April 29th, 2008
Written by Samir Diwan
Vaibhavi Tavare also contributed to this note.
Amazon (AMZN) and Wal-Mart (WMT) are giants on their own rights. Amazon is the world’s largest internet retailer while Wal-mart is the largest discount retailer. On 28 April 28, 2008, AMZN’s stock price was trading at USD81.97, at a P/E (ttm) multiple of 67.9 and WMT’s was at USD57.35, at a P/E (ttm) multiple of 18.5. We review the two companies in order to better understand the fundamentals that are currently in play for the two giants, and to better understand if AMZN deserves the price premium over WMT. read more…
April 18th, 2008
Written by Naveen Selvaraj
Satyam Kumar also contributed to this note.
With technology bellwethers like INTC, IBM kick- starting the earnings seasons with impressive results, it remains to be seen how software companies would perform. IBM has reported 14% Y-o-Y growth in software revenues and ~20% growth in Core Infrastructure products like middleware for the QEMar08. Our analysis of the Y-o-Y revenue growth achieved by software firms in 2007 and their corresponding guidance for 2008 indicates that most companies have lowered their Y-o-Y growth expectations.
We also looked at the guidance from software vendors based on the product categories they operate in and our analysis suggests that core infrastructure and enterprise applications would outgrow productivity applications like PLM, CAD/CAM. Further,2Q08 could turn out many positive surprises in software considering the lower growth rates forecast and the generally upbeat Tech earnings reports so far. read more…
April 15th, 2008
Written by Naveen Selvaraj
When Infosys Technologies Ltd. (NASDAQ:INFY) declares its quarterly results, the focus is more on by how much rather than whether beat/miss guidance. QEMarch08 results were no different. A quick look at the revenue and guidance data points available for the last three fiscals provided some interesting insights. INFY provides fiscal guidance at the beginning of each fiscal year and generally updates the same after every quarter. Exhibit I provides the details of revenue guidance Vs actual while Exhibit II provides the same on earnings per ADS (EPADS). read more…
April 14th, 2008
Written by Samir Diwan
Vishal Kapse and Amit Sureka also contributed to this Note.
March-08 comparable store sales showed an impact of calendar shift in the timing of Easter on retailers. Shops were closed on Easter resulting in one less selling day in March. Department stores and clothing and accessories retailers were the most impacted amongst the retailers. On the contrary, discounters were benefitted by strong Easter sales. Most retailers are now expecting higher y/y comparable store sales for ME Apr-08 on account of the Easter timing shift. read more…
April 14th, 2008
Written by Ravi Shenoy
Bharti Keswani, Mehul Ramaiya and Kavita Keyur Morparia also contributed to this note.
Drilling companies have reported contracts signed in Mar-08, that will yield revenues way up to 2015/2016. Customers are ready to pay even for idle time of rigs for upgrades as well as 10-40% higher day rates.
Gridstone Research covers 14 drilling companies (excluding GSF) within its current coverage universe of 143 oil and gas companies. Some of the drilling companies report deals struck for new rigs and new contracts on old rigs on a regular basis. This note makes an effort to look at the impact of the contracts on the earnings that these drilling companies will report in the future, during the tenure of the contract. read more…
April 14th, 2008
Written by Ravi Shenoy
Mehul Ramaiya, Kavita Keyur Morparia, Bharti Keswani and Anila Prakash also contributed to this note.
During the month of February 2008 oil companies acquired fields at ~$11-$12 per barrel of oil equivalent, and other assets at Enterprise value (EV) ranging from 4.8 to 9.1 times EBITDA.
Gridstone Research currently covers 143 Energy companies. Some of these companies have a stated intent of growing inorganically. This note is an attempt to keep track of M&A activity in the sector in the recent past and understand the impact that these could have on the financials of the acquiring company. read more…
April 11th, 2008
Written by Sunil Rajak
Sandeep Mukherjee and Abdulqadir Navsariwala also contributed to this note.
No sign of market pickup: Mar08 sales plummet across all major players
US automakers reported a decline of 12% in overall sales in a market environment marked by tightened credit lending norms, higher gasoline prices, and weakened housing and construction activities cumulating in weak consumer sentiments. Not surprisingly, all the major automakers reported negative sales growth. The car segment continued to perform relatively better driven by small fuel-efficient cars with respect to truck, SUV and pickup segment, Mar08 results reflect increased consumer preferences for fuel-efficient and smaller vehicles.
Among US automakers, GM posted sales decline of 19.2%, while F reported a sales decline of 14.3%. In non-US automakers, HMC posted sales decline of 3.2% and TM reporting sales decline of 10.3%. Truck division for all the automakers reported decline in sales. Notably, Mar08 had only 26 selling days compared to 28 selling days in Mar07. The US industry recorded an estimated seasonal adjusted annual rate (SAAR) in the range of 15.2 – 15.3 M units of cars and light trucks for the period ending Mar08.
read more…
April 9th, 2008
Written by Naveen Selvaraj
Sushil Jethwani co-authored this note
Salesforce.com (CRM:NYSE) showed a significant improvement(~200 bps qoq) in operating margin in 4QFY08 (QEJan08)to 5%, displaying the ability to lever its operating expenses. However, CRM will be operating in a vastly different competitive environment in the year ahead, with SAP’s aggressive push in the SaaS(Software as a Service) market with Business ByDesign, Oracle’s recently upgraded version of its on-demand CRM product, and Microsoft’s Dynamics Live CRM.
We looked at the past performance of CRM on various parameters such as margin improvement, sales productivity, subscriber growth and price realization to understand the levers available to CRM to shore up its margins. From our analysis and assumptions for the next two fiscals (FY09/10) based on competition, market dynamics and trends, we conclude that CRM is on the path towards margin improvement although competition will restrict the gains to a high single digit operating margin by FY10. read more…
April 2nd, 2008
Written by Shabbir Batterywala
Technology sector companies having exposure on auction-rate securities (ARS) are now faced with taking impairment charges on these investments. Though ARS were pitched as a higher yield alternative to cash, the once highly liquid investments have proved less so in recent months as there have been fewer bidders in the auctions that give the securities their liquidity. Low liquidity together with widening credit spreads have resulted in large mark-downs in the value of these securities.
We used Gridstone Research’s search feature to try and find out the possible list of companies that have exposure to ARS or how widespread are the investment in ARS by technology sector companies. The results show that majority of the companies in the technology sector have investments in ARS ranging from $5 - 200 M. Some of the prominent names in the list include PALM, PRGS, HRS, MCRS, CKFR, ADCT, TKLC, BBBB, and FCS. read more…
