Stock Market Predictions

Acme Packet says weak telecom spending to hit results

Stock Market Predictions

Rival Riverbed Technology Inc (RVBD.O) fell as much as 9 percent, while Juniper Networks Inc (JNPR.N) dropped as much as 4 percent.

Acme, whose customers include AT&T Inc (T.N), Verizon Communications Inc (VZ.N) and Sprint Nextel Inc (S.N), said it continued to experience weakness in its North American business.

The company, whose shares have fallen more than 80 percent since April 2011, had said in May that it expected orders to pick up in the second half of the year.

"We view this as yet another significant setback in the company's efforts to regain investor confidence following several missteps," analysts at Lazard Capital Markets said in a client note. "(We) believe the shares will likely be under pressure until signs of both improved execution and spending emerge."

The slowdown in spending by carriers is hurting telecom equipment vendors just as they were recovering from the 2008 recession and intense price wars.

Slowing growth at Acme's session border controller business, which makes products that enable calls over the Internet, and intensifying competition are cause for concern, Mizuho Securities analyst Joanna Makris said in a client note. That business accounts for about 80 percent of Acme's revenue.

"While we appreciate Acme's pioneer status and historically dominant position in fixed wireline networks, we argue that the company's current wireless strategy will achieve limited success over time," Makris said, cutting her price target on the company's stock by $7 to $13.

Acme's shares were trading at $15.62 on the Nasdaq in early afternoon trading, after hitting a low of $15.44, making them one of the biggest percentage losers on the exchange.

Acme said it expected a second-quarter profit of 12 cents to 13 cents per share, excluding items and forecast revenue of $66 million to $68 million, down from $79.7 million a year earlier. It expects its gross margin to fall to about 79 or 80 percent, down from 84 percent a year earlier.

Analysts were expecting earnings of 18 cents per share, excluding items, on revenue of $73.9 million, according to Thomson Global Markets I/B/E/S.

The Nasdaq Composite Index .IXIC was down 1.6 percent in early afternoon trading after a selloff in tech shares led by business software maker Informatica Corp (INFA.O), which dropped as much as 35 percent on concerns over tech spending.

(Reporting by Supantha Mukherjee and Sayantani Ghosh in Bangalore; Editing by Joyjeet Das and Ted Kerr)

A123's cash burn another black eye for green tech

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The company, which received a $249 million grant from the Obama administration as part of a program to develop advanced lithium-ion batteries, said in documents filed with U.S. regulators that it "expects to have approximately four to five months of cash to support its ongoing operations" based on its recent monthly spending average.

Its shares fell almost 11 percent despite A123's announcement of moves to raise $39 million.

A123 has previously raised concerns about its viability due to expected steep losses over the next several quarters.

While analysts said Friday's warning was not new, seeing it in a type of U.S. Securities and Exchange Commission filing used for an important corporate event may have spooked investors.

"While the stock and warrants proceeds of $9 million the company expects from its July 5th offering could conceivably provide the company with another half month or so of runway, we think it is important to get something done much sooner to allay any potential fears," CRT Capital Group analyst David Epstein said.

A123's issues have been a reminder of the struggles for a U.S. electric-vehicle industry still in its infancy and dealing with lower-than-projected demand.

It is also a sharp reversal of A123's fortune since 2009, when it raised $378 million in an initial public offering and its stock rose 50 percent during its first day of trading on the Nasdaq. In 2010, the White House said A123 planned to employ 3,000 people at its two Michigan plants. A123 currently employs about 780 in southeast Michigan.

President Barack Obama's administration has been a strong proponent of electric vehicles and set a goal of getting 1 million battery-powered vehicles on the road by 2015, a target that is looking increasingly unrealistic.

The development of both General Motors Co's Chevrolet Volt and Fisker Automotive's Karma plug-in electric hybrid cars were supported by low-interest federal loans. Electric carmaker Tesla Motors also got backing from the U.S. Department of Energy.

But numerous alternative energy companies have struggled. Fisker suspended work at its U.S. plant earlier this year as it works to renegotiate a $529 million federal loan. Fisker is a major A123 customer.

And since the bankruptcy of Solyndra last fall, a solar panel maker that received $535 million in U.S. loan guarantees, federal support for advanced vehicle technology programs has ground to a halt. Two weeks ago, another bankruptcy announcement from Abound Solar added another $70 million to the tab.

The White House has said repeatedly that start-ups involve a high level of risk and some of them are bound to fail.

Industry officials and analysts have pointed to tightened Department of Energy requirements in the face of withering criticism from Republicans about the Obama administration's generosity for anything related to green technology.

A123, which developed as a start-up at the Massachusetts Institute of Technology, said on Friday it will raise about $9 million by selling shares to existing institutional investors and get access to another $30 million after satisfying conditions related to its cash on hand. Analysts said another factor in the stock price decline was the dilution caused by the exercise of warrants in the stock sale.

"There's still a lot of work to be done," said Needham analyst Michael Lew, who has a "hold" rating on A123 shares. "Any cash they can raise will help buy them some more time, but what we don't know is where the other projects are, how fast they can accelerate them." He added that investors likely were hoping for A123 to raise a larger amount.

A123 previously said it was looking to raise additional cash and was exploring "other strategic alternatives." The Waltham, Massachusetts-based company said it could tap the capital markets for funds.

Stifel Nicolaus previously said A123 would need to raise an additional $75 million by the fourth quarter of 2012 and another $200 million in 2013 to fund its ongoing operations.

A123 said its cash and cash equivalents were about $68 million at the end of May, according to SEC documents. It said it was using on average $18 million to $25 million per month in "net operating and investing cash flows."

The company also had about $40 million of restricted cash, including the $30 million related to the 6 percent senior convertible notes tied to maintaining a minimum cash balance of $40 million, according to the SEC documents. By meeting that requirement, A123 fulfilled the conditions of the account agreement, the documents said.

A123 has said it expects to achieve positive quarterly gross profit margins next year instead of by the end of 2012. It expects positive adjusted operating earnings on a quarterly basis next year as well.

A123's losses stem from its recall of defective batteries built at its Livonia, Michigan, plant. The flaw came to light earlier this year when a Fisker Karma with an A123 battery failed during a test by Consumer Reports magazine.

The repairs will cost nearly $67 million and force A123 to rebuild its inventory. In addition to Fisker, A123 makes batteries for the BMW hybrid 3- and 5-Series cars, and GM's all-electric Chevy Spark due in 2013. China's SAIC Motor Corp and India's Tata Motors also are customers.

A123 said earlier this month it would hire up to 400 people over the next several months in response to increased business in its commercial transportation and grid operations.

(Additional Reporting by Bijoy Koyitty in Bangalore; Editing by Sreejiraj Eluvangal, M.D. Golan and Tim Dobbyn)

Navistar changes course on engines, stock slides

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The move failed to impress investors, who sent shares of the U.S. truck and engine maker down 16 percent, making it the biggest loser on the New York Stock Exchange. Analysts questioned the costs for the transition to the new engine.

Navistar, which makes the International brand heavy trucks and school buses, said the new engine would use liquid urea to help cut emissions of nitrogen oxide, a pollutant linked to asthma. Liquid urea is used by its rivals as a catalyst in diesel engines to reduce emissions of nitrogen oxides.

The move amounts to taking the same road as rivals, including engine maker Cummins Inc (CMI.N) and truck maker Paccar Corp (PCAR.O).

"It fell short of my expectations," said Morningstar analyst Basili Alukos of the move. "I was expecting or hoping for them to abandon their engine business completely and start buying from a third-party supplier."

A key concern for investors is whether the uncertainty around Navistar's engine strategy will make trucking companies less willing to buy its vehicles.

"Seven months ago this would have been a welcome announcement," said Rob Wertheimer, an analyst with Vertical Research Partners. "As it is we see it as a positive, simply due to clarity, but a high risk. Navistar aims to have engines on the road in early 2013. There remains a risk that Navistar is shut out of the business temporarily before then."

In addition to its trouble winning regulatory approval for the new engines, Navistar last month surprised Wall Street with a quarterly loss after taking a $104 million charge for warranty claims on engines sold in 2010 and 2011.

Navistar said its new technology, called In-Cylinder Technology Plus, will also help meet greenhouse gas emission rules in advance of 2014 and 2017 requirements.

Navistar had previously had difficulty winning approval from the Environmental Protection Agency for an alternate technology that did not use liquid urea, which the company had asserted would be a lower-cost option for truckers. It said its forthcoming engine will include aspects of each technology.

"Today's decision (is) a step in the right direction, but more answers (are) needed before becoming aggressive on the stock," R.W. Baird & Co analyst David Leiker wrote in a note to clients. Key questions include the costs of launching the new engine and how profitable the engine will be, he said.

NO FINANCIAL FORECAST

Navistar Chief Financial Officer Andrew Cederoth told investors in a brief conference call the company would not update its earnings and revenue forecasts until after it receives approval for the new engine from the EPA and California regulators.

Executives took no questions during the call.

Analysts, on average, expect a full-year loss of $2.18 per share, including one-time items, or a profit of 22 cents, excluding items, on $14.22 billion in revenue, according to Thomson Global Markets I/B/E/S.

The company said it has already shared its new engine approach with the EPA, which it described as "supportive."

"We have a high degree of confidence in the certainty of certification," said Troy Clarke, who was named president of its truck and engine business last month.

The EPA said in a statement it would "review any new certification application or information once it is received."

Navistar shares were down $4.71 to $24.08. They have lost one-half of their value over the past year and have been volatile over the past month, following the quarterly loss and the emergence of a new, big activist shareholder.

Activist fund company MHR Fund Management LLC, founded and run by Mark Rachesky, has taken a 13.6 percent stake in Navistar, becoming the largest shareholder, ahead of billionaire investor Carl Icahn who owns 11.9 percent.

Faced with the two activist stakeholders, Navistar last month adopted a poison pill plan to fend off hostile suitors.

Icahn last year sought to merge Navistar with rival Oshkosh Truck Co (OSK.N), of which he owns 9.5 percent. Navistar Chief Executive Daniel Ustian had been open to the idea but Oshkosh management and shareholders rejected it.

(Additional reporting by Bijoy Koyitty in Bangalore; Editing by John Wallace, Jeffrey Benkoe and Phil Berlowitz)

Centerra to work with Kyrgyz government on Kumtor issues

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The Canadian company also said it has been assured by the prime minister of Kyrgyzstan that a decree issued on Thursday that canceled certain surface rights that had been granted to Centerra in the Central Asian country would not affect operations at the Kumtor mine.

Shares of Centerra fell 4 percent to C$7.78 on Friday morning on the Toronto Stock Exchange. The miner's stock is down 33 percent since late last month when the report, which said Centerra's operations were damaging the environment and the health of local villagers, was debated in the Kyrgyz parliament.

Centerra maintains that its Kumtor mine, which produced about 580,000 ounces of gold last year, is compliant with local and international environmental, health and safety standards.

Kumtor accounts for some 60 percent of Kyrgyzstan's industrial output and represents nearly 12 percent of the country's gross domestic product. Centerra, which is 33 percent owned by the Kyrgyz state, retains full ownership of the mine and its output.

(Reporting by Julie Gordon; Editing by Peter Galloway)

Aviva raises $494 million from Delta Lloyd stake sale

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Aviva sold 37 million Delta Lloyd shares at 10.75 euros ($13.31) each, it said on Friday, one day after unveiling a program of disposals and cost cuts aimed at appeasing investors irked by its flagging share price.

Aviva shares were up 3.4 percent at 5.55 a.m. EDT, making the company the biggest riser in the Stoxx 600 European insurance index .SXIP, which was flat. Delta Lloyd shares were down 3.3 percent.

"We see this as early evidence of a new determination to re-focus the group on businesses that make a reasonable return," Investec analyst Kevin Ryan wrote in a note.

Aviva acquired Delta Lloyd in 1973 but began offloading its 92 percent stake via an initial public offering in 2009 after an unsuccessful attempt to challenge corporate governance rules that limited its control over the Dutch insurer.

Aviva's shares have lost about a third of their value in the past year, lagging a 10 percent decline for the European sector.

The company's weak stock market performance, which led to the removal of Chief Executive Andrew Moss in May, partly reflects concerns over its heavy exposure to the ailing euro zone, source of 40 percent of its profit last year.

($1 = 0.6443 British pounds)

($1 = 0.8077 euros)

(Reporting by Matt Scuffham and Myles Neligan; Editing by Erica Billingham)

Chelsea shareholder urges co to explore options

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Josiah Austin, who owns 12.39 percent of Chelsea's stock, said he was alerting the company in light of its deteriorating performance, a regulatory filing showed.

"I would welcome the opportunity to sit down with management and the board to discuss steps that can and should be taken now to enhance shareholder value, including an infusion of fresh perspective on the Board," Austin wrote to CEO Simon Pedder.

Chelsea said on Tuesday that U.S. regulators recommended an additional trial for its rejected hypotension drug Northera, further delaying the launch of the treatment.

Nothera is the most advanced clinical candidate of Chelsea, which does not have any approved products.

The Charlotte, North Carolina-based company's shares, which plunged to an eight-year low on Tuesday, rose to $1.30 on Friday on the Nasdaq.

(Reporting by Shailesh Kuber in Bangalore; Editing by Don Sebastian)

Yelp rises on reports of integration with Apple maps

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Apple launched its own mobile mapping service last month, taking the fight into Google Inc's (GOOG.O) domain.

The integration of Yelp's services with Apple's iOS6 will allow users to check in to different locations and businesses directly, without opening the Yelp app, thestreet.com reported on Wednesday.

Yelp was not immediately available for comment.

Yelp, which sells ads and other services to local businesses like restaurants and electricians, would likely see a big rise in check-in activity after the integration, given the huge popularity of the iPhone.

The company, which went public in March, recently said its number of active business accounts more than doubled in the first quarter.

The company's shares rose to $27.7 in morning trading on the New York Stock Exchange.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Don Sebastian)

Unipol hits new hurdle in Fondiaria deal

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Earlier on Friday, Unipol and Fondiaria had priced their respective rights issues, planned to provide funding for their merger plans to create Italy's No. 2 insurer, after which the share price of both companies slumped.

But in later statements, both said Consob had not approved the prospectus for their rights issue and that the offer could no longer be launched on Monday.

Sources close to the deal said banks were working to try and get the capital increases launched on July 16, but the delay would not prompt any shifting of the goalposts in an operation that at times has resembled an Italian soap opera.

The rights issues are also dependent on the banks in the underwriting consortium signing their final contract, but they have not done so yet. However, the merger is unlikely to be derailed because the banks are expected to eventually sign up, a banking source close to the deal said.

Unipol agreed in January to rescue its loss-making peer in a deal brokered by investment house Mediobanca (MDBI.MI).

But a series of judicial and regulatory hurdles, as well as bitter disputes with Fondiaria's main owners, the Ligresti family, have muddied waters and tested Unipol's patience.

An industry source said Fondiaria had only filed its rights issue prospectus in the early hours of Friday with a large number of changes, hinting Consob did not have enough time to evaluate it.

A regulatory source told Global Markets that Consob had requested additional information from the parties, adding this was a normal occurrence in complex operations.

Unipol's takeover plans envisage a four-way merger with Fondiaria, its debt-laden parent Premafin (PRAI.MI) and its unit Milano Assicurazioni (ADMI.MI), with three capital increases.

TOUGH CONDITIONS

Concern has been expressed that it could be difficult to get the rights issues away without a hefty discount, in light of challenging market conditions and financial strains at Fondiaria.

The insurer, which had a market capitalization of 5 billion euros ($6.15 billion) only five years ago, has seen its value shrink to about 387 million euros and has a solvency ratio - a measure of financial strength - well below the regulatory minimum.

Insurance regulator ISVAP has called for Fondiaria's capital to be bolstered quickly, with concern growing it could place the insurer in special administration if a solution is not found soon.

Unipol and Fondiaria are waiting on the banks lined up for the rights issues to formally sign the underwriting contract, another precondition for the capital hikes to go ahead.

"The discount is quite low and I think some of the banks could be scared to sign up since, with interest low, they could end up holding a lot of shares," one Milan analyst said.

Shares in the two insurers slumped on Friday after Unipol offered a 27.2 percent discount for the ordinary shares in its 1.1 billion euro cash call, while Fondiaria gave a 24.7 percent discount on a similar-sized issue.

"The discount is similar to recent operations of this kind but we couldn't have expected any more given the enormous amount of shares issued and dilution involved," a Milan trader said.

Unipol said it would issue around 442.8 million new ordinary shares at 2 euros each, and would offer 20 new shares for every share already owned.

Fondiaria said they would price around 917 million new ordinary shares at 1 euro each, with a swap ratio of 252 new shares to one.

Mediobanca, which holds Fondiaria debt to the tune of more than 1 billion euros, is organizing the consortium.

Shares in Unipol and Fondiaria closed down 10.6 percent and 17.2 percent respectively.

($1 = 0.8126 euros)

(Reporting by Stephen Jewkes and Andrea Mandala; Editing by David Hulmes)

VW sees Porsche buyout clearing path to global leadership

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The deal will enable VW to escape a tax bill of 1.5 billion euros. It also allows VW to speed up Porsche's integration into a multi-brand empire that aims to sell 10 million vehicles a year to become the world's no. 1 by 2018.

"We're wrapping up one of the most significant projects in the automotive world," VW Chief Executive Martin Winterkorn told reporters at the group's Wolfsburg headquarters.

"Together we are more capable than ever of becoming the best auto company on the planet," he said, adding that VW was poised to invest "massively" in new shared technologies and production.

Joint projects already underway include Porsche's next model, the Macan compact SUV, due for a 2014 launch. VW also plans to begin assembling some Porsche models in its own plants.

VW, already a major player in emerging markets such as China, Russia and Latin America, will also need a bigger U.S. presence if it is to win and maintain the global crown.

Under CEO Winterkorn, VW last year opened a factory in Chattanooga, Tennessee, and is adding an Audi plant in Mexico.

Shares in Europe's biggest automaker rose strongly on Thursday after it agreed to buy the remaining half of the sports-car maker for 4.46 billon euros ($5.9 billion), exercising options held since the purchase of its initial stake in 2009.

"VW is getting a good deal," said London-based Morgan Stanley analyst Stuart Pearson, predicting in a note to investors that its completion would lift VW earnings by 6 percent next year. "Porsche is the world's best premium car story."

With Porsche's global sales running 20 percent above their previous record, the main challenge facing the maker of the iconic 911 coupe is to increase production capacity, Pearson added, and integration with VW may help.

After giving up some of their earlier gains, VW shares were 4.3 percent higher at 1005 EDT, while Porsche SE (PSHG_p.DE) holding company stock was down 2.3 percent. The deal is expected to take effect by August 1, VW said.

BUYOUT PRICE

The buyout price - 3.88 billion euros set by the original options, plus a share of expected dividends and other gains from the tie-up - takes VW's total outlay to about 8.4 billion euros for the entire business, excluding debt.

Since 2009, when the basic purchase price was fixed, Porsche's sales have soared and its debt repayments have fallen with interest rates.

VW now values Porsche at "clearly more than 20 billion euros" and will write up the business in its accounts, Chief Financial Officer Hans Dieter Poetsch said on Thursday, pointing to the brand's 18 percent profit margin.

The companies had for months explored ways to avoid a tax bill of up to 1.5 billion euros that would have been incurred if the cash deal had gone through before August 2014.

Instead, by including a single share in the payment to Porsche SE, VW lawyers determined the transaction could go through tax-free under German law, leaving transaction levies of a little more than 100 million euros to pay.

VW's tax move has drawn political scrutiny, and the announcement came less than two days before Germany's Bundesrat, the upper house of parliament, begins debating the annual tax bill amid growing calls for amendments to close the loophole.

"If global players can save billions in taxes with such tricks, taxpayers will feel someone's kidding them," former economy minister Rainer Bruederle said on Thursday.

The VW group - including brands as diverse as Skoda, Audi and Lamborghini - is currently ranked global no.3 after Toyota 7803.T and General Motors (GM.N), according to first-quarter deliveries data compiled by Ernst & Young.

Full VW-Porsche integration is expected to generate annual savings of 700 million euros and erase Porsche's 2 billion euro debt. It will boost VW's full-year earnings by more than 9 billion euros and reduce net liquidity by 7 billion, the company has said.

The companies had first agreed a full merger in 2009, after the sports car maker racked up more than 10 billion euros of debt in a failed attempt to take over VW, pitting Porsche family members against the related Piech clan.

VW dropped the merger plan last September in response to U.S. and German investor lawsuits accusing Porsche of secretly piling up VW shares for the acrimonious bid, causing short-sellers to lose billions.

By purchasing the Porsche manufacturing business instead - a fall-back option included in the original tie-up agreement - VW sidesteps the issue, leaving ongoing litigation risk with the Porsche SE holding, which it is not acquiring.

(Writing by Laurence Frost; Editing by Will Waterman and Giles Elgood)

Informatica hits 2-year low on weak outlook

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The outlook prompted at least two brokerages to downgrade the stock and several others cut their price targets.

Informatica on Thursday forecast second-quarter revenue of $188 million to $190 million, below analysts' expectations of $217.2 million.

"The miss was due to slipped and downsized deals as customers were increasingly cautious and needed more levels of approvals and stronger business justification," Roth Capital Partners analyst Nathan Schneiderman wrote in a note.

Uncertainty in Europe, Informatica's second-largest market that brought in a quarter of its 2011 revenue of $784 million, has hurt two of his top segments - financial services and the public sector.

"Decision-making in Europe was delayed and approval thresholds became more stringent given the macro uncertainty over the last few weeks of the quarter," Stifel Nicolaus analyst Tom Roderick wrote in a note to clients.

Informatica, which helps companies access, integrate, and consolidate data across a variety of systems and users, counts Dell Inc (DELL.O) and BNY Mellon (BK.N) among its customers.

Deutsche Bank said the company's average selling price growth has been inconsistent in the last three quarters, after posting consistent double digit growth till the second quarter of 2011.

The brokerage downgraded the company's stock to "hold" from "buy" and cut its share-price target to $35 from $53.

Analysts also said the company is facing tough competition from International Business Machines Corp (IBM.N), Oracle Corp (ORCL.O) and Tibco Software Inc (TIBX.O).

"With peers like Oracle and Tibco recently reporting and providing more constructive forward quarter guidance, Informatica will not and should not get a pass for company-specific execution issues," Stifel analyst Roderick said.

Jefferies and Co downgraded the stock to "hold" from "buy."

Shares of the Redwood City, California-based company were down $15.06 at $28.31 in early trading. The stock, which hit a near two-year low, was the top percentage loser on the Nasdaq.

(Reporting By Aurindom Mukherjee and Supantha Mukherjee in Bangalore; Editing by Maju Samuel)