -0.14) while discretionary shares were pressured by homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 24.48, -0.62) and SPDR S&P Retail ETF (XRT 92.23, -1.21) lost 2.5% and 1.3%, respectively. On the upside, Netflix (NFLX 348.80, +11.46) gained 3.4% ahead of its quarterly report.

Elsewhere among influential sectors, health care (-0.1%) pressured the market in the early going following a revenue miss from Johnson & Johnson (JNJ 101.29, -2.75). However, the sector was lifted off its low by the relative strength in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 323.23, +5.41) gained 1.7% and settled at a fresh record high.

The biotech group also bolstered the Nasdaq and helped the index settle ahead of the broader market. To be sure, the Nasdaq received another measure of support from its top-weighted components, including Apple (AAPL 108.78, +2.79), which spiked 2.6%.

Treasuries notched their highs around 11:00 ET before spending the remainder of the session in a steady retreat. The 10-yr yield ended lower by five basis points at 1.79%.

Participation was a bit above average with more than 840 million shares changing hands at the NYSE floor.

Economic data was limited to the NAHB Housing Market Index for January, which slipped to 57 from a revised 58 (from 57) while the consensus expected the reading to hold at 58.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while December Housing Starts (consensus 1.04 million) and Building Permits (consensus 1.06 million) will be reported at 8:30 ET.
  • Dow Jones Industrial Average -1.7% YTD 
  • Nasdaq Composite -1.7% YTD
  • S&P 500 -1.8% YTD 
  • Russell 2000 -2.8% YTD

FT : Swiss bank to charge clients to hold cash

Swiss bank to charge clients to hold cash

One of Switzerland’s oldest private banks is to charge clients negative interest rates on cash balances over SFr100,000, in the latest sign of the widening fallout of the Swiss National Bank’s struggle to cope with the strength of the franc.
Last week, the SNB stunned markets around the world by abandoning the cap it imposed three years ago to stop the franc appreciating beyond SFr1.20 per euro.

At the same time, to try and make the franc — which functions as a haven currency — less attractive, the central bank said it would push Swiss interest rates further into negative territory, cutting its deposit rate from -0.25 per cent to -0.75 per cent.
In response to the SNB’s move, Lombard Odier, a Genevois private bank that traces its roots back to 1796, now plans to charge its clients a fee of 0.75 per cent on Swiss franc accounts with cash balances of more than SFr100,000. The measure will come into effect on Thursday.
The bank said the fee would apply only to cash deposits, and not to cash held in “discretionary portfolios with conservative, balanced or growth profiles” — referring to a type of investment portfolios in which clients leave it up to the bank to decide how to invest their money.
The SNB’s decision to push interest rates below zero has left Swiss private banks in a difficult position as many of them choose to run small loan books and shy away from investing deposits in risky assets.
As a result of this conservative stance, they are more exposed to the central bank’s measures than other banks which use their deposits more actively to generate revenues.
Lombard Odier said it would recommend that its clients cut the cash holdings in their accounts to “a level that meets their individual needs and to assess alternative investments for the excess cash”.
The bank will provide help for clients looking for alternative ways to invest their cash but those who choose not to will have to pay the fee, it said.
“The resulting negative rate will represent the cost of ensuring maximum liquidity and security at a time of heightened market volatility,” the bank said.
“Many clients will prefer to pay the negative rate with the confidence that their assets are safely held with the SNB in Swiss francs rather than take counterparty or foreign exchange risk elsewhere in the market.”

(BFW) Swiss Bank Lombard Odier to Charge Clients to Hold Cash: FT


Swiss Bank Lombard Odier to Charge Clients to Hold Cash: FT
2015-01-20 21:00:08.25 GMT


By John Simpson
(Bloomberg) -- Private bank to charge negative interest
rates on cash balances of more than CHF100,000 in wake of Swiss
National Bank abandoning cap on the franc last week, FT reports,
citing bank officials.
* Charge of 0.75% on affected accounts will come into effect
Jan. 22
* Fee to apply to cash deposits only and not to cash held in
“discretionary portfolios with conservative, balanced or
growth profiles,” bank said
* Bank to advise clients to reduce cash holdings and seek
alternative investments for the excess cash
Link to FT Story: http://tinyurl.com/ptovxur
Link to Company News:SNBN SW <Equity> CN <GO>
Link to Company News:1152Z SW <Equity> CN <GO>

For Related News and Information:
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To contact the editor responsible for this story:
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jsimpson12@bloomberg.net

FT : Staples to reject call to buy Office Depot

Staples to reject call to buy Office Depot

A car drives past a Staples Inc. store in Mount Prospect, Illinois, U.S., on Saturday, Aug. 13, 2011. Staples Inc. is scheduled to announce second quarter earnings on August 17. Photographer: Tim Boyle/Bloomberg©Bloomberg
Staples, the US’s biggest stationery seller, is expected to reject a call by activist investor Starboard Value to merge with Office Depot as it fears that the deal would be blocked by regulators, people familiar with the matter said.
The Massachusetts-based company is concerned that the Federal Trade Commission would block a merger on the grounds that it would hurt competition in the lucrative business of supplying stationary to large corporate clients.

“The deal makes a lot of sense [from a strategic perspective] but I can’t see how they could get it done,” said a person familiar with the thinking of Staples’ management.
Starboard, which owns about 6 per cent of Staples and a tenth of Office Depot, argued in a letter that a merger would more than double operating profits and help them compete with Walmart and Amazon.
“The magnitude of value creation from such a business combination far exceeds anything that either company could achieve on a standalone basis,” Starboard chief executive Jeffrey Smith said in a letter to Staples’ board.
Staples tried to merge with Office Depot in the late 1990s but the deal was aborted by the FTC despite the two companies offering to sell 63 of their stores to Office Max.
Since then, the consumer focused side of its business has suffered due to the rise of Amazon and other online retailers. However, competition in the segment focused on servicing large companies has diminished. Office Depot and Office Max merged early last year, leaving only two large competitors.
“Regulators will want to see how the Office Depot—Office Max merger affects the market before they allow for another deal to go through,” said a lawyer who asked not to be named.
Staples and Office Depot did not return calls and emails seeking comment.
Staples has already made corporate governance changes to try to head off the threat of a shareholder revolt. Last week, it appointed a new lead independent director, strengthened the board with the addition of an executive from Google, and announced that chief executive Ron Sargent will not take a pay rise this year.
One large Staples shareholder said the company should focus on improving its results before embarking on a combination with Office Depot that could prove a management distraction.
“If you look at what has happened to profits in the sector, it is pretty clear there is too much capacity,” the shareholder said. “Ultimately there should be one player, but the question is when and how.”
Starboard has emerged as one of the largest and most dogged players in the upsurge of hedge fund activism, taking on targets as big as Yahoo, where it is agitating for a merger with AOL. Last year, it swept away the board at Darden Restaurants, owner of the Oliver Garden chain, after a lengthy battle over the company’s performance.

>>> OWW Initial Thoughts on Valuation



From: LAURA ANREDER (OSCAR GRUSS & SON IN) At: Jan 20 2015 21:52:01
To: LAURENT CHEKROUN (MAKOR SECURITIES LLP)
Subject: Fwd:OWW Initial Thoughts on Valuation


From: lanreder@oscargruss.com At: Jan 20 2015 15:51:08
Subject: Fwd:OWW Initial Thoughts on Valuation

OWW - Report of potential sale possibly  driven by Par Management which owns 14.9% S/O; they sold ~8.1M shares in August 2013 for between $8.95-$11.88/share. Five year high price (excluding PAR Capital sale s price spike) was ~$10/share. Recent Internet Based Services transactions (OPEN, MOVE and TRLA) are not much help; OPEN had 40% EBITDA margin (vs 17% for OWW), MOVE had 20x EV/EBITDA and 40x P/E multiples (compared to 7x and 24x for OWW at prior 20 day $8.60/share average closing price) and TRLA is a strategic merger priced at 47x EV/EBITDA and 252x P/E (note: all multiples are CY15E). Direct comps are EXPE and TRIP; PCLN is a cult stock and its $58B market cap makes it a bad comp. Assuming $25M savings (6% of Revs), P/F OWW would have $192M EBITDA and $0.51 EPS). Based on prior 20 average price, the TRIP multiples (13.7x EBITDA, 24% margin, 29x P/E) implies takeover values at adjusted $192M EBITDA and $0.51 of $22.00 and $14.75 (both unlikely takeover prices by a PE buyer). The EXPE multiples (7.4x EV/EBITDA, 16.5% margin and 18.5x P/E) imply takeover prices of $10.95 and $9.40. So marginal at the current trading level unless the PE has other internet-based businesses to which greater synergies can be realized.

 

KYAK (purchased by PCLN for $40/share value in mid-2013) sizewise better comp, higher margins - Forward $96M EBITDA (22.4% margin) and $1.15 EPS implied takeover multiples of 16.3x EV/EBITDA and 35x P/E. The P/E multiple implies $12.50/share takeover price. However, PCLN was a strategic buyer (rather than a PE) and the margins were higher; a 30x P/E multiple implies $10.80/share takeover price for OWW. 

 


DISCLAIMER

This information represents neither an offer to buy or sell any security nor, because it does not take into account the differing needs of individual clients, investment advice.  Those seeking investment advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales representative.  Oscar Gruss & Son Incorporated believes this information to be reliable, but no representation is made as to accuracy or completeness.  This information does not analyze every material fact concerning a company, industry, or security.  Oscar Gruss & Son Incorporated assumes that this information will be read in conjunction with other publicly available data.  Matters discussed here are subject to change without notice.  There can be no assurance that reliance on the information contained here will produce profitable results.  A security denominated in a foreign currency is subject to fluctuations in currency exchange rates, which may have an adverse effect on the value of the security upon the conversion into local currency of dividends, interest, or sales proceeds.  The value of securities and depositary receipts of foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency exchange rates.

© 2015 Oscar Gruss & Son Incorporated.  All rights reserved.

 

 

Reuters - Hedge fund COMAC returning external capital after 8 pct hit on Swiss f

Hedge fund COMAC returning external capital after 8 pct hit on Swiss franc-sources
t
Jan 20 (Reuters) - London-based hedge fund COMAC Capital is returning external capital to investors after suffering losses mainly caused by last week's surprise jump in the value of the Swiss franc, two sources familiar with the matter said on Tuesday.

COMAC Global Macro Fund Ltd, managed $1.2 billion, as at the end of last month, according to an investor newsletter seen by Reuters. However, it lost 8 percent last week, according to the sources.

A spokesman for COMAC declined to comment.

FT : Tensions simmer over eurozone QE as investors buy up Spanish debt

Investors piled into peripheral eurozone debt on Tuesday ahead of the European Central Bank’s widely expected launch of large-scale bond purchases even as political resentment mounted over German attempts to water down the programme.
Spain made one of its largest ever bond sales at a record low rate, drawing investor orders of close to €23bn from around the world. Last year, Spain paid close to 4 per cent to borrow money for 10 years: on Tuesday it paid just 1.66 per cent.

Expectations that Mario Draghi, the ECB president, will on Thursday launch a programme of quantitative easing have driven up demand for government bonds in the eurozone, pushing yields down to historic lows, and countries in the periphery have moved to take advantage by locking in the low rates.
The timing of the Spanish sale and the strength of demand were remarkable, said Philip Brown, head of sovereign capital markets at Citigroup, one of the banks involved. “Investors are expecting that the ECB’s announcement will be positive for debt issued by peripheral eurozone countries,” he said.
As investors cheer, politicians and bankers across Europe are expressing mounting frustration over a key concession the ECB is set to make to mollify German opposition.
The expected announcement by Mr Draghi, will bring the bank closer into line with the US Federal Reserve and the Bank of England which adopted QE in the wake of the global financial crisis. But QE has split the central bank’s 25-strong governing council, with both German members voicing their opposition in recent weeks.
To appease QE’s German opponents, which include the chancellor Angela Merkel herself, Mr Draghi is expected to say that bonds bought will remain with national central banks, so losses will not be spread among eurozone members.
But other eurozone countries, as well as the International Monetary Fund, fear the concession could reduce QE’s effectiveness.
Athanasios Orphanides, a former member of the ECB’s governing council, said it potentially broke EU rules.
“It is as if it’s accepted that the euro area’s modus operandi is to clear things with Germany, and for the ECB to constrain its actions to what is best for Germany,” he told the Financial Times. “This is inconsistent with and violates the [EU] treaty.”
His criticism was echoed in Italy, whose finance ministry and central bank have in recent weeks warned against any move to water down QE.
“It’s good that the ECB is buying government debt but it would be a defeat for Draghi and a win for Merkel if the purchases were delegated to the central banks of each state,” said Il Mattinale, a daily newsletter published by centre-right lawmakers in Italy’s lower house of parliament. “It’s not a small matter, it’s a question of European solidarity,” it added.
Although some eurozone countries are critical of ECB concessions to Berlin, in Germany itself there is still strong opposition to the very idea of QE. Speaking in front of Mr Draghi and hundreds of other guests at a finance industry reception on Monday, Ms Merkel warned against using monetary policy to let governments in vulnerable economies off the hook over reforms.
She said: “One must prevent the dealings of the ECB from easing the pressure for improvements in competitiveness.”
While she was careful to avoid criticising the ECB directly at the event organised by the Deutsche Börse, the German stock exchange, Ms Merkel made no effort to deliver any public support to the central bank.
Mr Draghi has publicly defended the idea of QE. In an interview in the German press published last week, he said that to achieve the ECB’s medium-term inflation target of below but close to 2 per cent, the bank must “keep interest rates low and must work towards an expansionary monetary policy which accompanies growth”.
Yet the criticism of the design of the ECB’s programme from Mr Orphanides, a respected economist who was governor of Cyprus’s central bank until May 2012, was particularly pointed. His views carried extra weight at the ECB because he worked previously as a senior adviser to the US Federal Reserve.
“Changing the rules to avoid risk sharing absolutely damages the effectiveness of QE. It is not the best policy for the euro area as a whole and would not be promoting a single monetary policy,” said Mr Orphanides, an economics professor at Massachusetts Institute of Technology, where Mr Draghi completed his doctoral studies.
The EU treaty, he argued, banned preferential treatment for any one national central bank or government, while members of the ECB’s governing council were required to “make the best possible decisions for the euro area as a whole”.

In response, the ECB said it could not comment “on assumptions about future policy” ahead of Thursday’s meeting. “The ECB conducts monetary policy independently,” it added. “As it always has done, the ECB will continue to comply with EU law.”
Mr Orphanides’ criticism echoed comments from Michael Noonan, Irish finance minister, who said on Monday: “If monetary policy is going to be renationalised and national central banks are to become agents acting for Frankfurt, I think it [QE] will be ineffective.”
Leading the charge for abandoning risk-sharing has been Jens Weidmann, Bundesbank president and an outspoken QE critic. In December he argued that sovereign bond buying would break EU law unless national central banks shouldered the responsibility for losses. Privately, the government in Berlin supports Mr Weidmann’s position.