Tag Archives: hpe

ServiceNow Settles Patent Cases With BMC, HPE For $270 Million

Workflow software developer ServiceNow ( NOW ) lightened its wallet by $270 million, then lightened its stock price Thursday. ServiceNow stock stumbled 3% after the bell in the stock market today before recovering. It was down a fraction, above 63, in afternoon trading Thursday, 30% off its record high of 91.28, set Dec. 4. ServiceNow went public in December 2012 at 18. Investors seemed none too pleased with the size of ServiceNow’s disclosure to the Securities and Exchange Commission, filed after Wednesday’s close, to settle patent infringement litigation with BMC Software and Hewlett Packard Enterprise ( HPE ). ServiceNow had disclosed in early March that at least some settlement was imminent . Hewlett Packard Enterprise stock was down more than 1% Thursday afternoon. ServiceNow rivals SAP ( SAP ) and Salesforce.com ( CRM ) were both up a fraction, with SAP just 2% off recent highs and Salesforce 8% off an all-time high 81.24 set March 31. ServiceNow, which delivers its software via the cloud, said that it is taking the $270 million charge in its first quarter, which it’s slated to report Wednesday after the market close. “The settlement terms are rather significant, at over one-third of ServiceNow’s net cash balance as of Dec. 31, 2015, but still represent less than one year’s free cash flow (management has guided for $325 million of free cash flow in 2016), and both management and investors should welcome having these lawsuits in the rearview mirror,” said William Blair analyst Justin Furby in a research note Thursday. He said, “The company should benefit from the removal of ongoing legal fees that have been included in non-GAAP expenses.” Furby said that he won’t be changing his Q1 estimates for ServiceNow but will look for “additional detail” on Wednesday. ServiceNow Q1 Expected To Show Earnings Growth Analysts polled by Thomson Reuters expected ServiceNow to report earnings per share minus items of seven cents, up from a penny in the year-earlier quarter. Revenue is expected to rise 42% to $301 million. With revenue rising 47% for 2015, the company topped $1 billion in sales for the first time last year, contributing to its three-year 60% sales growth rate. RBC Capital Management analyst Matthew Hedberg estimated that the settlement would cost $1.50 per share off ServiceNow’s presettlement cash balance of $7 per share. Hedberg, who still rates ServiceNow a “top pick,” said in a Thursday research note, “There could be slight upside to forward margin expectations given an early resolution, as management likely planned for a longer trial and additional expenses.” He noted “no future royalty payments” from the settlements. “Overall, we are glad to put this issue to bed and believe focus can now return fully to execution, which had been less than ideal in 2015,” he said. Despite its fast growth, ServiceNow experienced growing pains in 2015, so analysts will look for clues that might firm up expectations for 2016. For the year, Wall Street expects EPS of 60 cents minus items on sales of $1.36 billion, up from 40 cents on $1 billion in 2015. After meeting with ServiceNow CFO Mike Scarpelli Feb. 2, Evercore ISI analyst Kirk Materne said in a research note that the company is going to remain in the penalty box until investors feel more comfortable about the 2016 forecast. He pointed out that ServiceNow had missed its own annual contract value target in 2015 due to “elevated sales turnover” and a pause in hiring in Q2. Sales staff hiring ramped up late last year, but billings guidance of 33% to 34% growth for 2016 “assumes very little/no sales productivity improvement and modest growth expectations for EMEA (Europe, Middle East and Africa) as the new regional sales head ramps up,” Materne warned. Still, he had a buy rating and 83 price target on ServiceNow stock, seeing growth in its market and in adoption rates for its platform. The company now averages seven custom apps per customer, up from 5.6 a year ago, Materne pointed out.

Cognizant Nears, ExlService Hits Record As Outsourcing Stocks Rise

You can almost hear the conversation: “That team did such a great job on that project,” said CEO Joe Fiction, “let’s give them the entire product line to operate and save some dough.” Converting traditional business process outsourcing (BPO) into business process management (BPM) framed the Indo-U.S. BPO Summit this week in Orlando, Fla., sponsored by the Indo-American Chamber of Commerce and India’s National Association of Software and Services Companies ( NASSCOM). Billed as a first-of-its-kind conference, the timing couldn’t have been better, as many of the outsourcers were trading near record highs after a slow start to the year. Service-level agreements “are changing to reflect this (BPO-to-BPM conversion), becoming more business-outcome-focused and leading the market to shift from a pure RFP (requests for proposal) procurement approach to a managed-service, end-to-end solution offering,” said Cowen analyst Bryan Bergin in a research note Friday. “This drives the shift from BPO to BPM and a strategic partner position. The effect of this evolution increases the stickiness of the revenue stream but also ties the fortunes of the provider even closer to that of their client base.” Many BPOs were represented at the show, including  Genpact ( G ), Wipro ( WIT ), Convergys ( CVG ) and WNS Holdings ( WNS ). But Bergin focused on Cognizant Technology Solutions ( CTSH ) and ExlService Holdings ( EXLS ) for their “industry depth and value-added service approaches that position each to win in this evolving landscape,” he said. Cognizant stock was up a fraction in afternoon trading in the stock market today , near 63 but still 10% off its Oct. 28 record high. ExlService stock was up more than 1%, near 52.50, just off of Wednesday’s all-time high of 52.92. Wipro stock was up 1%, 5% off its 52-week high. Genpact stock hit a record high Friday and was up nearly 1.5% Friday afternoon. WNS was up 3.5% Friday, just 7% from an eight-week high touched Nov. 2. Infosys ( INFY ) stock was up more than 1% and near a five-year high. Hewlett Packard Enterprise ( HPE ) stock was up 3% and hit a new record high Friday. “We favor EXLS for its traditional BPO model pairing with an operations consulting business and rapidly growing analytics offering,” Cowen’s Bergin said. “CTSH is building its BPM via a vertical-specific approach, leveraging its scale and expertise in health care and financial services to drive its (approximately) $1 billion business that is growing faster than the company average. We favor such approaches in the evolving BPM landscape.” Cowen carries ExlService with an outperform rating and a 63 price target. Cowen too rates Cognizant as outperform, with a 65 target. ExlService is a member of IBD’s Commercial Services-Outsourcing industry group, which hit a record high Friday. Cognizant is a member of IBD’s Computer-Tech Services industry group, which was trading 9% off its all-time high set Nov. 5. Both companies are near the top of their heaps for overall stock and operating performance, with ExlService earning an IBD Composite Rating of 98 out of a best possible 99, and Cognizant a 93 CR.

Accenture Survives Software Sag Of ’16; Stock Flirts With Record

Seemingly fully recovered from the infamous Software Sag of 2016 in January and February, big-cap Accenture ( ACN ) is flirting with a record-high stock price amid growth in its services, as it heads towards its fiscal Q2 earnings release due before the market open Thursday. Accenture stock was down a fraction in early trading in the stock market today , near 108, 18% above its seven-month low of 91.40 touched on Feb. 9 and just 2% off an all-time high of 109.86 set Oct. 28. Analysts polled by Thomson Reuters on average estimated Accenture earned $1.18 per share minus items for the quarter ended in February, up 9% from the year-earlier period, on revenue of $7.72 billion, down 2.6%. Accenture guided Q2 to $7.62 billion at the midpoint of its range. Dublin-based Accenture “cited no weakness in its financial services pipeline” during its Q1 earnings release on Dec. 17, wrote Cowen analyst Bryan Bergin in a recent research note. “This was (about) three weeks before a tumultuous start to 2016, and nearly two months prior to (services rival Cognizant Technology Solutions ( CTSH )) sounding warning bells in its banking and financial services vertical.” In the Cowen Feb. 25 research note, entitled “The Sky Does Not Appear to be Falling in Financial Services IT Spending,” Bergin wrote that “vendors that have noted service interruption have generally tied such weakness to a handful of specific clients. There have been Indian vendors with reports of healthy internal fiscal 2017 revenue growth targets, (notably Infosys ( INFY ) and Wipro ( WIT )) and positive industry demand narratives across investor days by ( Genpact ( G ), Epam Systems ( EPAM ) and Tata Consultancy Services) that have not yielded indications of across-the-board financials’ spending declines.” He noted that Accenture has grown revenue in financial services in constant currency in four of the last five quarters, although financial clients represent only 21% of Accenture revenue in the last 12 months. In a research note last week, Trefis applauded Accenture for a “very resilient business model,” with 45% of its business in outsourcing and 55% in consulting. Cowen rates Accenture stock at outperform, with a 115 price target. With a healthy IBD Composite Rating (CR) of 80, meaning its stock is outperforming 80% of S&P 500 issues in a variety of metrics, Accenture is worth about half of IBM ‘s ( IBM ) $142.8 billion in terms of market cap. IBM has a weak 56 CR. Infosys, with an 86 CR, has a $42.5 billion market cap, while Cognizant, with an 83 CR, is worth about $36.2 billion based on its stock price. Newly freed from PCs and printers, Hewlett Packard Enterprise ( HPE ) earns a 65 CR, with a $30.4 billion market cap. Slightly smaller Wipro carries a 68 CR, with $30.3 billion in market value. Those six companies comprise the largest members of IBD’s Computer-Tech Services industry group.