Verigy FY Q4 Tops Estimates; Q1 Outlook Beats Street

Verigy (VRGY) shares are up sharply after the semiconductor test company posted Q4 results for its fiscal fourth quarter ended October 31.

For the quarter, Verigy posted revenue of $97 million, up 11% sequentially, and slightly better than the $96.4 million the Street had expected. A non-GAAP loss of 12 cents a share was smaller than the Street projected loss of 20 cents. Orders of $109 million were up 17% sequentially.

For FY Q1 ending in January, the company ses revenue of $105 million to $115 million, with a non-GAAP loss of 2-9 cents a share; the Street had been looking for $105.6 million and a loss of 14 cents.

In late trading, VRGY is up $1, or 11.1%, to $10.

Chordiant Software FY Q4 Results Miss Street Forecasts

Chordiant Software (CHRD) reported worse-than-expected results for its fiscal fourth quarter ended September 30. Revenue was $15.2 million, down from $28.4 million a year, and below the Street at $17.9 million. A non-GAAP loss of 7 cents a share was worse than the Street consensus estimate for a loss of a penny a share.

The company did not give a specific fiscal 2010 forecast, but it did say total license revenue should be higher than the $22.5 million posted in FY 2009. The company expects to return to non-GAAP profitability, and to generate positive operating cash flow.

In late trading, CHRD is off 4 cents, at $3.18.

Sensex in India Above 17,000; Cox & Kings IPO

Stocks in Mumbai traded higher. Rupee edged lower but traded below 46.75 to a dollar. The IPO of a tour operator Cox & Kings India Ltd is 6.2 times oversubscribed. Bhusan Steel sells 5% stake to strategic investors. Scripps Networks agreed to acquire majority stake in NDTV unit for $55 million.

ADC Telecom Swoons On Weak December Qtr Outlook

ADC Telecom (ADCT) shares are down sharply after the network equipment provider offered disappointing guidance for its fiscal first quarter ending in December.

ADCT recently switched to a September 30 fiscal year end, from an October 31 year. For the two-month stub Q4 ended September, the company posted revenue of $183.9 million and a non-GAAP profit of 6 cents a share. For the pro forma three month period ended September, the company had revenue of $293.6 million, and an adjusted profit of 17 cents.

For the December quarter, the company sees sales of $250 million to $275 million, which implies a sequential decline of up to 15%. The company sees a GAAP loss of 5-15 cents a share, including a nickel-a-share charge for amortization expense, and excludes other restructuring charges that at this point aren’t known.

ADC said that this is normally a seasonally soft period, but that “in the current quarter, a larger sequential decline is anticipated due to expectations that major carrier spending, in aggregate, will be down considerably more in the December quarter than in the past.”

ADCT in late trading is down 90 cents, or 13.6%, to $5.74.

Under the radar: Rising demand for Mexico-built auto engines is another recovery sign

Under the radar: Some trends are obvious enough and visible to all investors. Others are more-subtle, but are just as potent, and these often slip 'under the radar.'

Case in point: Demand for Mexico-built vehicle engines is rising, helping to pull Mexico's economy out of it's recession, Bloomberg News reported.

The significance for investors? The increased demand for engines made south-of-the-border is being driven by a rebound in U.S. auto sales. Again, the increased sales trend is nothing to write home about -- U.S. automaker new vehicle sales rose in October and are expected to rise in November, as well, according to data compiled by Edmunds.com, Dow Jones reported, but the important dimension is the trend's direction.

Continue reading Under the radar: Rising demand for Mexico-built auto engines is another recovery sign

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The Upside of the Downside?

While many people are reportedly turning to comfort food to help them cope with the downturn, it seems that some are moving in a healthier direction, according to Britain's Telegraph, in a report entitled "Americans Run Off the Recession in Record Numbers":

Obesity be gone. Americans are lacing up athletic shoes and signing up to run in 5Ks, 10-milers and even marathons in record numbers.

In a country often lampooned as being populated with obese soda-swilling TV junkies, around 9.2 million people completed a certified foot race in the United States in 2008, up from 3.7 million in 1987.

Of those, 425,000 completed a marathon - 26.2 miles, or 42.2 kilometres - and 715,000 ran a half-marathon, according to Running USA, a non-profit group that promotes running. That is up from 143,000 marathon runners in 1980.

The numbers are expected to be even higher this year, said Ryan Lamppa from Running USA, a campaigning group that supports and promtes running as a sport. "There is still a pent-up demand for races in the country."

Marathons across the country are filling up so quickly that race organisers are adding half-marathons (13.1 miles, or 21 kilometres) along with shorter races on event day, Lamppa said.

Around 40,000 people ran the New York marathon in early November. In late October roughly 32,000 people ran the Marine Corps marathon in Washington DC, and 45,000 ran earlier in Chicago.

In Atlanta, 55,000 people signed up for the November 26 marathon - the bulk of the tickets sold online in seven hours - and 45,000 are expected at the Walt Disney World Marathon Weekend on January 10 in Florida.

Why the growth? Running is the cheapest, fastest way to lose weight, and along with walking, the easiest way to exercise.

But that's only part of the answer.

We live in a financially uncertain, violence-scarred world, and running "gives you something to control - you can't control the stock market or the economy, but you can control your health," said Lamppa.

Michael Giordana, a sports sociologist at the University of Illinois, Urbana-Champaign, believes there are three aspects fueling the running boom: people inspired by the 2008 Olympics, increased social networking - for example runners opening Facebook pages to collect money for charity - and a reaction to what he called "the obesity epidemic".

According to the US Centers for Disease Control, about one third of American adults are obese, while another third is overweight.

As more people run and enjoy the experience, word-of-mouth attracts new runners. "The stories that come out motivate people to get off the couch and be more active," said Giordana.

Race days have also become city-wide carnivals, complete with live music, free food, street vendors, and crowds cheering on the athletes.

Big sponsors have jumped into the act. While schools and local shops focus on neighborhood 5K runs, marquee names like Bank of America, ING, McDonalds and Continental Airlines have sponsored major races this year.

Training is also widely available, Giordana said. Aside from scores of books on running, there are software programmes and training programmes held at health clubs, some catering to specific interests like religion or single runners looking for a partner.

Runner's World magazine, the sport's bible, held a virtual training programme through its website that culminated in the November 14 Richmond, Virginia marathon.

Need in-person support? Bridget Bowers heads a training programme run by Pacers, a northern Virginian chain of running shoe shops.

"It's a very social thing to do," said Bowers, who also coaches the American University cross-country team.

Although the article doesn't say so, I'm assuming there are other reasons for the burgeoning interest in running, including the fact that a growing number of Americans:

  • Have more time available for such activities, because they are either unemployed or underemployed
  • Have less money available for traditional but costlier leisure pursuits such as eating out or going to a show
  • Need cheaper forms of stress relief (than alcohol, for instance)
  • Feel pressure to buff up their appearance to gain an edge in a challenging job market
  • Are more interested in life's simple pleasures, including enjoying the great outdoors


Analyst Date Night: Honey, Let’s Hit That BofA Protest

Don’t accuse this Wall Street analyst of being out of touch with Main Street.

Mike Mayo, a CLSA analyst who covers the banking industry, wrote in a recent research report about his experience observing a protest at a Bank of America branch in Manhattan’s Greenwich Village.

Ok, so Greenwich Village isn’t exactly the American heartland. But it isn’t often that you see a financial analyst incorporating his observations from a night out on the town with his wife into a research report. Ever the analyst, Mayo notes the “investment implication” of the banking protest, which featured an actor wearing a mask of BofA CEO Ken Lewis and people using lumps of coal to write “angry” sidewalk messages to BofA executives.

The protesters were criticizing Lewis’ lavish retirement package in light of BofA’s taxpayer-funded bail out.

Mayo’s piece was sent to his clients a few weeks ago on the heels of a New York conference on financial regulation sponsored by The Economist. The note recently came to Deal Journal’s attention and we thought it was still worth highlighting given the roaring debate about Wall Street compensation.

So here is an excerpt from Mayo’s research note:

“My Saturday night bank protest:”

On Saturday night, looking to rest from a week of analyzing bank earnings, I unexpectedly encountered a debate about banks, but only this time from the bottoms-up view via a street protest in the heart of New York City, as opposed to the top-down approach from the forum hosted by The Economist.

My wife and I decided at the last minute to attend a movie called “The Yes Men Fix the World” at the Film Forum in Greenwich Village in NYC. This is a movie about two activists who imitate corporate representatives to make points in the press. As a surprise after the movie, the actors appeared in front of the movie screen and led a Q&A session with audience.

They mentioned their next protest, to be staged at the American Banker’s Association conference in Chicago, and proceeded to lead the entire audience to a Bank of America branch on Bleecker Street to protest compensation and bailouts in the banking industry, complete with bullhorn.

The two actors passed out Bank of America deposit slips that showed a net deposit of $265,969,300,000 to the bank account of Bank of America CEO Ken Lewis, computed as a sum of the taxpayer bailout and backstop ($199bn), bank account fees ($66.9bn), and retirement package of Ken Lewis ($69.3 million).

One of the two actors from the movie appeared with a Ken Lewis mask on his face. I observed the emphatic clapping of the crowd and their energy, the passing out of lumps of coal to write angry messages on the sidewalk, and their seeming willingness to attack any figure that represents the banks, singing as they walked in reference to Ken Lewis’ retirement package, “He works hard for the money” to the tune of the Donna Summer song.

Having written about compensation issues starting in the late 1990s, I’m not surprised that there is a backlash but who expected this? These protests, political positioning, and required changes by regulators might not go away as quickly as desired by the industry.

The next CEO of Bank of America may need to realize that efforts will be anything but business as usual. Indeed, at The Economist conference, Lawrence Summers seemed to recognize this when he stressed that all major financial firms were beneficiaries of the bailouts of the past year, and that this should not be forgotten given stark differences between Wall St. and Main St. or, in my unexpected first hand example, Bleecker St.

The investment implication is that retail-oriented firms, ie, more traditional banks, may have more pressure than expected on their fees and that all financial firms will have greater scrutiny of their perception to the public.”


Intuit FY Q1 Tops Estimates; Q2 Outlook Misses

Intuit (INTU) this afternoon posted better-than-expected results for its fiscal first quarter ended October 31, with revenue of $493 million, up 2% from a year ago, and ahead of the Street at $487.7 million. Non-GAAP loss of 10 cents a share was smaller than the expected loss of 16 cents.

For Q2, however, the company sees revenue of $800 million to $835 million, with non-GAAP EPS of 29-32 cents; the Street has been expecting $833 million and 37 cents. For the full year, the company affirmed its previous forecast of $3.3 billion to $3.43 billion in revenue, with non-GAAP operating income of $985 million to $1.025 billion.

In late trading, INTU is down 65 cents, or 2.2%, to $29.62.

SocGen’s worst-case debt scenario

Our friends at the Daily Telegraph sent us into something of spin on Wednesday evening, when they published this: What they didn't mention was that the Societe Generale cross asset research study in question was published more than a month prior. Crucially, the Telegraph failed to highlight this little caveat,...

United States on verge of historic Senate debate on health care

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Any experienced investor knows that these are not normal times. But they could become truly historic times, if the United States is able to pass universal health care legislation in the the weeks ahead.

Sen. Majority Leader Harry Reid, D-Nevada, has crafted a health care bill that would cut the U.S. budget deficit by about $130 billion over 10 years, while extending coverage to up to 94% of Americans, The Associated Press reported Thursday. The bill's estimate cost is $848 billion.

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Smallest Businesses More Likely to Add Workers Than Largest

The smallest businesses were more likely to add workers during the first quarter than the largest firms, the Labor Department said today.

Private companies with one to four employees accounted for 18.2% of gross job gains in the first three months of the year, up from 17.1% in the previous quarter, according to the department’s Business Employment Dynamics report.

Meanwhile firms with 1,000 or more employees were responsible for 13.7% of gross job gains, down from 17.8% the previous quarter. The largest companies also let go of more workers, accounting for 18.1% of job losses. Small firms accounted for 14.9% of job losses.

On the whole, employment news was negative. Private companies shed a net 2.7 million jobs in the first quarter – the largest net loss for any quarter since the department began keeping track in 1992. Employers added 5.7 million jobs and cut 8.5 million.


Chegg Raises $57 Million

Chegg.com, a Santa Clara, Calif.-based online marketplace for textbook rentals, has raised $57 million in Series D funding. Insight Venture Partners led the round, and was joined by return backers like Kleiner Perkins Caufield & Byers, Foundation Capital, Gabriel Venture Partners and Primera Capital. Insight also led a $25 million credit facility, which is on top of a $30 million facility recently secured from Pinnacle Ventures and TriplePoint Capital.

PRESS RELEASE

Chegg.com, the No. 1 online textbook rental company, announced today that it has successfully closed $57 million Series D equity funding, led by Insight Venture Partners. In addition, Insight Venture Partners also led a syndicate that has provided a $25 million credit facility, adding to the $30 million in debt facility recently secured from Pinnacle Ventures and TriplePoint Capital. With this capital, Chegg.com plans to service the company’s extraordinary growth, enhance its commitment to best-in-class customer service and further build partnerships with publishers, wholesalers and colleges. As part of the funding event, Deven Parekh from Insight Venture Partners joins Chegg.com’s Board of Directors.

Using capital previously provided by Kleiner Perkins Caufield & Byers, Gabriel Venture Partners, Primera Capital and Foundation Capital, Chegg.com has helped hundreds of thousands of students at more than 6,400 colleges save in excess of $65 million with its Netflix-like textbook rental model. The company expects to double its workforce and to continue expanding its customer base and the number of colleges it serves.

“We are thrilled with the continued excitement from leading investors who understand the tremendous value we provide to students around the country,” Chegg.com Chief Executive Officer and Co-Founder Osman Rashid said. “This new funding is a significant step up from Series C and a testament to the growing market opportunity for Chegg.com’s textbook rental offering. With college tuitions continuing to climb and higher unemployment rates, parents and students are looking for any and all ways to cut costs.”

“Chegg.com exemplifies the type of company we look to invest in; a company that provides meaningful customer value, has a strong and growing customer base and, most importantly, an idea and an innovative spirit that drives business objectives,” said Deven Parekh, managing director of Insight Venture Partners, which has also invested in Twitter and SolarWinds among others. “We are big believers in the market potential for online textbook rentals and are excited about the high-growth trajectory of Chegg.com. Insight’s infusion of new financing will enable Chegg.com to execute on its aggressive growth plans.”

Chegg.com allows college students to rent textbooks online and save 60 to 75 percent off their textbook bill. In addition to saving money, students support the environment when they use Chegg.com; the company plants a tree for every textbook rented, bought or sold. To date, Chegg.com has successfully planted close to 1.5 million trees around the world.

“The aggressive growth Chegg.com has experienced is not only because we provide students significant savings on their textbooks — on average $500 per year — but our dedication to unparalleled customer service.” Chegg.com Senior Vice President of Operations and Co-Founder Aayush Phumbhra said. “Some of the additional funding will be used to further enhance our commitment to best-in-class customer service and build more partnerships with publishers, wholesalers and colleges.”

About Insight Venture Partners

Founded in 1995, Insight Venture Partners is a leading private equity and venture capital firm focused on the global software, internet and data services industries. Insight’s team is composed of experienced investors and operating executives with more than 150 years of collective experience in these industries, and a capital base of $3 billion to support the companies in which they invest. The company is headquartered in New York City.

About Pinnacle Ventures

Pinnacle Ventures is a private venture capital fund focused on providing debt and equity financing to early-stage companies across information technology, cleantech and healthcare. Pinnacle differentiates itself through the strength and diversity of its team, its creative and flexible financing alternatives and its unique approach to helping its portfolio companies achieve success.

About TriplePoint Capital

TriplePoint Capital is the leading global specialty finance company devoted to serving high-growth private equity and venture capital backed companies throughout their lifespan with debt financing, equity capital, and complementary services. With unparalleled levels of creativity, flexibility and customer service, TriplePoint Capital has been the primary debt-financing provider to YouTube, Facebook, Adify, Coskata, Facebook, Ilypsa, Suniva, Proteolix and numerous other high profile technology, cleantech, and life sciences companies. TriplePoint Capital is uniquely qualified as the only provider equipped to meet the needs of high-growth companies at every stage of their development. Headquartered on Sand Hill Road in Menlo Park, California, TriplePoint Capital partners with high-growth companies around the world.

About Chegg.com

Chegg.com’s transformative concept of money-saving, online rental access to textbooks has made it one of the Internet’s fastest growing companies and the number one online textbook rental company. Launched nationally in 2007, to-date, Chegg.com has saved students more than $65 million off the cost of textbooks at more than 6,400 colleges. With a growing inventory of more than 2.4 million titles, Chegg.com puts textbooks into the hands of students when they need them arriving in the brand’s iconic orange box. For every book rented, Chegg.com plants a tree through American Forests’ Global ReLeaf Program. To date, Chegg.com has planted more than 3,000 acres of forests.

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Dell: Dude, You Laid Another Egg

Dell (DELL) shares are headed south this afternoon after the company posted disappointing results for its fiscal third quarter ended October 30.

Dell posted revenue for the quarter of $12.9 billion, up 1% sequentially, down 15% from a year ago, and below the Street at $13.2 billion. Per share earnings of 23 cents a share were a nickel below the Street at 28 cents.

Gross margin was 17.3%, worse than the 18.1% expected by the Street. Shipments were flat sequentially and down 5% from a year ago. Operating income was down 43% from a year ago at $577 million; net income at $337 million was down 54%.

Large enterprise revenue was up 4% sequentially and off 23% from a year ago; public sector was down 3% sequentially, and 7% from a year ago; small and medium business was up 5% sequentially, and down 19% year-over-year. Consumer revenue was flat sequentially and down 10% from last year.

For Q4, the company sees seasonal improvement in the consumer business, with seasonal weakness in the public sector. Dell sees Q4 revenue up from Q3.

We are seeing improvement in overall underlying IT demand that is continuing into the fourth quarter,” CEO Michael Dell said in a statement. “The same is true with momentum in Dell’s business, specifically in our Large Enterprise and SMB segments. The launch of Windows 7 is being very well received by SMBs and consumers, and we’ll see the benefits of that more fully in our fiscal Q4.”

Dell in late trading is down $1.19, or 7.3%, to $14.89.

European Makets Close Lower; Trichet Comments

European markets closed lower. The ECB President Trichet comments suggest a gradual unwinding of economic stimulus. JC Decaux renews its exclusive advertising contacts in Shanghai. Technip awarded gas facilities contract in Abu Dhabi. Solon SE nine-month loss shrinks.

What Happened to the Public Option

Robert Reich refuses to give up on the public option:

Harry Reid, and What Happened to the Public Option, by Robert Reich: First there was Medicare for all 300 million of us. But that was a non-starter because private insurers and Big Pharma wouldn't hear of it, and Republicans and "centrists" thought it was too much like what they have up in Canada -- which, by the way, cost Canadians only 10 percent of their GDP and covers every Canadian. (Our current system of private for-profit insurers costs 16 percent of GDP and leaves out 45 million people.)

So the compromise was to give all Americans the option of buying into a "Medicare-like plan" that competed with private insurers. Who could be against freedom of choice? Fully 70 percent of Americans polled supported the idea. Open to all Americans, such a plan would have the scale and authority to negotiate low prices with drug companies and other providers, and force private insurers to provide better service at lower costs. But private insurers and Big Pharma wouldn't hear of it, and Republicans and "centrists" thought it would end up too much like what they have up in Canada.

So the compromise was to give the public option only to Americans who wouldn't be covered either by their employers or by Medicaid. And give them coverage pegged to Medicare rates. But private insurers and ... you know the rest.

So the compromise that ended up in the House bill is to have a mere public option, open only to the 6 million Americans not otherwise covered. The Congressional Budget Office warns this shrunken public option will have no real bargaining leverage and would attract mainly people who need lots of medical care to begin with. So it will actually cost more than it saves.

But even the House's shrunken and costly little public option is too much private insurers, Big Pharma, Republicans, and "centrists" in the Senate. So Harry Reid has proposed an even tinier public option, which states can decide not to offer their citizens. According to the CBO, it would attract no more than 4 million Americans.

It's a token public option... And yet Joe Lieberman and Ben Nelson mumble darkly that they may not even vote to allow debate on the floor of the Senate about the bill if it contains this paltry public option. And Republicans predict a "holy war."

But what more can possibly be compromised? ... Make it available to only twelve people?

Our private, for-profit health insurance system, designed to fatten the profits of private health insurers and Big Pharma, is about to be turned over to ... our private, for-profit health care system. Except that now private health insurers and Big Pharma will be getting some 30 million additional customers, paid for by the rest of us.

Upbeat policy wonks and political spinners ... will point out some good things: no pre-existing conditions, insurance exchanges, 30 million more Americans covered. But... Most of us will remain stuck with little or no choice -- dependent on private insurers who care only about the bottom line, who deny our claims, who charge us more and more for co-payments and deductibles, who bury us in forms, who don't take our calls.

I'm still not giving up. I want every Senator who's not in the pocket of the private insurers or Big Pharma to introduce and vote for a "Ted Kennedy Medicare for All" amendment to whatever bill Reid takes to the floor. And if this fails, a "Ted Kennedy Real Public Option for All" amendment. Let every Senate Democratic who doesn't have the guts to vote for either of them be known and counted.

I think it's important to have a public option in the bill in some form, even an unsatisfactory one, because it will be much easier to expand the option once it's in place than it would be to pass new legislation in the future that creates a public option.

Closing Bell: The grinch comes early (INTC, HOTT, MVIS, ETFC, SHLD)

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Today's jobs data was not bad, relatively any way, but the housing delinquencies and foreclosure rates was just awful and not representative of anything good. The overseas selling had the markets soft this morning and despite a recovery off lows the 'positive green line' was never really in the cards at the end of the trading day. The retailers are also running soft because of excessive discounting and promotions before the holiday season even starts.

Here are the unofficial closing bell levels:

Dow 10,341.44 -84.87 (-0.81%)
S&P 500 1,094.90 -14.90 (-1.34%)
Nasdaq 2,156.82 -36.32 (-1.66%)

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