Monday, November 21, 2016

Symantec to acquire LifeLock for $2.3 billion

Symantec to acquire LifeLock for $2.3 billion

By Liana B. Baker and Greg Roumeliotis
Symantec Corp (SYMC.O) said it would acquire U.S. identity theft protection services company LifeLock Inc (LOCK.N) for $2.3 billion, in a deal that it hopes will prop up sales at its Norton cybersecurity unit.
Symantec's security software often comes bundled with personal computers. As a result, the company has suffered as consumers use mobile devices more than traditional computers. While Norton remains profitable, its sales have been falling.
"(Norton) had been declining with the declines in PC market share. This acquisition brings $660 million in revenue to the consumer business and returns it to longer sustainable growth," Symantec Chief Executive Greg Clark said in an interview.
Reuters was first to report earlier on Sunday that Symantec was in the lead to acquire LifeLock.
Symantec's purchase of LifeLock is in line with its efforts to diversify its offerings. In August, it bought Blue Coat Inc, which helps firms maintain security over the internet, in a $4.65 billion deal. Clark previously held the top job at Blue Coat, and made the switch after the deal closed.
Based in Tempe, Arizona, LifeLock offers services such as monitoring new account openings and credit-related applications in order to alert consumers about unauthorized use of their identity. It also works with government agencies, merchants and creditors to remediate the impact of identity theft.
Fran Rosch, executive vice president of Norton Business Unit, said that Symantec had dabbled in identity security but had nowhere near Lifelock's 4.4 million members.
"We had to extend our value proposition. It was a no brainer for us to get back to growth," Rosch said.
Symantec expects to finance the transaction with cash on balance sheet and $750 million of new debt.
The Mountain View, California-based company has been moving away from what is sees as more commoditized services, selling its data storage business Veritas in January to private equity firm Carlyle Group LP (CG.O) for $7.4 billion. Technology-focused firm Silver Lake Partners has also made a $1 billion investment in the company in two parts this year.

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Symantec said the LifeLock deal is not expected to have a material impact on its financial results next year, and reaffirmed its fiscal year 2017 and 2018 guidance. The deal also represents a victory for activist hedge fund Elliott Management Corp, which had pushed LifeLock to explore its options.
Symantec was advised by Citigroup (C.N) and JP Morgan (JPM.N), along with Bank of America (BAC.N), Barclays Plc (BARC.L), and Wells Fargo (WFC.N). LifeLock was advised by Goldman Sachs (GS.N).
(Reporting by Liana B. Baker, Greg Roumeliotis in New York and Sangameswaran S in Bengaluru; Editing by Sandra Maler, Alan Crosby and Himani Sarkar)

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Oil is shooting higher

Oil is shooting higher

  • 3h
  • 2,703
Oil prices are jumping on Monday, boosted by hopes of a looming production cut and a weaker dollar.
Henry Croft, a research analyst at Accendo Markets, says in an emailed statement: "Crude Oil prices are once again being buoyed by improved market optimism that OPEC members will be able to reach a deal at the end of this month, being further helped by the USD trading below its record highs posted on Friday."
OPEC leaders meet at the end of the month and while initially a production cut had been planned, there has been uncertainty over just how likely this would be. However, UBS' commodities and FX strategist Wayne Gordon said on Monday that Donald Trump's Presidential victory makes a deal more likely, according to CNBC.
Croft says: "Iran, Iraq and Russia all released optimistic statements that a deal could be reached on November 30, however, Russian President Putin refused to commit to 100% certainty it will take place."
US West Texas Intermediate crude is the biggest gainer on Monday morning, up over 1.7% in early London trade and then jumping again as the US woke up. Here's how it looks at just before 1.40 p.m. GMT (8.40 a.m. ET):crudeInvesting.com
UK Brent is also popping. Here is how it looks at the same time:brentInvesting.com
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Facebook is doing a $6 billion stock buyback

Facebook is doing a $6 billion stock buyback

  • Nov. 18, 2016, 4:22 PM
  • 22,429
Mark ZuckerbergFacebook CEO Mark Zuckerberg.Thomson Reuters
FB Facebook-A
 121.23 3.21 (+2.70 %)
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Facebook is buying back up to $6 billion of its stock from shareholders, the company announced in a SEC filing on Friday.
Facebook said the repurchase program will go into effect in the first quarter of 2017 and does not have a fixed expiration date. The company said the buybacks will be consistent with Facebook’s "capital allocation strategy of prioritizing investment to grow the business over the long term."
Shares in Facebook rose over 1% on the news in after hours trading.
Facebook also announced that its chief accounting officer, Jas Athwal, is retiring after 9 years at the company in a separate filing. His last day will be Feburary 27.
It’s uncommon for tech companies like Facebook to return cash to shareholders through buybacks or dividends, as they generally prefer to spend their cash on growth opportunities. This is Facebook's first ever buyback program.
Facebook has roughly $26 billion in cash and short term securities on its balance sheet. Its stock sunk more than 8% earlier this month after the company warned investors that revenue growth rates will decline in the coming quarters, while 2017 will be an "aggressive investment year."
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Analysts are openly worrying about Apple's future profitability

Analysts are openly worrying about Apple's future profitability

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Apple's gross margins on iPhone sales — a measure of the raw underlying profitability of its business — have declined from 57.7% in 2009 to just 41% today, according to analysts at Bernstein Research (see chart below). They expect it to sink to a "mere" 39% in 2018.
Apple is the single most profitable company on the planet. In January of this year, it famously posted the biggest quarterly profit of any company, ever. So it is unusual to see analysts worrying about where future profits might come from.
To put this in context: Apple is going to stay very, very profitable. No one is saying those profits are going to disappear. But at least four teams of analysts said in recent notes to clients that it was becoming harder to see how Apple would sustain its massive gross margins.
Here's the chart from Bernstein's Toni Sacconaghi et al: 
AppleBernstein
AAPL Apple
 111.53 1.50 (+1.40 %)
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Key issues include the cost of making next year's iPhone and whether Apple still has the ability to raise prices even further despite price competition. Apple has seen a 30% decline in sales and a loss of market share in China, where consumers recently trended toward lower-priced Android smartphones.  
"Historically, iPhone gross margins have deteriorated steadily, and we believe margin compression underpins the bear thesis on the stock. Encouragingly, iPhone margins have been more stable over the last four years, and the mix shift to services is a positive tailwind,"  Sacconaghi wrote recently. "We believe that GMs [gross margins] will potentially become a larger issue as we approach the iPhone 8’s release, as the devices’ new form factor, OLED screen and increased functionality (wireless charging) will invariably drive up iPhone’s BOM [bill of materials], either necessitating a further price increase in the device, or potentially pressuring gross margins in FY 18. 
Morgan Stanley's Katy Huberty and her team agree. "Gross margin trajectory is the key debate post Apple earnings. While our long-term view of gross margin hasn't changed, 10-K data suggests Apple underestimated demand creating a near- term margin headwind as supply ramps," she said recently. "We also see this as a sign Apple approached iPhone 7 forecasts with conservatism. Given better than expected initial demand, Apple has increased orders to suppliers and is incurring expenses to ramp additional production lines, which is creating a headwind in December."
Again, these analysts are largely positive on Apple's future ability to generate profits. They simply are having difficulty figuring out how, exactly, that will happen. "Can Apple grow revenue and EPS [earnings per share]? Yes, at a low-teens pace for EPS over time as it takes share in slower-growth smartphone market," Huberty told clients.
Tim CookApple Inc CEO Tim Cook waves after meeting with Japan's Prime Minister Shinzo Abe at Abe's official residence in Tokyo, Japan, October 14, 2016.REUTERS/Toru Hanai
UBS's Steven Milunovich and Benjamin Wilson believe that if Apple builds a new, larger, 5.8 inch phone with an OLED screen that wraps around the whole device, creating a bezel-free phone, it may incur greater costs that the company may not be able to recoup with increased prices. "Depending on price increases, larger screens could increase ASPs. However, margins might decline if build cost increases outstrip higher prices. Apple could end up selling Plus phones at closer to regular size prices," they wrote. "Apple faces potential margin headwinds in F17/18 as the benefits from deferred revenue and lower warranty accruals wane."
"Warranty accruals" are the costs associated with customers whose phones break or malfunction, and who want the devices repaired or replaced. Bernstein's Sacconaghi and Wells Fargo's Maynard Um and their teams both told clients recently that the cost of accruals was becoming more unpredictable and might weigh on future profits. "We believe accrual levels are still too low relative to claims and expect an increase in FQ1, which we think may limit upside potential to gross margin from warranties. On a rolling 24-month basis, claims per unit have been relatively steady, while accruals per unit have decreased, which suggests, to us, a greater likelihood of increased to accruals," Um says.
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Japan October exports fall more than expected as strong yen drags

Japan October exports fall more than expected as strong yen drags

By Minami Funakoshi | TOKYO
Japan's exports fell in October for a 13th consecutive month and by more than expected as the strength of the yen and sluggish foreign demand weighed on trade, although current yen weakness could change the outlook.
Ministry of Finance (MOF) data showed on Monday that exports fell 10.3 percent in the year to October, pulled down by a strong rise in the value of the yen and lower export volumes, much weaker than the expected 8.6 percent drop and September's 6.9 percent decline.
The trade results came on the heels of recent data showing Japan's economy expanded for a third quarter in July-September as exports recovered and imports fell.
Exports dipped 1.4 percent in volume terms in the year to October, falling for the first time in three months and following a 4.7 percent gain in the previous month.
"Overall exports are starting to stall and this month's results are disappointing," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.
"The data once again shows that global economic recovery isn't necessarily smooth sailing," said Kodama, adding that overall economic growth in October-December may stall.
But Marcel Thieliant, senior Japan economist at Capital Economics, took a different view saying that the dramatic fall in the value of the yen since Donald Trump's election to U.S. president could help turn around Japan's export performance.
"Looking ahead...we expect it (the yen) to decline further next year, which should lift trade values. "We also expect growth among Japan's main trading partners to pick up marginally, and have pencilled in a 1.5 percent rebound in export volumes next year," Thieliant said in a commentary after the trade figures were posted.
Imports in October fell 16.5 percent versus the median estimate of a 16.3 percent fall. The trade balance came to a surplus of 496.2 billion yen ($4.47 billion), versus the median estimate for a 615.4 billion yen surplus.
The value of exports to China fell 9.2 percent in October from a year earlier, for the eighth straight month, as shipments of communication devices fell.

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Shipments to Asia, which account for more than half of Japanese exports, fell 9.9 percent, marking a 14th month of declines. U.S.-bound exports decreased 11.2 percent, posting an eighth falling month.
However, a private business survey showed that Japanese manufacturing activity expanded at the fastest pace in nine months in October as output and new export orders picked up.
(Reporting by Minami Funakoshi; Editing by Chang-Ran Kim and Eric Meijer)

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