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Hewlett-Packard May Grab Brocade – Analyst Blog

Zacks Market Commentaries — Tue, 06 Oct 2009 19:57:07 +0000

Hewlett-Packard Company (HPQ) may consider buying Brocade Communications Systems Inc. (BRCD), as the latter has put itself up for sale. Brocade, which sells routers, switches and software to help companies manage networks, is scouting for potential buyers. The process is in the nascent stages and HP is a strong contender in buying the company as both companies share a similar line of business.

Hewlett-Packard’s acquisition of Brocade will strengthen its grip on the networking equipment market. The company is one of the leading personal computer (PC) makers in the world. It also manufactures servers, which are used by companies in data center operations across the globe.

We believe that the addition of the networking product line will increase HP’s global market share in this segment and strongly position it versus other leading PC manufacturers that are increasingly moving in the same direction.

Historically, the company has grown through strategic acquisitions. The fiscal 2007 acquisition of HP Mercury Interactive Corporation and Opsware helped HP become the leading IT management software and Services Company and a leader in data center automation. Other acquisitions added transaction monitoring, applications security testing and data center automation capabilities to the company’s Business Technology Optimization (BTO) portfolio, thereby increasing BTO revenues by 24.6% in fiscal 2008.

During fiscal 2008, HP acquired nine companies, the largest of which was Electronic Data Systems (EDS), for approximately $13.9 billion.

Although the company has evaluated Brocade’s assets, it did not make any formal offer for the same. Some believe that HP may be interested in buying only certain segments of Brocade. HP is moving in-line with Cisco Systems Inc. (CSCO), which is also planning to grow through software and networking acquisitions.

Although Brocade looks to be a good deal for HP, we believe that other interested parties will also line up to acquire the company. Ultimately we believe that pricing, or the acquisition cost will be the deciding factor.
Read the full analyst report on "HPQ"
Read the full analyst report on "BRCD"
Read the full analyst report on "CSCO"
Zacks Investment Research

Cost Cutting Boosts CPWR – Analyst Blog

Zacks Market Commentaries — Fri, 24 Jul 2009 14:24:35 +0000

Compuware Corporation (CPWR) yesterday reported revenues of $214.4 million for the first quarter ended June 30, 2009, down 28% year over year and falling short of the consensus estimate of $217.8 million.

CPWR provides software products and professional services to many of the large users of information systems around the world. It serves more than 70% of the Fortune 500 companies and has over 23,000 customers spread across many industries worldwide.

GAAP EPS came in at $0.21 while non-GAAP EPS (excluding restructuring charges) came in at $0.22 beating consensus estimate of $0.13 due to strong performance by the business service delivery strategy. The divestiture of Quality Solutions fetched gains of $52.4 million.

Management stated that software license fees exceeded expectations. Software license fees came in at $40.5 million compared to $61.4 million in the year-ago quarter. Maintenance fees were $111.1 million compared to $126.5 million in the year-ago quarter. Revenue from professional services in the quarter was $62.7 million compared to $110.6 million in the year-ago quarter. Operating expenses were 44.8% down year over year. Consequently, operating margin improved to 36.3% from 17.0% in the year-ago quarter. Operating cash flow remained strong at $75 million.

The company continues to target cost savings of $200 million in operations over the next few years through improvements in business processes and increases in sales productivity. Most recently, CPWR reduced its workforce by approximately 250 employees (less than 5% of the company’s total workforce). The reduction primarily happened in its professional services.

Going forward, management expects overall cost cutting activities and operational momentum to drive significant margin expansion and EPS growth in the coming quarters.

However, the economic climate remains tough and IT spending is not expected to gain momentum before 2010. Compuware operates in an intensely competitive landscape. And rivals include big players like IBM, Accenture (ACN), Electronic Data Systems, BMC Software (BMC) and Computer Associates. We maintain our HOLD on the stock.
Read the full analyst report on "CPWR"
Zacks Investment Research

Ness Technologies Far From a Turnaround – Analyst Blog

Zacks Market Commentaries — Mon, 29 Jun 2009 15:58:06 +0000

Ness Technologies (NSTC) is a global provider of IT services. The company recently announced a multi-million dollar contract win from Latin American government. Under this contract, Ness will provide Control command and Control system to the Latin American Government.

Although this contract is expected to positively influence the revenue stream of the company going forward, but there is no clear indication about the commencement of cash flow from it. We do not expect this contract win to provide immediate support to the company's downward moving revenue flow.

This apart, Ness faces intense competition from many established firms such as Accenture (ACN), IBM (IBM), Hewlett Packard (HPQ), Wipro (WIT), Cognizant Technology (CTSH), Computer Sciences Corp. (CSC), HCL, Electronic Data Systems, GlobalLogic, Virtusa (VRTU), Persistent and Symphony Services, which is making it tough for the company to gain additional market share. The company's high level of exposure to its politically unstable domestic market in Israel is also a cause of concern to us. Research firm IDC, in its recent report forecasts worldwide IT spending to grow at a slower rate of just 0.5% in 2009.

The company continues with its trend of poor results in 1Q09, and once again lowered its FY 2009 guidance due to the global economic slowdown. We believe Ness is facing slow growth and the risk of execution for the company remains intact.

Moreover, choppy equity markets and an uncertain global economy have led to a significant fall in its stock price. We expect the company to post unhealthy results in most of the quarters for 2009. We are a tad apprehensive about the company, and reiterate our Sell rating on the stock.

Read the full analyst report on "NSTC"
Read the full analyst report on "ACN"
Read the full analyst report on "IBM"
Read the full analyst report on "HPQ"
Read the full analyst report on "WIT"
Read the full analyst report on "CTSH"
Read the full analyst report on "CSC"
Read the full analyst report on "VRTU"
Zacks Investment Research

Caxton Associates Hedge Fund | Exclusive 13F Holdings Analysis

Richard C. Wilson — Fri, 26 Sep 2008 04:33:43 +0000

Caxton Associatese

Caxton Associates Hedge Fund Holdings

This post is being written as part of HedgeFundBlogger.com's Investment Securities Tool which analyzes the holdings of hedge fund managers.

Up next in the macro hedge fund tracking series we have Caxton Associates, ran by Bruce Kovner. Taken from Wikipedia, Kovner's bio is as follows: "Kovner's first trade was for $3,000, borrowed against his MasterCard, in soybean futures contracts. Realizing growth to $40,000, he then watched the contract drop to $23,000 before selling. He later claimed that this first, nerve-racking trade taught him the importance of hedge fund risk management. In his eventual role as a trader under the legendary Michael Marcus at Commodities Corporation (now part of Goldman Sachs), he purportedly made millions and gained widespread respect as an objective and sober trader. This ultimately led to the establishment of his current company, Caxton Associates, in 1983, which today manages over $10 billion in capital and has been closed to new investors since 1992." Year-to-date, Caxton Associates was up 5% as of a few weeks ago.

So, now that we've got a background on Kovner and Caxton Associates, let's take a quick look at his portfolio highlights. Keep in mind that this is merely a brief summary of Caxton's top holdings. Due to the time sensitive nature of the 13F material, I wanted to get this information posted before the next set of filings come out in November.

Top 20 Holdings by % of portfolio
1. Compania Cervecerias Unidas (CCU) - Increased position by 72934%, from 25,000 shares to 18,233,668 shares
2. Electronic Data Systems (EDS) - New Position
3. Activision (ATVI) - New Position
4. Monsanto (MON) - Increased position by 41 %
5. Rockwood Holdings (ROC) - Increased position by 68.8%
6. W-H Energy Services (WHQ) - Increased stake by 195%
7. Occidental (OXY) - Increased stake by 65%
8. ChoicePoint (CPS) - Decreased position by
9. DirecTV (DTV) - Decreased stake by 25%
10. W.R. Grace (GRA) - Boosted stake by 8%
11. Qualcomm (QCOM) - Boosted stake by 44.6%
12. Coca Cola (KO) - Decreased position by 12.5%
13. Rural Cellular (RCCC) - Increased stake by 12.4%
14. Research in Motion (RIMM) - Boosted stake by 8.7%
15. Service Corporation (SCI) - Increased position by 32%
16. Nucor (NUE) - Boosted position by 37%
17. (ANST) - New position
18. XTO (XTO) - Boosted stake by 150%
19. Stewart Enterprises (STEI) - Increased position by 12%
20. Gilead (GILD) - Decreased position by 26.7%

Kovner's Caxton Associates definitely disassociate themselves from the rest of the macro pack when it comes to the equity side of their portfolio. While their portfolio does hold typical energy and technology names often seen in other hedge fund portfolios, they also hold seemingly obscure names that I have yet to see pop up in any other funds I track. So, Kovner and his team may have discovered some diamonds in the rough here. In particular, I want to focus on his top holding: Compania Cervecerias Unidas (CCU). In the quarter prior to the filing, he held just 25,000 shares of this name. Then, over this past quarter, he ratcheted up his holdings in the name big time. He increased his position by 72,934%, bringing it all the way up to his firm's top holding, with a market value of over $642 million at the time of the filing. Needless to say, they bought this name with conviction. And, although I've seen numerous other funds buying up shares of Latin & South American beverage companies, this is the first fund I've seen pick up this name. So, definitely keep an eye on it.

Additionally, I want to point out his holdings in Rocwood Holdings (ROC), W-H Energy Services (WHQ), and Service Corporation (SCI). These are three other names I am seeing for the first time amongst the hedge funds I track. And, he was adding across the board to all three names. Caxton added to WHQ the most, increasing their position by 195%.

Now, turning to the 'hedge fund favorite' names that tend to pop up in numerous hedge fund portfolios that I track, we see Caxton holds positions in Qualcomm (QCOM), Research in Motion (RIMM), XTO Energy (XTO), Occidental (OXY), and Gilead (GILD). Caxton was out adding pretty moderately to all these names. OXY and XTO are easily two of the favorite equity energy plays amongst various hedge funds. And, you have to wonder how they affected their portfolio, given the volatile ride energy stocks have seen as of late. Turning to tech, we see that Caxton, like so many other funds, enjoy large positions in both QCOM and RIMM. As I've noted before, QCOM is easily a top five most common equity holding among the hedge funds I track. And, just like energy, technology stocks have been whipsawed around a lot recently. So, although Caxton was out adding this past quarter, we'll have to see if they were still adding to these names come the next 13F filing.

We already knew hedge funds (and macro funds in particular) had a rough July. And, it's easy to see why, with the heavy commodity exposure many of them had. What we don't yet know is how they've rebounded (if at all). Lastly, I just want to re-emphasize that since Caxton is a macro fund, they obviously have the majority of their positions in the commodity, currency, futures, or other markets. But, at the same time, they still have a sizable chunk of money in the equity markets.

Caxton Associates' full 13F filing listing every position can be found at the SEC.

Guest post by Market Folly

Please check here next week for some further analysis on specific holdings of leading hedge funds.

Analysis #1: Tontine Capital Partners - 13F Hedge Fund Holdings
Analysis #2: Lone Pine Capital - 13F Hedge Fund Holdings
Analysis #3: Tremblant Capital - 13F Hedge Fund Holdings
Analysis #4: Maverick Capital Management 13F Holdings Analysis
Analysis #5: BP Capital Management 13F Holdings Analysis
Analysis #6: Blue Ridge Capital 13F Holdings Analysis
Analysis #7: Clarium Capital Management 13F Holdings Analysis
Analysis #8: Greenlight Capital David Einhorn 13F Holdings
Analysis #9: Soros Fund Management LLC 13F Holdings Analysis

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Tags: Caxton Associates Hedge Fund, Caxton hedge fund, Caxton Hedge Funds, Caxton Associates LP LLC Inc., hedge fund holdings of Caxton Associates, SCI, NUE, RIMM, RCCC

Caxton Associate’s (Bruce Kovner) Key Q2 Buys and Sells

CEO Blogger — Mon, 01 Sep 2008 21:53:47 +0000

Caxton Associates, run by well known and one of the industry’s best money manager’s, Bruce Kovner, is a $6.5 billion hedge fund. The fund holds 1200+ stocks in its portfolio and the KEY trades (or most material trades) in the quarter are tracked at: http://trackthepros.com/ The trades are broken down by New, Sold, added to and reduced: New Ansoft Clear [...]