Frontrunning: February 7

  • Here is why AAPL bounced off $550: Apple Repurchases $14 Billion of Own Shares in Two Weeks (WSJ)
  • German Court Refers OMT Decision to Europe’s Top Court (WSJ)
  • Inflation Fuels Crises in Two Latin Nations (WSJ)
  • U.S. job growth seen snapping back from winter chill (Reuters)
  • Google to own $750 million Lenovo stake after Motorola deal closes: HK exchange (Reuters)
  • Frigid Winter Spells Trouble for U.S. Economy (BBG)
  • Winter Games to open, Putin keen to prove doubters wrong (Reuters)
  • Regulators Ready to Proceed on Bank Leverage Limit (WSJ)
  • Abe Eyes Window for Biggest Military-Rule Change Since WWII (BBG)
  • Fidelity Joins D.E. Shaw Opposing Wider Ticks as Small-Cap Fix (BBG)
  • Stellar 2013 Hard to Top for U.K. Builders After 60% Surge (BBG)
  • Hidden Billionaire Daughters Emerge From Simmons Estate (BBG)

Overnight Media Digest


* Apple Inc has bought back $14 billion of its shares in the two weeks since reporting financial results that disappointed Wall Street, Chief Executive Tim Cook said in an interview.

* Sony Corp moved to deal with its two most troubled electronics units, saying it will eliminate 5,000 jobs in the company’s television and personal computer businesses while splitting off its TV division into a separate subsidiary.

* High-frequency traders have been paying to get direct access to market-moving news releases, a practice that can give firms the ability to trade fractions of a second ahead of less fleet-footed investors.

* Investors swapped out of U.S. equity funds and into bonds at the fastest clip on record last week, according to Lipper Inc, as they grasped for safety while the stock market swooned.

* The Pentagon has dropped a plan to retire one of its nuclear-powered aircraft carriers, USS George Washington, after the White House intervened to head off a brewing political fight.

* House Speaker John Boehner squashed growing expectations that Congress would rewrite immigration laws this year-dealing a setback to the White House, a group of U.S. businesses and a bloc of fellow Republicans seeking to improve their party’s chances with Hispanic voters.

* Greenbrier Co Inc, the nation’s second-largest maker of railcars, said the industry needs to move faster to make tank cars more crash-resistant, and will begin offering to retrofit older tanker cars that carry potentially explosive crude oil.

* Expedia Inc posted a bigger-than-expected jump in fourth-quarter revenue as the online travel agent reported growth in bookings, as well as early success in its partnership with Travelocity.

* Twitter Inc shares fell 24 percent Thursday, erasing about $8.7 billion in market value, on concerns about the messaging services’ sluggish user growth.

* The hackers that carried out the massive data breach at Target Corp appear to have gained access via a refrigeration contractor in Pittsburgh that connected to the retailer’s systems to do electronic billing.

* LinkedIn Corp reported solid growth in its core business selling to corporate recruiters, but disappointed investors by projecting revenue lower than analysts’ expectations for the current quarter. The company’s shares fell 8% in after-hours trading.

* General Motors Co reported a 13 percent decline in its fourth-quarter profit as strength in North America and China failed to offset declines elsewhere, with currency problems and costs related to plant closings eroding profitability.

* Spirit AeroSystems Holdings Inc on Thursday booked a raft of new charges against work on its commercial and business aircraft that analysts said raised concerns about the ability of jet maker Boeing Co to maintain momentum in reducing costs on its flagship 787 program.

* Aetna Inc said it expects to lose money on its business in the health-law marketplaces this year, with the demographics of enrollees skewing slightly more than expected toward people likely to rack up higher costs.

* International Business Machines Corp is exploring the sale of its semiconductor manufacturing operations, said a person familiar with the matter.

* The Swedish company behind the Truecaller phone-number identification app has attracted a large equity injection from Silicon Valley investor Sequoia Capital in a funding round that values the still-unprofitable company at $80 million.

* Alcatel-Lucent SA swung to a fourth-quarter profit and said it is in exclusive talks to sell a majority stake in its office-phone business to a Chinese state-owned investment company.

* Some foreign airlines are restricting ticket sales in Venezuela because of worries that the government’s currency moves last month could reduce the value of the billions of dollars they hold in the country by as much as 45 percent.

* 21st Century Fox lowered profit guidance for its fiscal year ending in June as higher expenses related to TV channel launches, the weaker performance of singing-competition show “X Factor” and poor results at its film unit took a toll on earnings in the December quarter.

* Activision Blizzard Inc shares surged on Thursday on better-than-expected earnings and a turnaround in subscribers for one of its most important videogames, “Warcraft.”

* News Corp’s revenue fell 4 percent in its fiscal second quarter as a drop in advertising and subscription revenue at the news and information business offset growth at its other businesses.

* BHP Billiton Ltd and Mitsubishi Corp will cut around 230 jobs from a mine in Australia’s Queensland state, highlighting the challenges facing coal producers here as prices stagnate near multiyear lows.

* Harsh weather chilled sales for many retailers in January, when stores were trying to clear excess inventory following the holidays. Gap Inc, L Brands Inc and Costco Wholesale Corp managed to buck the negative trend, buoying the overall result.

* AOL Inc’s chief executive angered employees Thursday when he said that care for two staffers’ “distressed babies” in 2012 cost the company about $1 million each, expenses that helped drive up AOL’s overall benefits costs and forced management to make difficult decisions.

* A continuing spill of coal ash into the Dan river from a man-made pond adjacent to a power plant in North Carolina is renewing questions about the safety of the hundreds of U.S. sites storing the byproduct of energy generation.



IBM, the world’s biggest technology service provider, is considering the sale of its semiconductor unit, and has appointed Goldman Sachs to sound out possible buyers for the business, according to people familiar with the matter.

A federal jury in New York found Mathew Martoma, a former portfolio manager at billionaire Steven A. Cohen’s SAC Capital hedge fund, guilty on all counts of being part of the largest insider trading case on record.

Barclays has made junior trader Daniel Ryan the interim head of its London spot foreign exchange desk, a post left open after the suspension of Chris Ashton last November amid a global probe into alleged market manipulation, two people close to the situation said.

Alcatel-Lucent has received an offer from China Huaxin that will see the telecoms equipment maker selling 85 percent of its enterprise business, taking Alcatel closer to meeting its targeted 1 billion euro ($1.36 billion) asset-disposal programme.

Silicon Valley-based professional social network LinkedIn disappointed investors after giving a subdued outlook for 2014 that fell short of Wall Street’s expectations.



* A federal jury has convicted Mathew Martoma for insider trading in what may be the last criminal case to emerge from a decade-long investigation of Steven Cohen and his hedge fund, SAC Capital Advisors.

* American labor groups, airlines and pilots say Norwegian Air Shuttle ASA’s expansion plans, which include bringing its pared-down model to the United States and Asia, take unfair advantage of a U.S.-Europe open-skies agreement even though Norway is not a member of the European Union.

* As of Friday, the Treasury will no longer have the authority to issue bonds as necessary to pay the government’s bills. In a matter of weeks, the government could run out of cash and begin defaulting on some payments unless Congress acts to raise the official ceiling on the national debt. And once again, Congress is struggling to avoid a potential fiscal and economic train wreck.

* The Senate failed to move forward on a three-month extension of assistance for the long-term unemployed on Thursday, leaving it unlikely that Congress would approve the measure soon while undercutting a key aspect of President Obama’s economic recovery plan.

* After failing to turn around two of its most troubled consumer electronics businesses, Sony Corp is pushing them aside. The company, which predicted on Thursday that it would lose 110 billion yen ($1.1 billion) in its current fiscal year, said it would sell its unprofitable personal computer unit, split its television division into a separate subsidiary and cut 5,000 jobs from the two businesses.

* General Motors Co on Thursday reported its 16th consecutive profitable quarter, but consistent losses in its troubled European division continued to hurt its results.

* European Central Bank on Thursday kept the benchmark interest rate unchanged for a third straight month, at a record low of 0.25 percent amid the threat of deflation in the euro zone and the region’s unemployment remaining stubbornly high.

* The owner and two executives of the WJB Capital Group were arrested on Thursday and charged with defrauding at least 15 investors out of more than $11 million during the waning days of their now-defunct brokerage company.

* Illinois Tool Works Inc has agreed to sell its industrial packaging unit to the Carlyle Group LP for $3.2 billion, the companies announced on Thursday. The sale of the Illinois Packaging Group signals the end of a process that began last September, when Illinois Tools Works decided to shed the unit and focus on its core businesses.

* After Coca-Cola Co announced its investment in Green Mountain Coffee Roasters on Wednesday, many investors assumed SodaStream International Ltd would suffer, but instead its stock jumped as much as 12 percent on Thursday. Behind Coke’s $1.25 billion investment in Green Mountain is a hedge against the continuing stagnation of the traditional soft-drink business and the rise of the make-your-own-soda sector, led by SodaStream.

* A New York State regulator has dealt a blow to Ocwen Financial Group by halting the transfer of about $39 billion in servicing rights to the company from Wells Fargo & Co .

* The Mercuria Energy Group, a fast-growing energy and commodities trading company, is in exclusive talks to acquire the physical commodities business of JPMorgan Chase & Co , according to a person familiar with the discussions.




* Canada is overhauling its citizenship laws, raising the bar for people to apply to become Canadian and increasing penalties for those who scam the system.

* A coalition of journalists is urging Canada’s government to step up pressure on Egyptian officials to release three journalists, including a Canadian, who have been jailed in Egypt for more than a month.

Reports in the business section:

* Baytex Energy Corp has ended a long drought of big acquisitions by Canadian oil companies, launching a $1.8-billion bid for an Australian-based firm to give it a position in a Texas shale oil formation that is key to surging U.S. crude output.


* A former member of the Canadian Forces has been arrested at Canadian Forces Base Wainwright in Denwood, Alberta, after allegedly posting a threat on a social media site. Military officials say the man in his 40s had a loaded 9mm Beretta in his possession when he was taken into custody on Wednesday.

* Canada’s Industry Minister James Moore is expected to flesh out details of Canada’s new space plan on Friday, which could eventually see Canadian hardware and possibly even a Canadian bound for the moon.


* Typo Products said BlackBerry is trying to hold a monopoly over smartphone keyboards, and that it shouldn’t have to take its new iPhone case off the market. The company, co-founded by “American Idol” host Ryan Seacrest, has filed documents in a California court defending itself against a patent infringement lawsuit.

* Civil liberties activists in British Columbia have filed complaints against Canada’s spy agency and the Royal Canadian Mounted Police for allegedly snooping on opponents of the Northern Gateway pipeline. The BC Civil Liberties Association alleges the spying activities include illegal searches of private information, and says some of the details were shared with oil and energy companies and the National Energy Board.



The Telegraph


A private equity group launched last year by retail giant Alliance Boots has made its first acquisition, buying a luxury aromatherapy company based in Middlesex.


Anglo Irish Bank executives hunted for investors across Europe, the Middle East and the U.S. in the months before its collapse in an effort to fund a doomed attempt to prop up its share price.


News Corp said revenue at its news and information services unit fell 9 percent to $1.6 billion on soft advertising and subscription sales, especially in Australia.

The Guardian


Barclays will begin to hand out bonuses on Friday to its 140,000 staff around the world from a bonus pool expected to be bigger than last year’s.


Bombardier UK has fought off competition from foreign bidders to win the 1 billion pound ($1.63 billion) contract to build trains for London’s Crossrail project.

The Times


Consumers will be opening their wallets this year at the fastest pace in more than a decade and push household spending above 1 trillion pounds for the first time, a leading think-tank has forecast.


The resolution of SuperGroup’s founder to avoid selling stock on eBay has been rewarded with an increase in sales and margins.

The Independent


Drugmaker AstraZeneca has showed it is still languishing in intensive care after patent expiries triggered an 8 percent fall in revenue to $25.71 billion.


Ryanair boss Michael O’Leary expects three more runways to be built at Heathrow, Gatwick and Stansted and says locals should not be able to block plans because they “chose to be a resident under a flight path”.


Luxury brand Burberry has bolstered its boards’ media credentials with the appointment of British Sky Broadcasting Chief Executive Jeremy Darroch.


Fly On The Wall 7:00 AM Market Snapshot


Domestic economic reports scheduled for today include:
Non-farm payrolls for January will be reported at 8:30–consensus 181,000
Unemployment rate for January will be reported at 8:30–consensus 6.7%
Consumer credit for December will be reported at 3:00 pm–consensus $12.0B



Alpha Natural (ANR) upgraded to Neutral from Sell at Citigroup
American Capital Mortgage (MTGE) upgraded to Buy from Hold at Wunderlich
C.H. Robinson (CHRW) upgraded to Hold from Sell at Stifel
Cummins (CMI) upgraded to Outperform from Market Perform at Wells Fargo
DineEquity (DIN) upgraded to Buy from Hold at KeyBanc
Education Management (EDMC) upgraded to Market Perform at BMO Capital
Kellogg (K) upgraded to Neutral from Underweight at JPMorgan
Lennox (LII) upgraded to Equal Weight from Underweight at Morgan Stanley
lululemon (LULU) upgraded to Outperform from Sector Perform at RBC Capital
MWI Veterinary Supply (MWIV) upgraded to Overweight from Neutral at Piper Jaffray
Magellan Midstream (MMP) upgraded to Outperform from Market Perform at Wells Fargo
Myriad Genetics (MYGN) upgraded to Neutral from Underperform at Credit Suisse
Netflix (NFLX) upgraded to Buy from Hold at Stifel
Noble Energy (NBL) upgraded to Buy from Neutral at Mizuho
Sagent Pharmaceuticals (SGNT) upgraded to Buy from Neutral at BofA/Merrill
Sony (SNE) upgraded to Buy from Hold at Jefferies
Starbucks (SBUX) upgraded to Outperform from Market Perform at Wells Fargo
Towers Watson (TW) upgraded to Overweight from Neutral at JPMorgan
WEX Inc. (WEX) upgraded to Neutral from Underweight at JPMorgan
XPO Logistics (XPO) upgraded to Buy from Hold at Stifel


AOL (AOL) downgraded to Neutral from Buy at BofA/Merrill
Echelon (ELON) downgraded to Hold from Buy at Needham
Fairway Group (FWM) downgraded to Hold from Buy at BB&T
Fairway Group (FWM) downgraded to Market Perform from Outperform at BMO Capital
Fairway Group (FWM) downgraded to Neutral from Buy at Guggenheim
Fairway Group (FWM) downgraded to Perform from Outperform at Oppenheimer
Fairway Group (FWM) downgraded to Underperform from Neutral at Credit Suisse
Fluidigm (FLDM) downgraded to Market Perform from Outperform at Cowen
Genomic Health (GHDX) downgraded to Neutral from Outperform at Credit Suisse
Genpact (G) downgraded to Market Perform from Outperform at Wells Fargo
Genpact (G) downgraded to Neutral from Overweight at JPMorgan
iRobot (IRBT) downgraded to Underweight from Neutral at JPMorgan
Lowe’s (LOW) downgraded to Neutral from Buy at Goldman
Maximus (MMS) downgraded to Neutral from Buy at Citigroup
PMFG, Inc. (PMFG) downgraded to Hold from Buy at Stifel
Spirit AeroSystems (SPR) downgraded to Hold from Buy at KeyBanc
VeriSign (VRSN) downgraded to Sell from Neutral at Citigroup


Rackspace (RAX) initiated with an Outperform at Credit Suisse
Red Hat (RHT) initiated with an Outperform at Credit Suisse
SunCoke Energy Partners (SXCP) initiated with a Buy at Brean Capital


Illinois Tool Works (ITW) sold industrial packaging unit to Carlyle Group (CG) for $3.2B
Baytex Energy (BTE) to acquire Aurora Oil & Gas for C$2.6B
LinkedIn (LNKD) acquired Bright for $120M
Shire (SHPG) reported Vyvanse studies did not meet primary efficacy endpoint
Activision Blizzard (ATVI) CEO Kotick: We have strongest pipeline of games in our history; board authorized debt repayment of $375M
American Apparel (APP) reported January SSS down 5%


Companies that beat consensus earnings expectations last night and today include:
Globe Specialty Metals (GSM), FMC Technologies (FTI), Brooks Automation (BRKS), OpenTable (OPEN), Bally Technologies (BYI), Kemper (KMPR), Outerwall (OUTR), NCR Corp. (NCR), athenahealth (ATHN), Tempur Sealy (TPX), VeriSign (VRSN), bebe stores (BEBE), News Corp. (NWSA), Netgear (NTGR), Activision Blizzard (ATVI), LinkedIn (LNKD), Expedia (EXPE), Lionsgate (LGF)

Companies that missed consensus earnings expectations include:
Cigna (CI), Snyder’s-Lance (LNCE), Post Holdings (POST), Bristow Group (BRS), MaxLinear (MXL), Fairway Group (FWM), Imperva (IMPV),  Hittite Microwave (HITT), Echo Global (ECHO)

Companies that matched consensus earnings expectations include:
ACETO (ACET), Intermolecular (IMI), ServiceSource (SREV), Genpact (G), Fluidigm (FLDM)


IBM (IBM) explores semiconductor manufacturing operations sale, WSJ reports
Apple (AAPL) repurchases $14B of stock after earnings, WSJ reports
Google (GOOG) to hold 5.94% Lenovo (LNVGY) stake after Motorola deal closes, Reuters reports
British Airways (BAIRY) considers replacing Boeing (BA) 747s with 777X, Bloomberg reports
Maryland bill would bar energy drink sales (MNST) to minors, CNBC reports
Oaktree Capital (OAK) to sell Osmose in a deal valued near $900M, Reuters reports
AOL (AOL) CEO upsets employees with ‘distressed babies’ comment, WSJ reports
News Corp. (NWSA) promises ‘fundamental review’ of Dow Jones, FT reports


Argos Therapeutics (ARGS) 5.63M share IPO priced at $8.00
Athlon Energy (ATHL) 14M share Secondary priced at $32.00
GeoPark (GPRK) 13.5M share IPO priced at $7.00
Tecogen (TGEN) files to sell 2.03M shares of common stock for holders


via Zero Hedge Tyler Durden

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