Author Archives: Scalper1

List Of Yahoo Suitors Gets Longer; Stock Up On Price-Target Boost

A takeout seems inevitable for troubled Web portal Yahoo ( YHOO ), which is seeing its core business continue to weaken, according to a report on Monday by Mizuho. The Japanese bank handed Yahoo a price-target boost in anticipation of an acquisition, and Yahoo stock rose. Mizuho raised its price target on Yahoo stock to 32 from 29, maintaining a neutral rating. Yahoo shares were up 3% in midday trading in the stock market today , above Mizuho’s 32 target. Still, Yahoo is down 28% over the past 12 months amid concerns about the company’s poor financial showing  and its future, with some influential investors calling for Yahoo CEO Marissa Mayer to resign. Despite gains in its mobile business, Yahoo’s unique visitor count is sinking, down 7% year-over-year in January, after a 5% drop in December and a 6% fall in November, Mizuho analyst Neil Doshi said in Monday’s industry note, citing comScore data. “In fact, January 2016 was the worst monthly decline in unique visitors we have ever seen for the company,” wrote Doshi, with total time spent on Yahoo sites dropping for the first time, down 4%. “We expect Yahoo will be more vulnerable a year from now to losing users and ultimately ad dollars to larger platforms like Facebook ( FB ), Alphabet ( GOOGL )-owned Google and high-profile startups like Snapchat and Pinterest,” Doshi said. Will Yahoo Appoint Starboard Reps To Its Board? With news reports of Yahoo’s board looking to add two Starboard Value executives to its board, and Yahoo saying it will hire outside bankers, “it seems like the board (and maybe or maybe not Ms. Mayer) … (is) getting more aggressive with Yahoo and M&A,” Doshi wrote. Verizon Communications’ $4.4 billion acquisition of AOL last year “can be viewed as a floor” price for any potential Yahoo buyout, he said. Yahoo’s directors are close to offering at least two board seats to Starboard, an activist hedge fund, in order to avert a proxy fight, according to a report on Friday in the New York Post. Starboard founder Jeff Smith is looking to oust Mayer and force a sale of the company’s core Internet business. Comcast ( CMCSA ), Verizon ( VZ ) and AT&T ( T ) “remain the leading candidates to acquire Yahoo,” said Doshi, adding that those companies could offer a higher price than private equity groups and that they have huge subscriber bases across Internet and TV and operate leading mobile services. “Each of these companies could easily absorb Yahoo , and with clear synergies to their businesses,” Doshi said. Scott Rostan, founder and CEO of Training the Street, a group teaching corporate valuation and merger and acquisition skills, agrees. “AT&T, Verizon and Comcast are such large companies that this would be almost just like a little, bite-sized morsel that they’d be gobbling up,” Rostan told IBD. “The ability to do the transaction would be pretty easy for those companies. It would be more of a question of do they want (it) from a strategic standpoint.” Time ( TIME ) could be another possible strategic suitor, Rostan said. “Imagine Yahoo Sports with Sports Illustrated somehow. Imagine Yahoo News with Time. Imagine Fortune with Yahoo Finance,” he said. “There could be some very interesting combinations that come out” of such a deal. On Monday, Yahoo estimated that its restructuring effort would result in pretax charges of $64 million to $78 million, mostly in the current quarter. Of the total, $40 million to $48 million would be for severance pay and related cash expenditures, the company said in a regulatory filing on Friday. Yahoo announced on Feb. 2 that it would reduce its workforce by 15% by the end of 2016 and close offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan.

Google Seen Slashing Cloud Pricing Vs. Amazon, Microsoft

The next round of price cutting in public cloud computing services could come from Alphabet ’s ( GOOGL ) Google, just as Amazon.com and Microsoft show some restraint, says a Goldman Sachs research report. Amazon Web Services (AWS), part of  Amazon.com ( AMZN ) , is the biggest provider of infrastructure as a service (IaaS), where customers rent computer servers and data storage systems via the Internet. Microsoft ( MSFT ) and Alphabet’s Google are the next biggest. The new boss of Google’s cloud business, Diane Greene, will make her debut at that unit’s user conference March 23 to 24, notes the Goldman Sachs report. Greene, a Google board member since January 2012, founded virtualization leader VMware ( VMW ), which she led as CEO until she was forced out in 2008. In November, Google acquired Greene’s startup, Bebop, for $380 million. While AWS has been the biggest IaaS price-cutter of the last decade, Google Cloud Platform (GCP) has been aggressive since moving into the market. Google slashed prices in March 2014, October 2014 and May-June 2015, Goldman analyst Heather Bellini said in the report. “Another 20% to 30% across-the-board price cut from Google in 2016 would not be surprising,” wrote Bellini. “This could be announced as early as their GCP Next conference in San Francisco on March 23-24. Similar to behavior in 2015, we do not expect Amazon and Microsoft to follow suit.” Goldman Sachs says that the top three service providers are gaining share as Verizon Communications ( VZ ), Hewlett Packard Enterprise ( HPE ) and others exit the public IaaS market and focus on private clouds. Goldman Sachs estimates that AWS’ revenue will hit $12.5 billion in 2016, up from $7.88 billion last year. “If AWS surpasses $10 billion in 10 years, it would be the fastest-growing software business,” surpassing Microsoft, Oracle ( ORCL ), and SAP ( SAP ),” Bellini wrote.

Valeant Stock Sinks As 2016 Guidance Withdrawn, CEO Returns

Embattled specialty drug maker Valeant Pharmaceuticals ( VRX ) said Monday that it was withdrawing its financial guidance and will reschedule its Q4 earnings release, as CEO J. Michael Pearson returns after a long illness. Valeant stock was down 9% in morning trading in the stock market today , near 73 and near a three-year low of 69.33 touched in November. Valeant had planned to report its quarterly results Monday morning, though they would have been unaudited due to an ongoing review of the company’s finances following a scandal last fall that called into question Valeant’s accounting and its relationship with now-closed specialty pharmacy Philidor. Last Monday, the committee reviewing those issues announced an interim finding that $58 million in Philidor-related revenue should not have been booked in 2014, leading to a 10-cent reduction in EPS for that year. However, since some of that revenue was supposed to be booked later, it would add 9 cents to 2015 EPS. Valeant CEO Fought Pneumonia Pearson came down with severe pneumonia at Christmastime and had to be hospitalized for so long that Valeant appointed former CFO Howard Schiller to take over his job temporarily. Pearson had also been chairman, but when he returned to work Monday the company said it would separate the two roles and appointed five-year board member Robert Ingram as chairman. Valeant affirmed its 2016 guidance in mid-January, calling for a 21% increase in sales and a 31% hike in EPS. The fact that it’s now withdrawing that guidance is a worrisome sign, say analysts. “While we had expected updated guidance, we struggle to fully understand the rationale for removing guidance altogether,” wrote Nomura analyst Shibani Malhotra in a research note. But Malhotra says Pearson’s return is a positive sign. “We believe investors still view much of Valeant’s strategy and success as driven by Pearson, and we expect that the ability to retain him as a leader will allow the company to maintain one of its more significant competitive advantages,” she wrote. “Perhaps more importantly, we believe the fact that Pearson is returning as CEO bolsters the credibility of the company and the board of directors, given that the board publicly supported Pearson and his leadership throughout the recent public scrutiny.” RBC Capital Markets analyst Douglas Miehm agreed, noting that Pearson said he would try to build stronger relationships with payers and government regulators and would improve Valeant’s accounting and transparency. “Having said this, we see the overall approach to rescheduling Q4 and withdrawing guidance after reiterating it in January as likely to carry more weight until Mr. Pearson has been able to reach out to the Street and provide some clarity,” Miehm wrote in his research note. Valeant also revealed that Actavis, the generic drug maker in the process of being acquired by Teva Pharmaceutical Industries ( TEVA ), had filed for FDA approval of a generic version of Xifaxan 550mg, a gastrointestinal drug that was the main selling point of Valeant’s $11 billion acquisition of Salix Pharmaceuticals last year. “We note that Valeant currently has 22 patents covering Xifaxan 550, which are scheduled to expire between August 2019 and October 2029,” Miehm wrote. “We continue to believe a generic is unlikely for at least seven years.”