Blackstone drops out of Dell deal. Blackstone (BX) ended its pursuit of DELL after its due diligence raised doubts about the future of Dell's PC business, say sources. Also maybe at issue was Blackstone's inability to figure out a way to free up Dell's overseas cash hoard without incurring a massive tax bill. The move puts Silver Lake and Michael Dell in a stronger position to buy the company for $13.65/share. To be heard from: Southeastern Asset Management and Carl Icahn, among others. Dell shares -2.6% to $13.59 premarket.
IBM misses estimates by wide margin. IBM fell as much as 6% premarket after Q1 earnings missed the mark and revenue fell 5.1% Y/Y. Hardware division sales fell 17%, with management blaming execution rather than the economy. Moving quickly, the company promises "substantial actions," including job cuts and the sale of some businesses. The company is reportedly in talks with Lenovo to sell its low-end server division and a published report in France says IBM plans to cut up to 14% of its workforce in that country.
Google reports mixed Q1. Profit of $11.58/share handily beat analyst estimates for $10.68, but revenue - though higher 31% Y/Y - missed forecasts as ad fees per click fell 4% from Q4 (vs. estimates of -2%). Mobile is the culprit as rates from smartphone ads tend to be about 50% less than those for desktops. Counting on mobile to boost growth, the company says more than 1.5M ad campaigns have been upgraded to support Google's "enhanced" Adwords campaigns. Larry Page reaffirmed the company's commitment to other big bets and said he "gets chills" when he uses Google Glass. Shares rose 1.2% premarket.
Top Stock News
Microsoft gains after profit exceeds forecasts. "I was expecting snow and we just got a flurry," said UBS analyst Brent Thill, pleased after the company lowered its target for operating expenses for the fiscal year ending June 30. Windows division sales rose 23% to $5.7B - less than the $5.9B forecast - but "not bad considering PC (industry sales) were off 14%," says Pacific Crest's Brendan Barnicle. On the conference call, Microsoft (MSFT) said it is working on a new version of Windows, code-named Blue. In other news, CFO Peter Klein will leave the company on June 30 after four years on the job. Shares rose 2.6% premarket.
Softbank not planning higher bid for Sprint. A top executive at Softbank (SFTBY.PK) said the firm isn't planning to raise its $20.1B offer for Sprint (S) after Dish Network (DISH) this week came in with a $25.5B bid. Softbank publicly says its offer is superior to Dish's "highly conditional preliminary proposal," and still expects to complete its 70% acquisition on July 1, but large Sprint shareholders including John Paulson and Omega Advisors have said they prefer Dish's bid. Piper Jaffray's Chris Larsen believes Softbank needs to raise the cash portion of its offer by $2B to match Dish, a move likely to send Softbank's credit rating to junk status.
Regulators eye mortgage REITs for systemic risk. The Financial Stability Oversight Council is set to cite the mREIT industry (MORT) as a potential source of market vulnerability, reported the WSJ. The companies - which leverage up to buy MBS - have seen assets quadruple to $400B since 2009 as investors flock to their high yields. Annaly Capital (NLY) CEO Wellington Denahan speaks up for the industry, noting the rise in assets has come about alongside a rise in the capital base. As large as they've become, mREITs remain a relatively small player in a market dominated by the big banks, the Fed, and the GSEs.
SeaWorld IPO values the company at $2.5B. Blackstone (BX) reportedly priced its 26M share offering of SeaWorld (SEAS) at the very top of an expected $24-$27 range, raising $702M and valuing the theme park operator at $2.5B. SeaWorld earned $77.4M last year - quadruple the amount it earned in 2011 - and will have a quarterly dividend of $0.20, an annualized 2.96% yield at the $27 offering price.
Top Economic & Other News
Japan previews "third arrow" of economic policy. Japanese Prime Minster Shinzo Abe's "third arrow" of a three-part economic policy aimed to boost growth included a promise for more free trade deals. Arrows one and two - super-easy monetary policy and a big boost in government spending - have Japanese markets and Abe riding high. Skepticism about part three runs high though, as few complain about printing money and boosting spending, but opening trade in Japan would require serious reform.
Gold climbs back above $1,400. Gold continued to bounce from panicky selling earlier in the week, rising 1.4% to $1,413/oz. Maybe helping were comments from Japanese Finance Minister Taro Aso who said his nation's new easy money policies went unopposed at the recent G-20 meeting in D.C.