Stock Market Predictions

Europe weighs on NetApp's outlook, stock slumps

Stock Market Predictions

The day before, Dell Inc (DELL.O) posted disappointing quarterly results that heightened concerns about cautious IT spending, sending tech stocks sharply lower.

"The EMEA (Europe, Middle East, Africa) story is one of uncertainty. We could be seeing a rebound or we could be seeing a strong degradation from there," CEO Tom Georgens said in a telephone interview.

"It's time for us to be cautious," he added.

Georgens later said on a conference call with analysts that because of a economic uncertainty, NetApp would not provide guidance for full-year fiscal 2013.

The growing popularity of mobile gadgets like Apple's iPhone, which access remote computing power and data over the Internet, has fueled demand for storage products sold by NetApp and rivals like EMC Corp (EMC.N).

But NetApp's growth has been affected this year by weak spending by U.S. military and intelligence agencies, which are major customers.

A sizeable amount of NetApp's sales also comes from Europe, where a debt crisis has shaken confidence in the economy and policy-makers fear Greece could pull out of the euro zone.

"European macro is weak right now in May and it only gets worse as we head into the summer months, which historically are the weakest period of the year," said Piper Jaffray analyst Andrew Nowinski.

Also on Wednesday, Hewlett Packard Co (HPQ.N) said it would lay off roughly 27,000 employees to cut costs.

MORE PRESSURE

New product launches from EMC are expected to add more pressure on NetApp in the July quarter.

Concerns about enterprise spending have helped send shares of NetApp 30 percent lower since the end of March - not including Wednesday's after-hours sell-off. The shares have traded recently around 12 times expected earnings.

Sunnyvale, California-based NetApp posted fiscal fourth-quarter revenue of $1.70 billion, compared with $1.43 billion in the year-ago period.

NetApp said it expects current-quarter revenue to be in the range of $1.40 billion to $1.50 billion. Analysts had expected $1.684 billion in revenue for the quarter ended in April and $1.606 billion for the quarter ending in July, according to Thomson Global Markets I/B/E/S.

NetApp reported fourth-quarter net income of $181 million, or 47 cents a share, compared with $161 million, or 40 cents a share, in the same quarter last year.

Adjusted earnings per share were 66 cents, versus expectations of 63 cents.

The company said current-quarter non-GAAP earnings per share would be between 34 and 39 cents per share.

Shares of NetApp were down 18.26 percent at $26.86 in extended trading, recovering a little from an earlier after-hours decline of about 22 percent. They closed down 1.3 percent at $32.86 in the regular session on the Nasdaq.

(Reporting by Noel Randewich; Editing by Carol Bishopric, Matthew Lewis and Steve Orlofsky)

MediciNova asthma drug fails trial; shares crash

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MediciNova, which is testing MN-221 as a treatment for acute asthma attacks not responsive to standard therapy, said the drug failed to show a statistically significant improvement over a placebo.

MN-221 looks to treat the condition by bypassing constricted airways to deliver the drug directly into the lungs. It aims to improve FEV1 ratio when compared with a placebo.

FEV1 ratio measures volume of air exhaled in the first second.

The trial, however, demonstrated a reduction in hospital admissions when MN-221 was added to standard treatments, the company said in a statement.

MediciNova, which said there were three serious adverse events in the trial, plans to continue development of the drug.

Shares in the San Diego, California-based company fell 51 percent to $1.35 in extended trade. They closed at $2.75 on Wednesday on the Nasdaq.

(This story corrected first bullet point and paragraph 2 to say the drug did not show any statistically significant benefit over placebo)

(Reporting by Balaji Sridharan in Bangalore; Editing by Sriraj Kalluvila)

PVH sees cost pressures easing in second half, shares rise

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Climbing raw material costs and higher spending on advertising have been denting the clothier's operating margins.

The company has banked on the popularity of its Tommy Hilfiger and Calvin Klein brands to increase prices, relieving some pressure on its margins.

Tommy Hilfiger reported an 8 percent increase in revenue in the first quarter, while Calvin Klein's revenue grew 7 percent.

PVH, which reported better-than-expected quarterly results on strong demand for the two brands, has also been expanding its international business to drive sales.

The New York-based company, which shortened its name from Phillips-Van Heusen Corp last year, expects second-quarter adjusted earnings of $1.18 to $1.20 per share.

Analysts on average were expecting $1.18 per share, according to Thomson Global Markets I/B/E/S.

The company, which has beat market expectations for more than two years, raised its full-year adjusted earnings outlook to $6.15 to $6.25 per share, from $6.10 to $6.20.

First-quarter net income rose to $93.1 million, or $1.27 per share, from $57.7 million, or 79 cents per share, last year.

Excluding items, the company earned $1.30 per share.

Sales rose about 4 percent to $1.43 billion.

Analysts on average were expecting earnings of $1.26 per share, on revenue of $1.40 billion.

PVH shares, which have risen about 9 percent this year, rose to $79.97 in extended trade. They closed at $77.37 on Wednesday on the New York Stock Exchange.

(Reporting by Ranjita Ganesan; Editing by Viraj Nair)

Oman's bank Nizwa attracts $1.77 billion in IPO

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The bank will be listed on the Muscat Securities Market on June 12, Oman Arab Bank said. Bank Nizwa raised 60 million rials by selling 40 percent of its capital.

Oman reversed its prohibition on Islamic finance last year and now intends to develop the industry, seeing economic and political benefits. Bank Nizwa is not yet operational and has only a representative office; three branch openings are planned after the IPO.

Another Islamic bank under formation, Al Izz International Bank, is expected to conduct an IPO of 40 percent of its 100 million rial capital by June, the central bank said earlier this year.

(Reporting by Saleh al-Shaibani; Writing by Mahmoud Habboush; Editing by Andrew Torchia)

DigitalGlobe, GeoEye jump on nod for imagery funding

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Shares of DigitalGlobe rose as much as 10 pct while those of GeoEye jumped 9 percent in response to the first positive news for the sector in quite a while.

Both DigitalGlobe and GeoEye provide digital imagery services to U.S. military and intelligence agencies and are working on next-generation satellites to double their capacity.

But their shares have been hammered in recent months amid news that the U.S. National Geospatial-Intelligence Agency plans to sharply reduce and possibly halve its purchases of those products over the next years.

The prospect of sharply lower U.S. government orders has prompted an unusual flurry of takeover negotiations between DigitalGlobe, which had a market capitalization of $731.26 million on Friday, and GeoEye, with a market capitalization of $426.87 million. The situation is at an impasse at the moment, but industry analysts do not believe the lower level of orders will be great enough over the longer term to sustain both companies.

The Senate Armed Services Committee announced late on Thursday that it had voted to authorize $125 million in continued funding for commercial imagery purchases in fiscal year 2013, which begins in October, restoring funds cut by the Pentagon in its proposed budget.

The move would maintain funding at fiscal year 2012 levels and mandates a study by the Joint Staff and the Congressional Budget Office on the requirements for commercial imagery. A full report is due to be released in early June.

But the funding still has a long way to go before becoming law. It must still be approved by the full Senate and the House of Representatives, and will need action by both House and Senate appropriations committees before it can take effect.

U.S. defense officials say cutting funding for commercial imagery was a difficult, but necessary choice given Pentagon plans to cut funding by $487 billion over the next decade.

COMPANIES WELCOME SENATE PANEL'S MOVE

Many U.S. military commanders like using commercial imagery because it is easier to share with allies, but defense officials say they are trying to find ways to improve their ability to share even classified data with allies. They also say they expect to double the production of digital satellite imagery with their own new government-owned satellites.

DigitalGlobe, which says it is better positioned to weather the cuts than GeoEye since it provides more imagery to the government at lower cost, said the committee's decision underscored the value of commercial imagery.

"DigitalGlobe is committed to continuing our legacy of providing superior value and performance to the U.S. government and taxpayers in support of our customer and national defense," the company said in a statement.

GeoEye also welcomed the news and said it continued to work on its new satellite, GeoEye-2, which it said would be the world's highest resolution and most accurate commercial satellite in orbit, when it is launched next year.

"While these are challenging fiscal times, the Senate Armed Services Committee and other defense and intelligence committees continue to express concerns with the risk reflected in the proposed budget," said Steve Wallach, GeoEye senior vice president for national security strategy.

GeoEye got another shot in the arm last week when it passed a key milestone on its new satellite, which will pave the way for the company to receive $111 million in cost-share funding already set aside by NGA, according to two sources familiar with the situation.

NGA is also taking steps to temporarily extend a service contract with GeoEye that is due to expire in September, said one of the sources, who was not authorized to speak publicly. That move will keep the company's work "on life support" until the future funding issue is resolved with Congress.

GeoEye has said its service agreement will be fully funded in fiscal 2012, but analysts say the company is unlikely to receive the full amount of cost-share funding for the new satellite that the federal government initially promised, analysts believe.

Dougherty & Company analyst Andrea James said shares were clearly buoyed by the Senate committee's move.

"The Senate is showing public support for commercial satellite imagery programs, which save taxpayer money ... this is the first concrete positive development that investors have seen in a while," she said via email.

DigitalGlobe shares rose $1.07, or 6.8 percent higher, to close at $16.76 on the New York Stock Exchange while GeoEye shares closed $1.29 higher, up 6.75 percent, at $20.39 on the Nasdaq.

(Reporting by Andrea Shalal-Esa and Kartick Jagtap in Bangalore; Editing by Sreejiraj Eluvangal, Gary Hill)

Analysts back Hewlett Packard's layoff plans

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Shares of the world's No. 1 personal computer maker were up 6 percent at $22.26 in early trading on the New York Stock Exchange on Thursday.

"While we certainly don't believe HP has resolved all their issues, we do see the company moving in the right direction," RBC Capital Markets LLC analyst Amit Daryanani wrote in a note to clients.

The accelerating popularity of mobile computing devices such as Apple Inc's iPad has been eroding PC sales for years and a downturn in the European markets has just added to the pressure.

Rival Dell gave a disappointing revenue forecast Earlier this week that spurred fears that global tech spending is weakening faster than anticipated.

HP said the layoff of 27,000 workers, or 8 percent of its workforce, would be made mainly through early retirement and would generate annual savings of $3 billion to $3.5 billion as it exits fiscal year 2014. The company employs more than 300,000 people globally.

Hewlett Packard, which also posted a second-quarter profit above market estimates, said it expects to use the cost savings from job cuts to drive organic growth.

"The market will likely want to see that the savings are real and tangible in the bottom line before they are diverted to other things," Nomura Equity Research analyst Richard Windsor said in a research report.

"When one has little faith in a management team, there will be little hope that these savings will ever be properly realized as they will never be properly visible," Windsor said.

At least three brokerages raised their price targets on the stock on Thursday.

Analysts said it may be too early to predict a sustainable turn, given the deterioration of demand in Europe and secular pressures in many of HP's businesses into the second half of the year.

"We believe many of HPQ's further risks stem from inconsistent operational execution and recent large acquisitions, which combined with aggressive buy-backs have weakened its balance sheet," said Evercore analyst Rob Cihra.

Rival Dell has been diversifying its revenue base in the face of weakened consumer demand, giving up low-margin sales to consumers and moving into higher-margin areas, such as catering to the technology needs of small and medium businesses in the public sector and the healthcare industry.

Analysts, however, prefer HP over Dell saying the PC maker's revenue and margins growth will take too long to play out, whereas HP's restructuring will likely help the stock over the next few quarters, despite weak revenue.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Joyjeet Das, Saumyadeb Chakrabarty)

Corrected: Gevo starts up first new plant, shares jump

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Gevo said it had flipped the switch on the plant, which will produce isobutanol from corn starch, on Wednesday and it expects to ship the first rail cars of the chemical to its customer Sasol around the end of June.

Sasol plans to the sell the isobutanol into the solvents and specialty chemicals markets, although the organic compound can also be used as an alternative to gasoline.

Chief Executive Officer Patrick Gruber told Global Markets the company would begin production slowly at the new facility located in Luverne, Minnesota and planned to increase output to about 1 million gallons per month around the end of the year.

In addition to the isobutanol sales, Gevo will sell the corn by-products into the animal feed market.

Gevo retrofitted the ethanol plant to use its own yeast and fermentation technology to produce isobutanol. The company is currently engaged in a legal dispute with Butamax, a joint venture of BP Plc and DuPont over the technology.

The company is planning to start another larger facility in Redfield, South Dakota next year.

Investors, who have been wary of shares in the new advanced biofuels makers, welcomed the news pushing its share price up 9.5 percent to $5.86 per share on the Nasdaq.

Analysts have attributed some of that market wariness to the company's plan to raise an estimated $75 million to $100 million around mid-year.

"We still have to raise money this year, and it's question of when we pull that trigger," Gruber said.

(This story is filed to correct paragraph 3 to show Sasol plans to sell the isobutanol into the solvents and specialty chemicals markets instead of use it as a feedstock in its chemical products in the May 24 story)

(Reporting By Matt Daily; Editing by Leslie Gevirtz)

Talbots deal on hold for now, shares plunge

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Talbots said it was open to pursuing a transaction with Sycamore at $3.05 per share, which would value Talbots at around $215 million, if Sycamore could provide certainty that it can obtain financing and close the deal. Talbots said Sycamore was not ready make a deal at this time.

Sycamore declined to comment. The parties' exclusivity agreement expired on Thursday.

Talbots lost about $73.2 million in market capitalization on Friday, with shares falling $1.05 to close at $1.51 on the New York Stock Exchange.

Founded in post-war Massachusetts, Talbots built its reputation on traditional pearls-and-classics fashions, but today is widely panned as dull.

Efforts to reach out to younger shoppers failed and alienated its core shoppers, women over the age of 35. Talbots has been consistently lagging peers Ann Inc (ANN.N) - owner of Ann Taylor and Loft stores - and Chico's FAS Inc (CHS.N), and its sales have fallen for five straight years.

Talbots, which has about 540 stores in the United States and Canada, posted a slightly higher adjusted first-quarter profit on Friday as it worked on managing discounts, costs and inventory.

DETERIORATING FUNDAMENTALS

Sycamore, which is Talbots' second-largest shareholder with 9.95 percent of its shares, made the $3.05 offer earlier this month, up from a $3 bid it first made in December.

"When a large shareholder engages in the time and finances to do due diligence and ends up not proceeding forward, you have assumed (they're) not even going to get the $3.05," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.

Kuby usually is a long-term investor, but sold all his shares in Talbots over the past year and a half.

Total outstanding debt was $197.9 million as of April 28, compared with $86.8 million a year earlier.

"Based on our estimates, Talbots has enough liquidity to continue operating for at least the next 12 months," analyst Jennifer Davis of Lazard Capital Markets wrote in a note.

Davis wrote that even as the company's fundamentals deteriorate, Talbots has options like borrowing more money or selling its credit card receivables.

The company is also looking for a successor to departing chief executive Trudy Sullivan, who unsuccessfully tried to reignite growth at the chain with new store formats and cost cuts.

Industry-watchers including consultants and investors have long said the company should go private to fix its problems.

Talbots has closed 90 locations so far and plans to close about 110 in all.

Talbots' board is being advised by Perella Weinberg Partners and White & Case LLP.

Talbots said that for the fiscal first quarter ended April 28, net income rose to $1.09 million or 2 cents a share from $739,000 or 1 cent a share a year ago. Excluding certain items, adjusted earnings from continuing operations rose to $6 million, or 9 cents per share, from $5.3 million, or 8 cents per share, a year earlier.

Sales fell 8.4 percent to $275.9 million, due in part to store closures. Comparable sales, which look at year-over-year changes at existing operations not slated to close, fell 3.8 percent.

(Reporting by Nivedita Bhattacharjee and Jessica Wohl in Chicago, Nadia Damouni in New York and A. Ananthalakshmi in Bangalore; Editing by John Wallace, Tim Dobbyn and Matthew Lewis)

Chilean retailer Cencosud files for $718 million U.S. IPO

Stock Market Predictions

The company in March won shareholders' approval for the issue of American Depositary Receipts as part of a previously approved capital increase of up to 270 million shares.

Cencosud will join 11 other Chilean companies currently trading ADRs. Bank CorpBanca (BCA.N) COB.SN in late 2003 was the last Chilean company to list in New York.

The diversified retailer, which is listed on the Santiago Stock Exchange, the Bolsa Electronica de Chile and the Valparaiso Stock Exchange under the symbol "CENCOSUD," intends to list its ADSs on the New York Stock Exchange under the symbol "CNCO."

Cencosud, which has operations in Chile, Argentina, Brazil, Colombia and Peru, plans to use the proceeds to repay debt and acquire the remaining 38.6 percent of shares of its subsidiary Jumbo Retail Argentina S.A. currently held by UBS AG London.

J.P. Morgan Securities and UBS Securities are acting as the lead underwriters and joint book-running managers of the offering.

The filing did not reveal the number of ADSs the company planned to sell or their expected price.

The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO could be different.

(Reporting by Ashutosh Pandey in Bangalore; Editing by Sriraj Kalluvila)

Dell in talks to buy Quest Software: report

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Quest shares were up 5 percent at $26.45 in early trading on Friday on the Nasdaq.

Shares of the company, which now has a market value of $2.12 billion, gained more than a third of their value after Insight Venture's offer.

Quest said earlier this month it had received multiple alternative proposals during its go-shop period following the offer from the private investment firm.

Dell has been seen by analysts as one of the possible bidders for Quest, whose backup and security software offerings would complement Dell's product portfolio.

Faced with falling PC sales, Dell has been diversifying its revenue base, giving up low-margin sales to consumers and moving into higher-margin areas, such as catering to the technology needs of small and medium businesses in the public sector and the healthcare industry.

Analysts have also named BMC Software Inc, CA Inc, Microsoft Corp and Oracle Corp as other potential bidders.

Quest has retained Morgan Stanley as its adviser.

The company, whose products include software that monitors the flow of data through networks, is led by Chief Executive Vinny Smith, who took over in February after Doug Garn stepped down citing poor health.

When contacted, a Dell spokesman said the company does not comment on rumors or speculation. Quest Software could not be immediately reached for comment.

Dell shares were up 1 percent at $12.58 on the Nasdaq.

(Reporting by Supantha Mukherjee in Bangalore, Jennifer Saba in New York; Editing by Saumyadeb Chakrabarty)