Oracle to buy NetSuite for $9.3 billion to gain cloud computing clout

Stock market, Technology

Business, Investing

Business software maker Oracle Corp (N:ORCL) said on Thursday it would buy NetSuite Inc (N:N) for about $9.3 billion in cash, a deal designed to help Oracle gain market share in the fast-growing cloud computing business.

The deal will bring together two companies linked to high-profile technology billionaire Larry Ellison. In addition to being Oracle's executive chairman, entities he owns hold about 40 percent of NetSuite's shares, according to a regulatory filing, a situation corporate governance consultants said would increase scrutiny of the deal.

NetSuite shares rose about 18 percent to $108.30, just shy of the offer price of $109 a share. Oracle shares were up 0.5 percent at $41.15.

"It's definitely pricey from Oracle's perspective but it's understandable and it's justifiable especially in this environment," said Morningstar analyst Rodney Nelson, who noted some companies in the sector have sold for high multiples.

Oracle and NetSuite both offer software applications that help companies automate back end and administrative operations from technology to human resources.

NetSuite's chief executive, Zach Nelson, was responsible for Oracle's global marketing from 1996 to 1998.

Oracle's cloud business, which stores enterprise software and data on remote servers, lets the company sell to clients who lack the budget for on-site hardware and technology staff.

Like rivals SAP SE (DE:SAPG), Amazon.com Inc (O:AMZN) and Microsoft Corp(O:MSFT), Oracle has focused on moving its business toward the cloud-computing model as sales of traditional software licenses struggle.

The deal also could help Oracle, which is aggressively trying to build and sell more cloud-based business software, play catch up with competitors such as Workday Inc (N:WDAY) and Salesforce.com Inc (N:CRM) that specialize in cloud-based offerings.

Jefferies analysts said in a note the deal provides an immediate, significant entry into the mid-market for corporate applications but that "the price paid seems steep."

Oracle also has acquired companies such as Textura and Opower to increase its competitiveness in the cloud market. Morningstar's Nelson said NetSuite would be Oracle's largest purchase since PeopleSoft more than a decade ago.

The company expects the deal to add to its adjusted earnings in the first full fiscal year after it closes.

CORPORATE GOVERNANCE SCRUTINY

Oracle said the evaluation and negotiation of the deal was led by a committee of independent directors. Closing is conditional on investors tendering a majority of the NetSuite shares not owned by executive officers, directors or people affiliated with Ellison and his family.

Kevin McManus, vice president of Egan-Jones Proxy Services, said he expects a few investors might object to Ellison being on both sides but that most investors likely will not care.

“People care (about governance) when someone makes the wrong decision," he said. "But if the merger makes sense for the market, it’s going to be hard to complain too much.”

In June, Oracle said revenue from its cloud-computing software and platform service accounted for 8 percent of overall revenue.

NetSuite on Thursday reported strong second second-quarter results, with revenue up 30 percent to $230.8 million and adjusted net income that beat estimates.

Source Investing.com

Despite dieselgate, VW becomes top-selling carmaker as Toyota slips

Business

Toyota Motor Corp reported a drop in first-half vehicle sales on Thursday following a series of production stoppages, falling behind Volkswagen which became the world's top-selling carmaker in the first six months of 2016 despite its emissions scandal.

The Japanese company, which manufactures the Toyota, Lexus and Daihatsu brands, said its global sales slid 0.6 percent in January-June to 4.992 million vehicles worldwide, down from 5.021 million in the same period last year.

Volkswagen (DE:VOWG_p) said on Wednesday it delivered 5.116 million vehicles in the same period, a 1.5 percent rise.

Having been the world's best-selling automaker for four consecutive years through 2015, Toyota (T:7203) has suffered this year from a hit to Japanese production after an earthquake in April damaged a plant operated by a key supplier, halting production at many of its lines across the country for weeks.

Before that, production at domestic assembly plants ground to a halt for a week in February after an explosion at one of the automaker's steel suppliers led to a shortage of parts.

For the month of June, sales of Toyota vehicles, which include the Camry and Corolla sedans and the gasoline hybrid Prius, fell 1.1 percent on the year to 881,000.

VW's sales have so far not taken a beating from its "dieselgate" scandal, sparked by its admission in September that it installed illegal software to mask toxic emissions on about 11 million diesel vehicles worldwide.

While sales of its mass-market VW brand have suffered, this has been more than offset by strong demand for luxury Audi and Porsche models as well as Czech brand Skoda.

Europe's largest automaker said on Thursday it expected full-year sales to come in slightly above last year's 9.93 million deliveries, as demand in China and Western Europe outweighs declines in the Americas and Russia.

Although the emissions scandal has tarnished its reputation and triggered a multitude of lawsuits, VW has maintained sales in part by offering incentives to buyers in the United States and other markets while it repositions its business by investing in electric cars and on-demand transport services.

General Motors (N:GM), the largest U.S. automaker, is third in global sales rankings, with six-month sales of 4.76 million vehicles, down 1.2 percent from a year earlier.

Source Investing.com

Wall St. mixed as tech titans tee up quarterly reports

Stock market

Wall Street, Investing

Wall Street was mixed on Thursday as investors fretted about disappointing earnings from Ford and awaited quarterly scorecards from technology heavyweights Alphabet (O:GOOGL) and Amazon.com.

It was the 10th session of range-bound trading following a sharp rally in late June and early July that hit record highs and has left the S&P 500 up 6 percent for the year.

Amazon.com (O:AMZN) rose 1.5 percent as investors anticipated its quarterly results after the bell, with Google parent-company Alphabet also due to report.

"Tech has been pretty much the strongest sector over the last month. Momentum players are focusing to buy on pullbacks," said Michael Matousek, head trader at U.S. Global Investors in San Antonio. "With Amazon, if it's a good beat we will be off to the races because it's already pushing up to 52-week highs."

Earlier, Ford reported weak China sales and declared that the U.S. auto industry's long recovery was at an end, triggering a 8.6-percent fall in its shares. The stock was the biggest drag on the S&P 500 index.

The carmaker's dismal forecast rattled the wider automobile market, with shares of General Motors (N:GM) falling 3.2 percent and Fiat Chrysler (N:FCAU) 4.6 percent.

Apple (O:AAPL) rose 1 percent, giving the S&P 500 its biggest lift.

A report by the U.S. Labor Department showed that the number of people claiming unemployment benefits rose more than expected to 266,000 for the week ended July 22.

At 2:40 pm, the Dow Jones industrial average (DJI) was down 0.11 percent at 18,451.04 points and the S&P 500 (SPX) had risen 0.12 percent to 2,169.26.

The Nasdaq Composite (IXIC) added 0.24 percent to 5,152.36.

Seven of the 10 major S&P 500 sectors were higher, with the consumer staples sector (SPLRCS) up 0.4 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.11-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored decliners.

The S&P 500 posted 32 new 52-week highs and no new lows; the Nasdaq Composite recorded 107 new highs and 24 new lows.

Source Investing.com

Under govt pressure, BOJ mulling specific steps for easing - sources

Economy

Business, Investing

The Bank of Japan, under pressure from the government, is considering specific steps for expanding monetary stimulus on Friday to address signs of weakness in inflation, people familiar with the central bank's thinking said.

By timing its action with the government's big fiscal spending package, the bank would aim to maximize the boost of its measures on the world's third-biggest economy, which is struggling to escape decades of deflation, the sources said.

The Ministry of Finance is lobbying hard for the BOJ to ease policy further and has prepared a statement it will publish in the event that the BOJ eases.

"We welcome the BOJ's decision and will deploy all necessary policy steps including a scheduled big stimulus package," says a draft statement seen by Reuters.

It is uncertain whether the MOF has drafted the statement because there is a high chance the BOJ will ease policy or only because it is standard practice to prepare one as a precaution in case the central bank shifts policy.

But the fact a draft statement is being prepared suggests the government is keen for the BOJ to ease on Friday.

Some board members may dissent to BOJ Governor Haruhiko Kuroda's proposal for easing due to wariness over the rising costs and diminishing returns of an already massive stimulus program, however.

The dollar gained to a U.S. session high of 104.98 yen on Thursday after the report.

BOJ IN BIND

Pressure for BOJ action intensified with Japan's economy minister calling on the bank to work with the government to spur growth in the wake of Prime Minister Shinzo Abe's announcement of a bigger-than-expected 28 trillion yen ($266 billion) stimulus package on Wednesday.

Worried about their dwindling policy options, many BOJ officials prefer to not ease now. Some have openly voiced doubts over the feasibility of expanding an already massive stimulus program that has failed to boost inflation.

But analysts say the BOJ has little choice but to ease, with markets almost fully pricing in action and Abe having put the ball into the bank's court by unveiling his big spending plan days before its policy meeting.

"Abe's announcement is a squeeze play on the BOJ. The BOJ has to move now. It is unavoidable," said Hiroaki Muto, an economist at Tokai Tokyo Research Center.

Even if the BOJ were to act, it is unlikely to please market players betting on radical steps such as "helicopter money," or direct central bank underwriting of public debt.

That means the BOJ will likely use its existing policy framework that combines negative interest rates with the huge asset-buying program adopted in 2013.

The BOJ is now buying roughly 110 to 120 trillion yen of government bonds a year to meet a pledge to expand the total amount of its JGB holdings at an annual pace of 80 trillion yen.

Expanding bond purchases further would be a challenge as the BOJ already holds one-third of Japan's entire government bond market.

Still, a sizable increase in bond purchases, combined with an expansion of risky assets like exchange-traded funds (ETF), would be the most likely option if the BOJ wants to shock markets by scale, the sources say.

The option of deepening negative rates from the current minus 0.1 percent is less preferred, as the policy, decided on January, has proven unpopular among the public, they say.

Some analysts aren't quite sure what could happen given Kuroda's history of springing surprises.

The BOJ will take into account the boost to growth from Abe's stimulus package, which means any cut to its inflation forecasts will be small, sources have told Reuters. That makes it hard for the bank to justify acting now.

"It's like trying to read Kuroda's mind - to be honest, we can't say we're very confident (about our predictions) and I think other analysts are the same," said BNP Paribas(PA:BNPP) economist Hiroshi Shiraishi, who sees a 60 percent chance of easing.

"Unless the BOJ does something really big, it can't go above the already high expectations. But if it does do something really big, there's a chance the side-effects and future costs will be really big."

Source Investing.com

Crude falls sharply to fresh April lows, officially entering bear market

Commodities

 U.S. crude futures fell sharply on Thursday, officially entering bear market territory, as further signals of global oversupply dragged oil prices to levels not seen since a failed Doha summit in mid-April.

On the New York Mercantile Exchange, WTI crude for September delivery traded between $41.05 and $42.22 a barrel before closing at $41.16, down 0.76 or 1.81% on the session. With the considerable losses, WTI closed lower for the fourth consecutive session and the eighth time in the last 10 trading days. At session-lows, the front month contract for U.S. crude tumbled to its lowest level since April 20. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $43.15 and $44.14 a barrel, before settling at $43.24, down 0.67 or 1.53% on the day.

U.S. crude futures have now tumbled approximately 22% from their June highs around $53 a barrel.

On Thursday, oil prices showed little signs of reversing an extended downturn after recent data provided indications of rising stockpiles, swelling rig counts and a spike in production. A session earlier, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that U.S. Commercial Crude inventories increased by 1.7 million barrels for the week ending on July 22. At 521.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Analysts expected to see a slight draw of 2.257 million barrels. Previously, U.S. crude stockpiles had moved lower for a period of nine consecutive weeks, offering some optimism for dormant shale producers hoping to return online.

Market players await Friday's weekly rig count from Baker Hughes for further signals on drilling activity nationwide. A week earlier, Baker Hughes said U.S. oil rigs rose by 14 to 371, increasing for the fourth consecutive week and the seventh time over the last two months. At the same time, the total number of oil and gas rigs increased by 15 to 462 for the period ending on July 22. In early-June the combined rig count posted its first weekly gain of the year, halting a drought of 41 consecutive weeks.

Earlier this spring, oil futures slipped below $40 a barrel after negotiations at a meeting of top producers in Qatar collapsed when Saudi Arabia demanded that Iran take part in any agreement to freeze output at January levels. The latest sell-off reinforced views that a five-month rally has come to a screeching halt. In February, WTI plunged to a 13-year low at $26.05 a barrel.

"We're going to rebound, the question is timing," analysts from Citigroup (NYSE:C) said on Thursday.

The latest declines came ahead of the release of quarterly results from Exxon MobilCorporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) in Friday's session. Exxon is expected to report earnings per share of 0.64 on revenue of $60.23 billion.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell to a near two-week low at 96.25 on Thursday before rallying slightly to 96.66 in U.S. afternoon trading (down 0.39%). Earlier this week, the index hit a four-month high at 97.62.

Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.

Source Investing.com

Chipotle to open first 'Tasty Made' burger joint this fall

Business

Investing, Stock market

Chipotle Mexican Grill Inc (N:CMG) on Thursday said it will open its first "Tasty Made" hamburger restaurant this fall in Lancaster, Ohio.

The burrito seller's newest chain will serve only hamburgers, french fries and milkshakes, a recipe that has worked well for California's beloved In-N-Out Burger chain that consistently gets high marks from diners.

It will not be the burrito seller's first effort to expand into new cuisines. It debuted ShopHouse Southeast Asian Kitchen in 2001 and invested in Pizzeria Locale in 2013.

Chipotle won a huge following for its "good food, fast" philosophy that includes serving meats from animals raised without antibiotics and organic produce when available. But it is still fighting to win back customers who abandoned the chain after a series of food safety lapses last year.

"Tasty Made" will compete in a crowded and competitive category dominated by "better burger" chains such as Five Guys Burgers and Fries, Shake Shack Inc (N:SHAK), The Counter, The Habit (O:HABT) and Smashburger. Many of those chains also serve food made from high-quality ingredients.

Source Investing.com

Wall Sreet dragged down by weak data, Ford results

Stock market

 Wall Street, Investing

The S&P 500 index and the Dow edged lower on Thursday as investors fretted about weak economic data and disappointing earnings from Ford.

The carmaker reported weak China sales and declared that the U.S. auto industry's long recovery was at an end, triggering a 9.6 percent fall in its shares. The stock was the biggest drag on the S&P 500 index.

Ford's dismal forecast rattled the automobile market, with shares of General Motors (N:GM) falling 4 percent and Fiat Chrysler (N:FCAU) 6 percent.

A report by the U.S. Labor Department showed that the number of people claiming unemployment benefits rose more than expected to 266,000 for the week ended July 22.

Energy shares took a hit after oil prices fell 2 percent. Exxon (N:XOM) and Chevron(N:CVX) dropped more than 1 percent.

However, gains in Amazon.com (O:AMZN), ahead of its results on Thursday, helped the Nasdaq limit losses.

Strong economic data had put Wall Street on a record-setting run in the past weeks, with the S&P 500 breaking its all-time high six times in 13 days.

"When you've got a one-way market, which we've had for several weeks, it is bound to consolidate or rest a bit," said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management.

"You also have some negative earnings reports and oil prices are back on people's mind as it approaches the $40 level."

At 12:38 p.m. ET (1638 GMT), the Dow Jones Industrial Average (DJI) was down 74.71 points, or 0.4 percent, at 18,397.46.

The S&P 500 index (SPX) was down 4.28 points, or 0.2 percent, at 2,162.3.

The Nasdaq Composite index (IXIC) was down 2.58 points, or 0.05 percent, at 5,137.23.

Eight of the 10 major S&P 500 sectors were lower, with the telecom services index (SPLRCL) falling the most. Consumer staples (SPLRCS) and utilities (SPLRCU) indexes were flat.

Declining issues outnumbered advancing ones on the NYSE by 1,538 to 1,298. On the Nasdaq, 1,639 issues fell and 1,096 advanced.

The S&P 500 index showed 25 new 52-week highs and no new lows, while the Nasdaq recorded 90 new highs and 22 new lows.

Source Investing.com

Gold pares Fed-inspired gains as investors turn attention to BOJ meeting

Commodities

Gold pared gains after hitting two-week highs on Thursday, as market players digested signals that the Federal Reserve could avoid a near-term interest rate hike and looked ahead to a closely-watched meeting from the Bank of Japan.

On the Comex division of the New York Mercantile Exchange, Gold for December delivery traded between $1,339.55 and $1,352.55 an ounce before settling at $1,341.65, up 7.15 or 0.54% on the session. At session-highs, Gold surged to its highest level since July 12 when the precious metal retreated from 28-month highs triggered by an extended Post-Brexit, risk-off rally. Since opening the year around $1,075 an ounce, Gold has soared approximately 25% year to date and is on pace for one of its strongest years in a decade.

Gold likely gained support at $1,253.70, the low from June 24 and was met with resistance at $1,368.60, the high from July 7.

Gold spiked in Wednesday's after-hour session after the Federal Open Market Committee (FOMC) left its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50% at the conclusion of its July monetary policy meeting. Despite noting that near term risks to the economic outlook have diminished over the last month, the FOMC said it still expects that economic conditions may only warrant gradual increases in short-term interest rates in the coming months. For the most part, markets interpreted the statement as a dovish indication that the FOMC could delay the timing of its next rate hike beyond their meeting in September. Following the release, the CME Group's (NASDAQ:CME) Fed Watch tool lowered the probability that the FOMC could raise interest rates in September to 18%, down from 20.3% earlier in the session.

Any rate hikes by the FOMC this year are viewed as bearish for gold, which struggles to compete versus high-yield bearing assets in periods of rising rate environments.

Elsewhere, the Dollar fell sharply against the Japanese Yen amid signals that the Bank of Japan could fail to meet market expectations by approving only slight easing measures at a highly-anticipated meeting on Friday. While Japan prime minister Shinzo Abe unveiled a broad ¥28 trillion stimulus plan on Wednesday, Reuters reported that the Japanese government may only provide as much as ¥7 trillion in direct fiscal stimulus. If Abe is unable to deliver on promises of jumpstarting the economy with a broad stimulus initiative, the Japanese Central Bank could feel added pressure to lower interest rates deeper into negative territory. The Yen has gained nearly 13% against the Dollar year-to-date.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell to a near two-week low at 96.25 on Thursday before rallying slightly to 96.66 in U.S. afternoon trading (down 0.39%). Earlier this week, the index hit a four-month high at 97.62.

Dollar-denominated commodities such as Gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for September delivery surged 0.238 or 1.19% to 20.233 an ounce.

Copper for September delivery soared 0.027 or 1.24% to 2.212 a pound.

Source Investing.com

Myanmar urged to follow shake-up of jade industry with more action on transparency

Commodities

Myanmar's decision to shake up its multi-billion dollar jade business is a ground-breaking opportunity to stop human rights abuses and increase transparency, but more needs to be done to create a more inclusive economy, activists said on Thursday.

The government announced late on Wednesday it will not renew mining permits for jade and other gemstones and that no new permits will be granted until a reformed legal framework is in place, local media reported.

"This is a game changer," Juman Kubba, senior campaigner at British-based charity Global Witness, said of the announcement.

The poorly-regulated industry, estimated to be worth $31 billion, almost half of Myanmar's economic output, has been accused of looting the country's mineral wealth with little regard for local people and the environment.

A 2015 Global Witness report said a string of military figures and drug lords secretly controlled and profited from the trade in jade, a green stone mainly used for ornaments and jewelry.

Nobel laureate Aung San Suu Kyi was swept into office in April after winning a landslide election last year, but the military, which ruled Myanmar for nearly half a century until 2011, still holds immense power.

"It suggests Aung San Suu Kyi's government is serious about reform and could help turn the page on the ruthless military rule, cronyism and human rights abuses of the recent past," Kubba said.

Deadly accidents in Myanmar's jade mining areas, where small time prospectors and big firms vie for the precious stone, have underscored the sector's lax safety rules and a lack of accountability.

Last November, a massive landslide swept through a mining encampment in Kachin State, which produces some of the world's highest-quality jade, killing more than 100 people.

The jade industry has also been accused of creating social problems since narcotics addiction is rife among gem scavengers who come to the mining areas in hope of finding lumps of jade overlooked by big miners.

The struggle over control of the jade business also remains a major driver of armed conflict between the Myanmar army and the Kachin Independence Organisation.

Matthieu Salomon, Myanmar manager for U.S.-based charity, the Natural Resource Governance Institute (NRGI), said the reported announcement opened the door to reform of the gemstone industry and an end to human rights abuses in the sector.

"It has the opportunity now to set up a framework for a responsible and sustainable business, which forms part of a broader, more inclusive economy for Myanmar," said Salomon.

Campaigners urged the government to follow up the announcement with an agreement on how to share the benefits of the jade industry in a transparent way.

The government should also introduce environmental and social measures to protect against landslides and to address local grievances fairly, the NRGI said.

As a participant in the Extractive Industries Transparency Initiative, a global standard to promote accountable management of natural resources, Myanmar should publish more data on permit holders, owners of jade companies and detailed sales records, the NRGI said.

Source Reuters