From Briefing.com: 4:12 pm Hewlett Packard Enterprise beats by $0.04, misses on revs; guides Q4 EPS below consensus; confirms plans to spin off and merge non-core software assets with Micro Focus in $8.8 bln deal (HPE) : Reports Q3 (Jul) earnings of $0.49 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus of $0.45; revenues fell 3.9% year/year to $12.21 bln vs the $12.61 bln Capital IQ Consensus.
Enterprise Group revenue was $6.5 billion, down 8% year over year, flat when adjusted for divestitures and currency, with a 12.6% operating margin. Servers revenue was down 4%, down 2% when adjusted for divestitures and currency, Storage revenue was down 8%, down 5% when adjusted for divestitures and currency, Networking revenue was down 22%, up 12% when adjusted for divestitures and currency, and
Technology Services revenue was down 7%, up 1% when adjusted for divestitures and currency.
Enterprise Services revenue was $4.7 billion, down 5% year over year, down 3% when adjusted for divestitures and currency, with an 8.3% operating margin. Infrastructure Technology Outsourcing revenue was down 6%, down 3% when adjusted for divestitures and currency, and Application and Business
Services revenue was down 4%, down 3% when adjusted for divestitures and currency.
Software revenue was $738 million, down 18% year over year, down 3% when adjusted for divestitures and currency, with a 17.8% operating margin. License revenue was down 28%, down 17% adjusted for divestitures and currency, support revenue was down 17%, flat when adjusted for divestitures and currency, professional services revenue was down 8%, up 1% adjusted for divestitures and currency, and software-as-a-service (SaaS) revenue was down 5%, up 17% adjusted for divestitures and currency.
Financial Services revenue was $812 million, up 1% year over year, net portfolio assets were up 7%, and financing volume was down 6%. The business delivered an operating margin of 9.9%.
Co issues downside guidance for Q4, sees EPS of $0.44-0.49, excluding non-recurring items, vs. $0.60 Capital IQ Consensus Estimate.
Hewlett Packard Enterprise also announced plans for a spin-off and merger of its non-core software assets with Micro Focus in a transaction valued at ~$8.8 billion.
4:05 pm Hewlett Packard Enterprise confirms plans for a spin-off and merger of its non-core software assets with Micro Focus in a transaction valued at approximately $8.8 bln (HPE) :
The combination of these software assets -- which includes HPE's Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses -- and Micro Focus' highly complementary portfolio will create one of the world's largest pure-play software companies. In addition, HPE and Micro Focus announced plans for a commercial partnership that will name SUSE as HPE's preferred Linux partner and will bring together HPE's Helion OpenStack and Stackato solutions with SUSE's OpenStack expertise to provide best-in-class enterprise-grade hybrid cloud offerings for HPE customers.
The combination of HPE's software assets with Micro Focus is expected to create a business with annual revenues of approximately $4.5 billion. Micro Focus expects to improve the margin on HPE's software assets by approximately 20 percentage points by the end of the third full financial year following the closing of the transaction, while also investing in key growth areas like big data and security. As owners of 50.1 percent of the combined company, HPE shareholders will share in the value of these operational improvements, as well as future growth of earnings.
At the completion of the transaction, currently expected to occur by the second half of HPE's fiscal year 2017, HPE shareholders will own American Depositary Shares representing 50.1% of the equity of the new combined company (which will continue under the name Micro Focus) on a fully diluted basis. This equity stake in Micro Focus is valued at approximately $6.3 billion based on the closing price of Micro Focus shares as of market close on September 5, 2016. HPE will also receive a $2.5 billion cash payment prior to the completion of the merger, resulting in total consideration to HPE and its shareholders of approximately $8.8 billion. The transaction is expected to be tax-free to HPE.
To recognize the $8.8 billion of value and unlock a more attractive financial profile for HPE going forward, HPE expects to incur one-time after-tax separation costs of approximately $700 million, with the vast majority occurring in fiscal year 2017. The transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of the transaction by Micro Focus' shareholders.
4:07 pm Intel confirms $4.2 bln deal with TPG to establish a newly formed, jointly-owned, independent cybersecurity company (INTC) :
The new company will be called McAfee following transaction close. TPG will own 51 percent of McAfee and Intel will own 49 percent in a transaction valuing the business at approximately $4.2 billion. TPG is making a $1.1 billion equity investment to help drive growth and enhance focus as a standalone business.
Under the terms of the agreement, TPG will own 51 percent of a newly-formed cybersecurity company in a multi-step transaction valuing Intel Security at approximately $4.2 billion, based on an equity value of approximately $2.2 billion plus McAfee net debt of approximately $2 billion. The debt initially will be financed by Intel until completion of audited financial statements for McAfee (expected within three to five months of close). The transaction is expected to close in the second quarter of 2017, subject to certain regulatory approvals and customary closing conditions.
Chris Young will be appointed CEO of the new company upon closing of the transaction.
4:15 pm : The stock market ended a quiet midweek session on a flat note as participants employed some caution ahead of tomorrow's policy statement from the European Central Bank. The tech-heavy Nasdaq (+0.2%) settled slightly ahead of the S&P 500 (UNCH) and the Dow Jones Industrial Average (-0.1%).
The major averages rose at the start of the session, responding to a positive bias in European markets. Regional bourses ended in the green as investors examined a mixed set of economic data ahead of tomorrow's policy decision from the ECB. The central bank is scheduled to release its September rate decision at 7:45 ET while ECB President Draghi is scheduled to offer remarks at 8:30 ET.
Equity indices pulled back after the first hour as some strengthening in the U.S. Dollar Index (94.97, +0.15, +0.16%) weighed on dollar-denominated oil and the broader market. The greenback benefited from some softening in sterling, following accommodative remarks from Bank of England Governor Mark Carney. Mr. Carney addressed parliament today, indicating that post-Brexit recession risks have receded. However, the BoE governor went on to note that the central bank has further room to maneuver monetary policy, if needed.
The benchmark index found support near its 20-day simple moving average (2180.21), climbing off that level for the remainder of the session. Six sectors ended in the green with technology (+0.2%), telecom services (+0.2%), and energy (+0.3%) outperforming. Conversely, materials (-0.1%), health care (-0.1%), and consumer staples (-0.9%) led to the downside.
The influential technology sector (+0.2%) finished ahead of the broader market as top-weighted Apple (AAPL 108.38, +0.68) outperformed. The Dow component jumped 0.6% after unveiling the iPhone 7 and a new iteration of the Apple Watch. Meanwhile, fellow heavyweight Facebook (FB 131.05, +1.32) rose 1.0% after Morgan Stanley issued some bullish commentary on the name. Conversely, the high-beta chipmakers underperformed, evidenced by the 0.7% decline in the PHLX Semiconductor Index.
In the energy sector (+0.3%), refining names outperformed ahead of this evening's inventory report from the American Petroleum Institute. Phillips 66 (PSX 79.59, +0.48) and Valero Energy (VLO 56.09, +0.82) ended higher by 0.6% and 1.5%, respectively. The Department of Energy's more influential inventory report will be released tomorrow morning at 11:00 a.m. ET. For its part, WTI crude ended its pit session higher by 1.4% ($45.48/bbl; +$0.63).
Biotechnology led in the health care space (-0.1%) as the iShares Nasdaq Biotechnology ETF (IBB 286.10, +2.01) ended higher by 0.7%. In the ETF, Gilead Sciences (GILD 78.22, +0.34) outperformed after noting that it continues to examine potential M&A options, but would prefer to partner with a more mature company with a revenue stream. Meanwhile, Valeant Pharmaceuticals (VRX 30.27, +0.80) and Progenics Pharmaceuticals (PGNX 6.34, +0.18) gained after the two unveiled the first FDA approved Relistor tablets for commercial sale in the United States.
In the consumer staples space (-0.9%), grocery store names weighed as the sub-group moved lower in sympathy with Sprouts Farmers Market (SFM 19.68, -3.13). The stock was under pressure after cutting its third-quarter and full-year guidance. Kroger (KR 31.32, -1.35) and Whole Foods (WFM 29.08, -1.62) fell in sympathy with the name, declining 4.1% and 5.3%, respectively.
Treasuries ended on a flat note with yields little changed through the curve. The yield on the 2-yr note ended flat (0.73%) while the yield on the 10-yr note settled lower by one basis point (1.53%).
Today's participation was below the recent average as fewer than 803 million shares changed hands on the NYSE floor.
Today's economic data included the weekly MBA Mortgage Index and the July Job Openings and Labor Turnover Survey:
The MBA Mortgage Index showed that mortgage applications increased 0.9% in the week ending September 3. This followed a 2.8% gain in the prior week.
The July Job Openings and Labor Turnover Survey showed that job openings came in at 5.871 million from a revised 5.643 million (from 5.624 million) in June.
Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 265k) and Consumer Credit for July (Briefing.com consensus $16.0 billion), which will cross the wires at 8:30 ET and 15:00 ET, respectively.
Russell 2000: +11.0% YTD
S&P 500: +7.0% YTD
Dow Jones: +6.3% YTD
Nasdaq Composite: +5.5% YTD
DJ30 -11.98 NASDAQ +8.02 SP500 -0.33 NASDAQ Adv/Vol/Dec 1732/1.719 bln/1153 NYSE Adv/Vol/Dec 1861/802.9 mln/1103
3:30 pm :
The dollar index was +0.1% around the 94.95 level after yesterday's -1.1% decline, weakening precious metals
Commodities, as measured by the Bloomberg Commodity Index, were up +0.7% around the 83.93 level
Crude oil saw notable volatility for the second consecutive session ahead of tomorrow's EIA inventory data
October crude oil futures rose $0.63 (+1.4%) to $45.48/barrel
Contributing factors affecting the price of oil include:
Yesterday, Iran's President came out with comments in support of measures to aid in an oil price recovery
Non-OPEC producer Russia & Saudi Arabia (the two largest producers in the world collectively responsible for ~20% of global oil production) agreed to form a coalition to track oil markets and recommend action to OPEC members, announced after the G-20 Summit
Saudi Arabian oil minister has stated that he does not see the need for a production freeze at current price levels after the G-20 announcement
The next OPEC meeting will take place in Algiers, Algeria from Sept 26-28
China released data on its strategic petroleum reserves, totalled 31.97 mln tons equal to 33-36 days of China's imports, China notes they have been stockpiling oil in anticipation of a future oil price recovery
Upcoming Data:
API data will be released today after the bell
EIA petroleum data will be released tomorrow at 11:00 am ET, 30 min after natural gas inventory data
Monthly IEA data will be released Sept 13
Natural gas extended yesterday's losses ahead of tomorrow's inventory number
October natural gas closed $0.04 lower (-1.5%) at $2.68/MMBtu
EIA natural gas inventory data will be released tomorrow at 10:30 am ET
In precious metals, gold & silver ended near session lows as the dollar inched higher
December gold ended today's session down $4.90 (-0.4%) to $1349.00/oz
December silver closed today's session $0.28 lower (-1.4%) at $19.85/oz
Base metal copper closed pit trading modestly higher for the day
December copper closed $0.01 higher (+0.5%) at $2.10/lb
The stock market endured another quiet session on Wednesdaywith the S&P 500 (UNCH) spending the day inside an 11-point range. Thebenchmark index finished a step behind the Nasdaq Composite (+0.2%), remaining up 0.3% for the week.
Investors did not receive any market-moving data and thingswill remain quiet on the economic front for the remainder of the week. As forrate hike expectations, the fed funds futures market projects a 52.4% chance ofa rate hike in December.
The technology sector (+0.2%) settled just ahead of thebroader market while chipmakers struggled to keep pace, sending the PHLXSemiconductor lower by 0.7%.
In the broader tech sector, Apple (AAPL 108.38, +0.68) added 0.6% following its product refresh presentation.During the event, Apple unveiled a water-resistant iPhone 7 with stereospeakers and longer battery life. Although the features are new to Appleproducts, other manufacturers have been selling water-resistant devices andphones with similar speaker placement for some time.
In addition to presenting the new phone and a new version ofits Watch, Apple announced that Nintendo's (NTDOY 36.32, +8.12) Super Mario Run will be available through the App Store. Shares ofNintendo rallied 28.8% in reaction to the news.
The Apple press event was today's focal point, maskingrelative strength among hard drive manufacturers after Western Digital (WDC 53.30, +5.75)boosted its guidance. The stock spiked 12.1% while peer Seagate (STX 36.51, +2.04) advanced 5.9%.
Taking a glance at other sectors: XLF UNCH, XLV UNCH, XLY UNCH, XLI +0.1%, XLE +0.6%, XLP -0.9%, XLB -0.1%, XLU UNCH, IYZ +0.8%
Other news among sector components:
Fleetmatics (FLTX 59.99, +0.06) acquired Inosat, terms not disclosed Microchip (MCHP 60.78, -1.49) narrowed Q2 sales and earnings guidance
AMD (AMD 6.84, -0.50) plans to commence concurrent offerings of $600 million in stock and $450 million in debt
MasterCard (MA 99.57, +0.78) guided for low double digit revenue growth on currency neutral basis
Elsewhere in the tech space:
F5 Networks (FFIV 120.42, -4.01) EVP of Product Development and CTO Karl Triebes resigned
IBM (IBM 161.64, +1.29) received favorable ruling in case over timing of a write-down related to semi unit sale In reaction to quarterly results:
HealthEquity (HQY 34.56, +0.70) beat estimates and raised full-year 2017 revenue guidance SecureWorks (SCWX 13.97, -0.43) beat estimates and reaffirmed its guidance for the full year Sigma Designs (SIGM 7.67, -0.63) beat earnings estimates, but guided below expectations Analyst actions:
VMW downgraded to Neutral at Goldman, IPHI downgraded to Market Perform at Northland Capital, ISIL downgraded to Hold at Stifel, and MXIM downgraded to Sector Perform at RBC Capital Markets
3:00 pm Apple issues official release confirming the iPhone 7 & iPhone 7 Plus, its new AirPods wireless headphones, and that Apple Pay will soon be available in Japan (AAPL) :
iPhone 7 and iPhone 7 Plus: "Apple today introduced iPhone 7 and iPhone 7 Plus, the best, most advanced iPhone ever, packed with unique innovations that improve all the ways iPhone is used every day. The new iPhone features new advanced camera systems that take pictures like never before, more power and performance with the best battery life ever in an iPhone, immersive stereo speakers, wide color system from camera to display, two new beautiful finishes, and is the first water and dust resistant iPhone. iPhone 7 and iPhone 7 Plus will be available in more than 25 countries beginning Friday, September 16."
New AirPods wireless headphones: "Apple today introduced AirPods, innovative new wireless headphones that use advanced technology to reinvent how we listen to music, make phone calls, enjoy TV shows and movies, play games and interact with Siri, providing a wireless audio experience not possible before."
Apple Pay in Japan: "Apple today announced that iPhone 7, iPhone 7 Plus and Apple Watch Series 2 will bring customers in Japan the ability to use Apple Pay, an easy, fast and secure way to pay for everything in their daily routines, beginning in October."
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