Best Buy profit beats estimates; shares surge

Business

Best Buy Co Inc (N:BBY) reported a much higher-than-expected quarterly profit on strength in health and wearable items like smartwatches, and the largest U.S. electronics retailer raised its earnings outlook, sending its shares up nearly 16 percent.

The results bucked a string of weak performances in the electronics category by competitors like Target Corp (N:TGT) and Wal-Mart Stores Inc (N:WMT).

Best Buy said demand rose for items like home theater systems, major appliances and computing products, as well as smartwatches, but declined for mobile phones and gaming.

Chief Executive Officer Hubert Joly said he expected mobile phone sales to increase this quarter and next as scheduled product introductions draw consumers.

Apple (NASDAQ:AAPL) Inc's long-awaited iPhone 7 is set for availability next month. Last week, Target blamed its poor performance in part on lower demand for electronics due to a drop in demand for Apple products.

Best Buy's online sales as a percentage of domestic revenue increased to 10.6 percent from 8.6 percent in the second quarter ended on July 30, helped by faster shipping and improvements in the checkout process and search functionality, Joly said.

Excluding special items, earnings of 57 cents per share beat the analysts' average forecast of 43 cents, according to Thomson Reuters I/B/E/S.

Sales at established stores rose 0.8 percent from a year earlier. Analysts had expected a 0.60 percent decline, according to research firm Consensus Metrix.

Best Buy said it expected low-single-digit percentage growth in fiscal-year operating income, compared with a previous forecast of "approximately flat" results.

The company gave a third-quarter profit and revenue outlook roughly in line with analysts' estimates.

Revenue rose slightly to $8.53 billion in the second quarter, snapping a three-quarter streak of declines. Analysts on average had expected $8.40 billion.

Net income increased 20.7 percent to $198 million from $164 million.

International revenue declined 1 percent but rose 4.1 percent on a currency-neutral basis.

Source by Reuters

Mobileye, Delphi aim to release self-driving system in 2019

Business

A new technology partnership between top auto suppliers Mobileye NV (N:MBLY) and Delphi Automotive Plc (N:DLPH) could pull ahead production of self-driving cars to late 2019, executives of both companies said Tuesday.

Mobileye, a key supplier of vision-based sensing systems, and Delphi, a provider of automotive safety systems, said they plan to begin testing a jointly developed turn-key system for self-driving cars early next year.

Mobileye's U.S.-listed shares were up 6.6 percent at $49.71 in early trading, while Delphi's shares rose 3 percent to $67.04.

Both companies supply parts and systems to many of the world's automakers, but declined to say if they had specific customers for their jointly developed self-driving system.

The Mobileye/Delphi alliance is the latest in a series of partnerships aimed at speeding deployment of automated driving systems.

In the past week, Ford Motor Co (N:F) said it plans to begin selling self-driving vehicles to commercial ride-sharing fleets in 2021 and has acquired a stake in Velodyne, a maker of laser-based lidar sensing systems.

Ride services giant Uber Technologies Inc last week said it had acquired self-driving truck startup Otto and planned to partner this fall with Geely Automobile's (HK:0175) Volvo Cars on a test fleet of self-driving cars in Pittsburgh.

Other large automakers, notably Toyota Motor Corp (T:7203), Volkswagen AG (DE:VOWG_p) and General Motors Co (N:GM), are developing self-driving vehicles in-house.

Mobileye and Delphi plan to invest "hundreds of millions of dollars" in their self-driving system, which will combine hardware and software developed by both companies. The system will employ an array of sensors, including cameras, radar and lidar, and will have high-resolution mapping ability.

The two companies said their technology would cater to smaller automakers that may not necessarily want to develop their own self-driving systems.

Mobileye earlier this year announced a self-driving vehicle partnership with German automaker BMW AG (DE:BMWG) and U.S. chipmaker Intel Corp (O:INTC), aimed at production in 2021.

Mobileye Chairman Amnon Shashua on Tuesday said the new alliance with Delphi will be "complementary" to the BMW/Intel deal and that BMW had not selected a supplier for its planned self-driving system and components.

Shashua also said "we are not changing our minds" about Mobileye's recent decision to end a partnership with Tesla Motors Inc (O:TSLA).

Mobileye cut its ties with Tesla last month after the electric carmaker's Autopilot system faced scrutiny from regulators following a fatal accident in early May. Tesla's Autopilot system uses EyeQ chips from Mobileye to help with image analysis for steering and staying in lanes.

Delphi and Mobileye said they will demonstrate their autonomous driving system in urban and highway driving at the Consumer Electronics Show in Las Vegas in January 2017 and begin road testing soon after that.

Source by Reuters

VW, suppliers settle dispute after marathon talks

Business

Volkswagen and two of its parts suppliers on Tuesday resolved a contract dispute that had hit output at more than half of the carmaker's German plants and threatened to undermine its recovery from a diesel emissions scandal.

After more than 20 hours of negotiations that went on through the night, VW said it had settled its differences with CarTrim, which makes seats, and ES Automobilguss, which produces cast iron parts needed to make gearboxes, but gave no further details. The suppliers confirmed an agreement had been reached.

The conflict had threatened VW's profitability following last year's diesel emissions test cheating scandal and also risked hurting hundreds of other VW suppliers.

The suppliers were seeking compensation for lost revenue they said ran into tens of millions of euros after VW canceled a contract.

The dispute affected about 28,000 workers at six of VW's 10 German factories on Monday when the automaker halted production of the top-selling Golf and Passat models, as well as assembly of engines, gearboxes and emissions systems.

VW said on Tuesday that the suppliers had agreed to start delivering parts again and that the affected plants would gradually resume production.

Faced with billions of euros of costs from its emissions scandal, VW had previously indicated it would seek price cuts from its suppliers.

Lower Saxony Economy Minister Olaf Lies, a member of VW's supervisory board, has said the dispute was hitting VW "at the worst possible time". Whether VW management should face questions for over-reliance on single suppliers needs to be clarified, he added.

Analysts at UBS estimated that a one-week production halt at VW's Wolfsburg headquarters would result in about 100 million euros ($113 million) in lost gross profit, and could have knock-on effects on other suppliers.

OTHER SUPPLIERS SUFFER

Pressure had been growing on both sides to resolve the dispute, with Germany's economy ministry warning of the broader impact on jobs.

Five hundred companies that supply parts for the Golf were being forced to build up inventories because the carmaker was not buying, according to the German Association of Supply Chain Management, Procurement and Logistics.

In addition, VW's customers face delays in the delivery of new cars, which could prompt them to cancel purchase contracts and switch to other brands.

"The consequences for the entire supply chain are already considerable today," Christoph Feldmann, managing director of the association, said in a statement.

While the disruption may keep workers at home, there could be a silver lining for VW in limiting Golf output. The automaker had already canceled Golf production shifts on October 4-7 and December 19-22 due to falling demand.

VW said the stoppages were part of regular production adjustments.

"Given the slowdown of VW sales (excluding China), the brand certainly needs to slightly trim production levels," said London-based Evercore ISI analyst Arndt Ellinghorst.

Source by Reuters

Chinese investors buy ad tech startup Media.net for $900 million

Technology

Advertising technology startup Media.net, founded by tech entrepreneur Divyank Turakhia, said on Monday it had been acquired for about $900 million by a group of Chinese investors.

The deal would represent the third-largest in the ad tech industry, after Alphabet Inc (GOOGL) unit Google's acquisition of DoubleClick and Microsoft Corp's (O:MSFT) deal for aQuantive.

"We got an incredible amount of interest just because ad tech is a large and growing space and, at the same time, the number of companies that have been successful in it have been limited," Turakhia said in an interview.

The company's products, which are licensed by various publishers and ad networks, auto-learn and display the most relevant ads to users.

Media.net, a Yahoo Inc (O:YHOO) ad partner, attracted seven bidders, including a publicly listed company based in the United States.

However, the bid fell through following a substantial decrease in the company's stock value, Turakhia said.

The deal gives Media.net access to the Chinese online advertising market, which is currently the second largest in the world, Turakhia said.

Digital ad spend in China is expected to reach $40.42 billion in 2016, a 30 percent jump from a year earlier, according to research firm eMarketer.

Media.net, which is based in Dubai and New York, gets 90 percent of its revenue from the United States.

The company posted revenue of $232 million in 2015, with more than half of that coming from mobile users.

The Chinese consortium will buy Media.net from Turakhia's Starbuster TMT Investments and has already made a payment of $426 million.

The group is led by Zhang Zhiyong, the chairman of telecom firm Beijing Miteno Communication Technology Co.

Miteno's shares have been halted since December.

Source by Reuters

Pfizer confirms to buy Medivation for about $14 bn

Business

Pfizer (NYSE:PFE) Monday confirmed it is to buy Medivation for about $14 bn.
Pfizer said it will pay $81.50 a share in cash for the U.S. pharmaceutical firm.
Medivation shares were up 19.9% at $80.50 in pre-market after closing at $67.16 Friday.
Pfizer said the acquisition would add $0.05 to its annual diluted EPS. 
The deal will “accelerate revenue growth and drive overall earnings,” Pfizer CEO Ian Read said.
Medivation's XTANDI cancer treatment generated $2.2 bn in global sales over past four quarters.

Source by Investing.com

Office Depot CEO to retire; company creates COO, North America

Business

Office Depot Inc (O:ODP) said on Monday Chief Executive Roland Smith would retire, three months after the second-largest U.S. office supplies retailer and bigger rivalStaples Inc (O:SPLS) abandoned their planned merger.

The company also said it would consolidate its retail, contract, ecommerce and marketing operations under a newly created role of chief operating officer, North America.

Office Depot said 62-year-old Smith, appointed to the top job in November 2013, would continue until a replacement was found.

The company said it expected to name a new CEO by the end of the first quarter of 2017.

The office supplies retailer has been struggling with seven quarters of falling sales amid strong competition from online giant Amazon.com Inc (O:AMZN).

Office Depot said earlier this month it would shut 300 more stores in the next three years in addition to the 400 stores it had already closed.

The company's planned merger with Staples was thwarted by antitrust regulators in May.

Staples Chief Executive Ron Sargent has also stepped down.

Source by Reuters

Government 'to do its best' to privatise Rosneft in 2016: Russian Economy Minister

Business

Russia's government should do its best to privatise a stake in the nation's largest oil producer Rosneft (MM:ROSN) this year, Russian Economy Minister Alexei Ulyukayev said on Monday.

"Taking into account the attractiveness of this asset and keeping in mind that this would allow us to resolve to a large extent the problem of the budget deficit, I believe a sale of part of Rosneft will be a priority project now," Ulyukayev told journalists on a visit to the Kursk Region in central Russia.

"We should do our best to do it in 2016."

He also said that it was technically possible to privatise mid-sized oil company Bashneft (MM:BANE) at the end of 2016 or in 2017, if there was "a political decision".

Source by Reuters

ChemChina's Syngenta acquisition close to clearing U.S. review

Business

ChemChina's $43 billion acquisition of Syngenta AG is in the final stages of being cleared by the Committee on Foreign Investment in the United States, which scrutinizes deals for national security implications, people familiar with the matter said.

A positive end to the CFIUS review would remove significant uncertainty over whether the acquisition of the world's largest pesticides maker will be completed. Syngenta shares ended trading on Friday at 380.80 Swiss Francs ($396), some 100 Swiss Francs less than what ChemChina's offer valued the company.

Several U.S. lawmakers wrote to Treasury Secretary Jacob Lew earlier this year asking for CFIUS to subject the deal to additional scrutiny over its impact on domestic food security. The U.S. Department of Agriculture also joined the CFIUS review, Reuters previously reported.

Syngenta and ChemChina expect that CFIUS will clear their deal, and are hoping to announce a positive outcome as early as this week, the sources said on Sunday, cautioning that the outcome was not yet certain.

It could not be learned whether the two companies had agreed to any concessions in their negotiations with CFIUS for their deal to be approved.

The sources asked not to be identified because there has not yet been any official announcement on the CFIUS review. CFIUS, Syngenta and ChemChina did not immediately respond to requests for comment.

Syngenta said earlier this year it would make a voluntary filing with CFIUS "even though no obvious national security concerns were identified during due diligence".

Unveiled in February, the deal is the largest foreign acquisition ever by a Chinese company. It comes as China looks to secure food supplies for its population.

Syngenta, which is headquartered in North Carolina and generates nearly a quarter of its revenue from North America, is a key player in the market for pesticides and seeds. It has other facilities in North Carolina, as well a presence in California, Delaware, Iowa and Minnesota, among other states.

The CFIUS review is also being watched closely by Monsanto Co, the world's largest seed company, which is currently deliberating whether it should sell itself to Germany's Bayer AG. Syngenta last year turned down offers to be acquired by Monsanto.

With a growing number of Chinese companies looking to acquire U.S. peers, CFIUS has emerged as a significant risk for such deals, particularly those with potential cyber security implications.

For example, in February, state-backed Chinese firm Unisplendor Corp scrapped a $3.78 billion investment in Western Digital Corp after CFIUS said it would investigate the transaction.

Source by Reuters

U.S. banks want to cut branches, but customers keep coming

Business

Despite banks' nudging toward online tools, many U.S. customers are not ready to give up regular visits to their nearest branch, complicating the industry's efforts to slim down.

U.S. banks have trimmed the number of branches by 6 percent since it peaked in 2009, according to Federal Deposit Insurance Corp data. The 93,283 branches open at the end of last year was the lowest level in a decade.

Yet analysts who have examined the data say banks should have done more to offset the pressure on revenue from low interest rates and regulatory demands.

The number of FDIC-insured banks has fallen by more than 25 percent over that time even as industry assets have grown, indicating room for greater branch consolidation.

Bank executives argue, however, that branches remain crucial for acquiring new customers and doing more business with existing ones. Closures, they say, would hurt revenue more than help reduce costs.

"Our customers still want to visit us," Jonathan Velline, Wells Fargo's head of ATM and store strategy, told Reuters in an interview. "They're still coming to our stores and our ATMs at pretty consistent rates."

Bankers across the industry share that view. They say online banking complements traditional services for U.S. customers, but few have gone fully digital.

The United States falls somewhere in the middle among developed nations in terms of how aggressively its banks have been slimming down, according to the International Monetary Fund's population-adjusted data. They have cut relatively more branches than banks in Germany, France or Canada, but not nearly as many as those in Greece, Ireland, Spain or Italy.

While other factors are at play, one difference is that U.S. customers still routinely use checks and need branches to process them, said Rick Spitler, managing director at consulting firm Novantas.

FDIC Chief Economist Richard Brown said he often fields questions why the industry still has so many branches.

"This thesis…that we have mobile banking and high-tech banking, therefore the branch offices are dinosaurs and going away appears to be substantially overstated," he said.

ON EVERY CORNER

The case for reining in sprawling branch networks as a way to cut costs looks compelling.

The traditional branch costs roughly $2-4 million to set up and $200,000-400,000 per year to operate, according to Ed O'Brien, an analyst at Mercator Advisory Group. For big banks with thousands of branches – many of them clustered in pricey urban centers – it can get expensive.

For instance, an eight block stretch near Manhattan's Penn Station houses 14 bank branches - Astoria Bank, Apple Bank, Capital One, Citibank, HSBC, PNC, TD Bank, Sterling National Bank, Wells Fargo, two Bank of America branches, and three Chase branches.

Yet bank executives argue that, in a competitive market, they need to be footsteps away from the best customers.

Executives at JPMorgan Chase & Co, the country's largest bank, say each branch earns about $1 million in annual profit, but takes a decade to reach its full potential.

Chase bankers regularly scrutinize data on branch foot traffic and what customers do while inside to determine whether a location should remain open, shut down or shrink.

The bank has shut 265 locations since 2013, roughly 5 percent of its network, but executives insist that branches remain essential for JPMorgan's relationships with customers. They are the best way to sell clients many products and services ranging from mortgages to investment advice, according to Gordon Smith, JPMorgan's head of consumer and community banking.

"Often I will be asked why don't we just accelerate closings. Why don't we close 400 or 500 branches?" Smith said at the 2016 investor day. "The answer is that customers won't go there."

John Elmore, vice chairman of community banking and branch delivery at U.S. Bancorp, says branches are especially important for small businesses that need to deposit cash frequently, prefer to negotiate loans in person, or want strategic advice.

"Proximity to their business is a very, very important factor to their bank selection and their continuing relationship with a bank," Elmore told Reuters.

Source by Reuters

Staples forecasts fifteenth straight quarterly sales decline

Business

Staples Inc (O:SPLS), the biggest U.S. office supplies retailer, forecast its 15th straight quarter of declining sales as it closes stores in the face of intensifying competition.

The company and former merger partner Office Depot Inc (O:ODP) are struggling to compete with Wal-Mart Stores Inc (N:WMT) and Amazon.com Inc (O:AMZN) at a time when people are using less stationery.

Staples' shares were down 8.5 percent at $8.54 in morning trading on Wednesday. The stock had lost about a third of its value in the 12 months through Tuesday's close.

The company's sales fell a slightly steeper-than-expected 3.7 percent in the second quarter and the company said it expected sales to also decline in the current quarter. It did not provide a specific forecast.

Analysts on average were expecting sales to drop 3.1 percent in the current quarter, according to Thomson Reuters I/B/E/S.

"The blunt truth is that market dynamics are firmly against Staples in that there are far more generalists in the stationery market than there used to be and online plays a much more significant role," said Carter Harrison, a retail analyst at Conlumino.

Framingham, Massachusetts-based Staples said total sales fell to $4.75 billion in the second quarter ended July 30 from $4.94 billion a year earlier.

Analysts on average had expected sales of $4.77 billion, according to Thomson Reuters I/B/E/S.

Sales at the company's established stores in North America fell 5 percent, steeper than the 3.1 percent drop analysts polled by research firm Consensus Metrix had expected.

Staples also reported a net loss of $766 million, or $1.18 per share, compared with a profit of $36 million, or 6 cents per share, a year earlier.

Besides trying to buy Office Depot - a deal that fell apart over antitrust concerns - Staples has been responding to tough conditions by closing stores and focusing on serving medium-sized businesses rather than Fortune 500 companies.

Staples reiterated that it would close 50 stores in North America this year. It closed a total of 242 stores in 2014 and 2015 as a part of its restructuring plan. Staples had 1,907 stores as of Jan. 30.

The company is also focusing on offerings other than office supplies, such as electronics and furniture, and said in May it would step up deliveries to 80 percent of total North American sales within three years in an effort to compete with Amazon.

Excluding items, Staples earned 12 cents per share, matching analysts average estimate.

The company said it expected an adjusted profit of 32 to 35 cents per share for the current quarter. Analysts on average were expecting a profit of 35 cents per share.

Source by Reuters

Target cuts fiscal-year profit forecast; shares drop

Business

Retail chain Target Corp (TGT.N) cut its fiscal-year profit outlook on Wednesday after quarterly sales fell more than expected due to lower demand for electronics and disappointing results in its grocery business.

Shares of the sixth-largest U.S. retailer dropped 7 percent to $70.15, erasing their nearly 4 percent gain for 2016.

"It's a very cautious consumer, ... and it will continue to be a very competitive environment," Chief Executive Officer Brian Cornell said on a conference call.

Cornell said electronics sales fell by a double-digit percentage rate in the second quarter ended on July 30 and accounted for about two-thirds of Target's 1.1 percent sales decline at stores open at least a year.

About a third of the decrease in electronics sales stemmed from reduced demand for Apple Inc (AAPL.O) products, which were down more than 20 percent.

Target, which has been reorganizing its grocery business by adding more organic and fresh food, said those early efforts were disappointing. The business had a "small" decline in comparable sales and was pressured by price deflation for food items like meat and milk.

The company's sales, like those of rivals, have suffered as shoppers increasingly use online retailers such as Amazon.com Inc (AMZN.O) and spend on big-ticket items like cars and home renovations rather than small discretionary purchases.

Cornell said customer visits declined during the quarter across product categories. The retailer, however, gained market share in apparel and home improvement.

The company said it expected same-store sales to be flat to down 2 percent in the second half of the year and cut its full-year profit forecast to between $4.80 and $5.20 per share from a prior range of $5.20 to $5.40.

Net income attributable to the company fell nearly 10 percent to $680 million in the second quarter.

Excluding items such as debt retirement losses and the impact of the sale of its pharmacy business to CVS Health Corp (CVS.N), Target earned $1.23 per share. Analysts on average had expected $1.12, according to Thomson Reuters I/B/E/S.

Net sales fell 7.2 percent to $16.17 billion, lagging analysts' expectations of $16.18 billion.

Digital sales increased 16 percent, a deceleration from previous quarters, and accounted for 3.3 percent of the company's total.

Source by Reuters

China warns 'protectionist' Australia on investment after grid deal blocked

Business

China warns 'protectionist' Australia on investment after grid deal blocked

Australia's decision to block the A$10 billion ($7.7 billion) sale of the country's biggest energy grid to Chinese bidders was a protectionist move that would negatively affect investment in the country, China's Ministry of Commerce said on Wednesday.

Australian Treasurer Scott Morrison said last week that preferred bidders State Grid Corp of China [STGRD.UL] and Hong Kong's Cheung Kong Infrastructure Holdings (1038.HK) would be prevented from buying electricity network company Ausgrid, citing unspecified national security concerns.

"This kind of decision is protectionist and seriously impacts the willingness of Chinese companies to invest in Australia," China Commerce Ministry spokesman Shen Danyang said at a regular news briefing in Beijing.

"China hopes Australia will create a fairer and more transparent environment for Chinese investment."

The decision was the second time this year Canberra has rejected bids for major Australian assets by Chinese interests, the biggest source of proposed foreign investment in Australia, according to an April report from the Foreign Investment Review Board.

It previously knocked back an offer by a China-led consortium to buy the country's largest agricultural land owner, cattle company Kidman & Co.

UNDER SCRUTINY

China's offshore ambitions have come under increasing scrutiny this year by governments in Europe and the United States.

Following a surprise move by new British Prime Minister Theresa May to review the building of a nuclear plant part funded by China, Beijing questioned whether Chinese money was still welcome.

Australian Prime Minister Malcolm Turnbull used a major speech on Wednesday to criticize the rising tide of protectionism within parliament, despite his government being responsible for the rejection of the Ausgrid and Kidman bids.

The speech warned against giving in to the growing protectionist mood reflected in the new parliament, which he said could reverse gains made by the country since it liberalized its economy two decades ago.

Turnbull's conservative Liberal-National coalition will at times require support in the new parliament from a bloc of foreign investment critics led by the Far-right One Nation party to pass legislation.

FOREIGN INVESTMENT

Proceeds from the sale of state-owned assets are designed to be plowed back into the economy through job-creating infrastructure projects, including public transport networks.

"These are the transactions Australia needs if it is going to get out of the low growth, low productivity scenarios," said Brendan Lyon, chief executive of industry lobby group Infrastructure Partnerships Australia.

Chinese investment in Australia surpassed $11 billion in 2015, according to a report by accounting firm KPMG and the University of Sydney.

Former senior defense department official Peter Jennings said the trade relationship put Australia in a difficult strategic position.

"We've never had a greater dependency with any country," said Jennings, a director at the Australian Strategic Policy Institute.

"The risk that creates for us is if Beijing wants to adopt politically coercive policies, it's in a fairly strong position to do so with us because of that level of trade dependence."

Last year, Landbridge Group, owned by Chinese billionaire Ye Cheng, won a long-term lease to operate Darwin's port, in the north of Australia, in a deal worth A$506 million.

Turnbull defended the deal following reports that U.S. President Barack Obama had expressed anger at the Australian Prime Minister for not having informed him earlier.

U.S. Ambassador to Australia John Berry told Reuters national security must be taken into account when considering foreign direct investment in infrastructure and sensitive areas.

"The U.S. fully respects the process and decisions on foreign investment made by the Australian government, even when it affects U.S. companies," Berry said in a statement.

(Additional reporting by Matt Siegel and Tom Westbrook in SYDNEY and Michael Martina in BEIJING; Editing by Lincoln Feast)

Source by Reuters