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Online Travel, Other Tech Giants Set Sights On Cuba

As President Obama stands beside Cuban President Raul Castro in Havana and brokers historic talks to thaw relations between the two countries, online travel giants and other Silicon Valley titans have set their sights on building businesses on the island nation. The $8.4 billion tourism industry is likely to swell once Washington allows general tourism to the island nation. For now, a license from the Treasury Department is required for legal travel to Cuba, but the online travel kings have been quick to strike deals to build sales to that nation. Still, online travel firms shouldn’t expect any big returns on their efforts for three to five years, says Douglas Quinby, an analyst with travel research firm Phocuswright. “But once all the ducks are lined up, I think you’re going to see a lot of interest for U.S. travelers,” Quinby told IBD. “It’s a huge Caribbean destination, it’s got great beaches and sun.” Online travel giant Priceline ( PCLN ), via its Booking.com platform, already is setting up shop in Havana and allowing U.S. citizens to reserve and pay for rooms at Cuban and foreign-owned hotels. “Members of our leadership spent many weeks working hand in hand with the Cuban government and tourism authorities, hotel partners, and banks to ensure that when we launch a few weeks from now our customers will experience the secure and seamless service they’ve come to expect from Booking.com,” Todd Dunlap, managing director of Booking.com Americas, told IBD via email. Expedia ( EXPE ) is working on getting travel to Cuba online as well — though it did not share a timetable or a specific date that bookings could begin. “We currently have a team working across multiple channels to help enable U.S.-to-Cuba travel, taking every step to ensure that the solutions align with the laws governing travel between the countries,”  company spokeswoman Sarah Gavin said in an emailed statement. Privately held Airbnb has been operating in Cuba for a year, and is available to U.S. citizens in Cuba. The San Francisco-based firm lets travelers rent homes, rooms in homes and apartments. According to an Airbnb blog post , U.S. visits to Cuba rose 77% in 2015, to 161,000. The company says it’s working closely with the Cuban government. TripAdvisor ( TRIP ) spokeswoman Julie Cassetina told IBD via email that the company is “now displaying hotel metasearch for Cuban hotels” on its website, but she declined to make executives available for an interview. Silicon Valley Heads To Havana Outside of the online travel agency kings, the tech contingent included IBD Leaderboard stock PayPal ( PYPL ). In a blog post Sunday, PayPal CEO Dan Shulman outlined his case for targeting Cuba. The major cash cow for the firm is likely to be in assisting Cubans who receive money from sources in the U.S., an influx which at the moment, according to the blog , accounts for $2 billion, or 3%, of the Cuban economy each year. It’s a chance for PayPal to expand the reach of its Xoom subsidiary, which handles international transfers. PayPal bought Xoom for $890 million in July 2015. The blog also makes the pitch that PayPal plans to find ways to attract Cuban small businesses — which at the moment are mostly not set up to process credit and debit cards. Privately held Stripe, which competes with PayPal payments-processing subsidiary Braintree, also made the trip to Cuba. Stripe  said in a blog  that it would start offering Cuban businesses the ability to set up bank accounts and incorporate in the U.S. On the trip, President Obama said Alphabet ( GOOGL )-owned Google would try to help ensure that Cubans have access to broadband Internet, which remains scarce, especially outside of large cities. “We know, from the experience of many countries around the world, that new technologies and improved internet access can help people in their daily lives, provide new information and experiences, and help harness a country’s creativity and ingenuity,” Brett Perlmutter, the Cuba lead for Google Access,  wrote in a blog post Monday. “We hope to have the chance to offer more services to the Cuban people in the future.” Xerox ( XRX ) CEO Ursula Burns also attended the trip in a fact-finding capacity. “Recent changes in U.S. regulations may afford new commercial opportunities in Cuba,” Burns told IBD in an emailed statement, “but the parameters of those opportunities are not always obvious. The U.S. government has worked hard to describe what the recent changes mean. I think part of my job on this trip is to evaluate what they mean in light of the economic realities here in Cuba.”

Cognizant Misses Q1 Guidance As Q4 EPS Beats; Xerox BPO Lurks

Highly rated business process outsourcing firm Cognizant Technology Solutions  gapped down 8% after the Monday stock market opening bell, shortly after management disappointed investors with guidance lower than Wall Street expected for the first quarter and 2016. Cognizant ( CTSH ) beat analysts estimates for Q4 earnings growth and came in short of analysts’ revenue expectations. Its stock fell as low as 53.46 early Monday in a rough market, 23% below its all-time high 69.80 reached Oct. 28. Shares were down 7% midday in the stock market today . Cognizant stock enjoys a high IBD Composite Rating of 90, meaning it’s performing better than 90% of stocks across a variety of metrics. That’s a hair better ranking than its larger business process outsourcing (BPO) rivals Infosys ( INFY ), somewhat better than  Accenture ( ACN ) and far better than IBM ( IBM ). Like Cognizant with huge operations in India, Infosys was down 5% at midday Monday. Accenture about 4.5% and IBM was off 1%. A new concern for BPO companies — not that they haven’t been competing already — is Xerox ‘s ( XRX ) BPO spin-off, announced just 10 days ago. Xerox has been offering outsourcing for years, but as a free-standing publicly traded company its BPO is likely to receive heightened attention in the market. Cognizant declines to discuss Xerox, a spokeswoman said. Xerox stock was down about 5% at midday. Cognizant said the current Q1 earnings per share should reach 78-80 cents on revenue of $3.18 billion to $3.24 billion. Analysts polled by Thomson Reuters thought Cognizant could do better on earnings, expecting adjusted EPS up 12% to 81 cents from 71 cents a year ago, on sales up 14% to $3.319 billion from $2.911 billion in Q1 2015. For Q4 2015, Cognizant said it earned 80 cents per share minus items, up 19.4% from 67 cents a year earlier, on revenue up 17.9% to $3.23 billion. Analysts polled by Thomson Reuters had on average been expecting 78-cents EPS minus items on $3.24 billion in revenue. “Our cash and investment balances, net of debt, grew by $1.5 billion during 2015 due to our strong business performance and strong cash flows,” said CFO Karen McLoughlin in Cognizant’s earnings release. She said Cognizant spent more than $375 million buying back stock in 2015, “reflecting our commitment to drive shareholder value.” Said President Gordon Coburn: “While digital opportunities significantly expand our addressable market, our rapidly growing consulting, infrastructure and business process services and geographic market expansion, continue to be solid drivers of demand for our services.” Cognizant and Infosys recovered in December from heavy flooding in Chennai, India, where they employ tens of thousands of workers.  

Activist Attack On Female CEOs

There are 27 companies in the S&P 500 that have a woman CEO – just 1 of those companies have any of the three common takeover defenses in place – including staggered boards, poison pills or unequal voting rights. Nearly one in four of the men-led S&P 500 companies have at least one defense. Now, an even bigger question, is it that activists are targeting women-led companies or is it that activists are really just target underperforming companies? (click to enlarge) With Carl Icahn’s targeting of Xerox (NYSE: XRX ), it’s official, activist investors are out to get female CEOs. Part of this is the fact that they have poor defenses against said activists. There are 27 companies in the S&P 500 that have a woman CEO – just 1 of those companies have any of the three common takeover defenses in place – including staggered boards, poison pills or unequal voting rights. Reynolds American (NYSE: RAI ) is the lone exception, but the takeover defense was in place long before Susan Cameron showed up there. Nearly one in four of the men-led S&P 500 companies have at least one defense. The bigger question, I think, is not having these takeover defenses, is that good or bad corporate governance practice? Xerox’s Ursula Burns is just the latest to get a call from an activist this year. Nelson Peltz’s Trian Fund has been a true woman hater of late, taking on DuPont’s (NYSE: DD ) Ellen Kullman and PepsiCo’s (NYSE: PEP ) Indra Nooyi before that. Peltz has also been putting pressure on Mondelez’s (NASDAQ: MDLZ ) Irene Rosenfeld. Bill Ackman and his Pershing Square ( OTCPK:PSHZF ) have joined in on the Mondelez activist fiasco as well. David Tepper, the recent TerraForm (NASDAQ: TERP ) activist, was part of a group with frontman Harry Wilson that went semi-activist on GM (NYSE: GM ) CEO Mary Barra to force her into a massive buyback. Now, an even bigger question, is it that activists are targeting women-led companies or is it that activists are really just target underperforming companies? Is it safe to assume that activists target women CEOs because they see them as easy targets? And it could be that Wall Street is simply giving women the tough turnaround jobs that prove impossible – Marissa Mayer, Yahoo (NASDAQ: YHOO ), anyone? Just chew on this will you; takeover defenses are said to weaken shareholder rights. Hence, women-led companies score better in the corporate governance department. And there’s the strong correlation of underperforming stocks and weak shareholder rights.