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October 2017

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New challenge now emerges for Schlumberger in the form of this deal

The oil service company, Schlumberger Limited (NYSE:SLB) seems to be challenged by some of its smaller peers. In 2014, Halliburton Company (NYSE:HAL) decided amidst a wake of depressed crude oil prices to merge with Baker Hughes Incorporated (NYSE:BHP) and tap Schlumberger’s market share. The merger however came under pressure from the US and European regulatory authorities and failed to go through. While the threat seemed to be over for Schlumberger, a new challenge has now emerged as Bake Hughes decides to merge with General Electric Company’s (NYSE:GE) oil and gas operations.

As reported by Barron’s, Colin Davis from Bernstein believes that the combined General Electric and Baker Hughes entity can pose a challenge for Schlumberger. At the same, he also mentioned that this would not be immediate and may take some more time.

The deal between Baker Hughes and General Electric took place in October. Amid a more than 50% decline in crude oil prices over the past two years, General Electric was struggling with its oil and gas division. The merger thus aimed to help lower costs and make use of Baker Hughes’s technical expertise in oil and gas.

The merger is expected to bring General Electric’s 2018 EBITDA at $5.5 billion. Cost synergies for General Electric and Baker Hughes following the merger would be around $2.4 billion, along with $100 million in revenue synergies. Although Bernstein is quite satisfied with the figures provided, it still wants the companies to give a proper timing as to when these synergies would start to kick in.

As mentioned above, Bernstein expects the management’s view to be too optimistic in challenging Schlumberger immediately, but the firm has not ruled out a possibility of this happening in the long run. The sell-side firm said regarding the issue, “While we agree conceptually, the implementation will likely be much more challenging than conveyed at the investor meeting.”

Contrary to previous rumors, the next flagship will apparently feature a headphone jack

Apple Inc. (NASDAQ:AAPL) iPhone 7 and the lack of a 3.5mm headphone jack have become synonymous over the last few months, thanks to the sheer number of rumors and reports pointing towards the phasing out of the audio component by the company. Hence, the reason a new component leak has taken everyone aback by claiming that the iPhone 7 will indeed sport a 3.5mm headphone audio-out jack.

The latest rumored component leak was first spotted on Chinese social media site Weibo by French site nowwereelse.fr, after which Apple Insider took up on it as well. Apple has for long been the company setting trends for others to follow, and the first iPhone launching without a physical keyboard to the latest MacBook with just a USB-C port are the prime examples of how Apple has always led the innovation queue for the rest.

The 3.5mm jack is another age-old component which will soon be extinct mostly because of the adequate convenient replacements, like the USB-C port and the Bluetooth headphones that are all the rage these days. However, the latest rumored purported component leak of the iPhone suggests that even if the headphone jack is a goner sooner or later, Apple’s next flagship set for release this Fall will probably come a little too soon for it.

Apple CEO Tim Cook spoke to CNBC’s Jim Cramer recently and pointed out that new innovations are in the pipeline for the iPhone which would make the iOS device difficult to live without. iPhone 7 has also been reported to persevere with the design of iPhone 6, which make the innovations like ditching the headphone jack and sporting a MacBook-like flush Home button all the more important. Hence the component leak in question might set users back further who were looking hopefully towards Apple to bring back its typical risk-taking approach to innovation.

The Country Caller highlights the insider selling activity at Facebook and Alphabet

The Country Caller highlights Facebook Inc.’s and Alphabet Inc.’s insider selling report. The particulars of each transaction are as follows:

Facebook Inc.

Chief Operating Officer Sherly K. Sandberg unloaded 109,000 shares, (2.12% of her immediate ownership in the company) a total of $11,905,738 in multiple transactions on March 3. Following this, she had a leftover direct stake of 5,034,296 shares worth $532,276,116.

All of the 334 transactions – worth a combined total of $1,510,377,225 – that Facebook Inc. saw insiders make during the last 12 months were sells.

Alphabet Inc.

President Sergey Brin sold 16,666 shares, (18.28% of his immediate ownership in the company) a total of $12,210,799 in multiple transactions on March 3. Following this, he had a leftover direct stake of 74,500 shares worth $53,103,600.

Based on recent political changes, Lockheed Martin stock soared 13.55% over past month trading sessions

Lockheed Martin Corporation (NYSE:LMT) changes course this month as its stock price soared 13.55% over the past 30-day trading session because the defense and aerospace industry begins to recover on Trump winning the election. The defense and aerospace segment has been facing a downturn since last year as the US reduced its spending on the Department of Defense.

Over past 12 months, Lockheed Martin stock soared 16.38%; however, the company faced a decline in its stock price during the third quarter fiscal year 2016. Along with Lockheed Martin, other defense-based companies have also been reporting similar results due to the slowdown in the industry, including Boeing’s defense segment.

As Donald Trump won the election, analysts related to the industry expected it would boost the defense companies’ stock price. Furthermore, it is also expected that those defense deals, which were on hold since last year, would also get a green signal to proceed forward, further supporting the companies.

Based on the slowdown in the industry, defense companies were also reporting declining growth in their operating revenues. Based on the situation, the companies had to look for new order overseas due to struggle over increased competition in the market.

The current political change would recover the slowdown in the defense companies’ revenues, but it might have an adverse effect on come commercial companies. One of the prominent examples is Boeing’s deal with Iran to sell commercial aircraft that is recently blocked with the passage of a new bill limiting the financial support to the company.

Based on this limitation, Boeing might lose its multi-billion dollar contract after which it will have to look for alternative orders. The aircraft manufacturer will have the opportunity to recover the losses from commercial aircraft deal by getting new defense based contracts from the government.

Among other defense products, military helicopters also faced a downturn in demand partially due to the slowdown in the oil and gas industry. With recent political changes, these companies might report growth in their revenues by next two years.

The iPad Pro 9.7 and the Surface Pro 4 are two of the best hybrids available in the market

Portable tablet/laptop hybrids are all the rage these days, with their capability of functioning both as a tablet and a laptop, giving users more functionality and flexibility. As more and more powerful hybrids enter the market these days, it is becoming increasingly difficult to select the most suitable one. If you are currently on the lookout for a high performing laptop/tablet hybrid then you might want to consider the Apple (AAPL) iPad Pro 9.7 and the Microsoft (MSFT) Surface Pro 4. Here is a detailed comparison of the two hybrid devices to make your choice a bit easier.

Design:

Both Surface Pro 4 and the iPad Pro 9.7 are elegantly designed and are impressive looking devices. However, the iPad Pro 9.7 is much thinner and lighter than Microsoft’s Surface Pro 4, something that certainly gives the former a bit of an advantage over the latter. The one design advantage that Surface Pro 4 has over iPad Pro is the inbuilt kickstand and the inclusion of Surface Pen, an incredibly responsive accessory that improves the overall functionality of the hybrid device. Another advantage of Surface Pro 4 remains the inclusion of a MiniDisplay port, a microSD card reader and a USB 3.0 port which are nowhere to be found on the other.

Hardware:

The iPad Pro features the Apple’s most powerful A9 chipset which really boosts the processing capability of the device. The iPad Pro 9.7 can even match the processing power of the early 2015 MacBook Air model. However, the Surface Pro 4 completely owns the iPad Pro, as the former gives users the option to incorporate a 16GB with a base level Intel Core i3 processor that can be upgraded up to Intel Core i7. So, even though both devices are super-fast but the Surface Pro 4 offers users much more in terms of processing power.

Software:

The iPad Pro 9.7 runs on the latest iOS operating system. On the other hand, the Surface Pro 4 runs on Windows 10 OS which offers users full-desktop applications which are not possible to install in the iPad Pro.

Conclusion:

Apple has tried its best to create an impression that its iPad Pro 9.7 is a capable hybrid device which can take on the best hybrid devices in the market. Unfortunately for Apple, that is not true as Microsoft’s Surface Pro 4 has an upper hand against Apple’s iPad Pro 9.7 in every possible aspect of the two devices. So, if you can afford to pay the extra few hundreds of dollars for Surface Pro 4 then there is no point in choosing Apple’s iPad Pro.

Reports suggest that the Department of Justice has filed a suit against Baker Hughes to stop the merger with Halliburton

Baker Hughes Incorporated (NYSE:BHI) is one of the world’s largest oil field service companies and is currently incorporated in America. The stock was recently downgraded at Deutsche Bank following reports of US regulators suing the company in a bid to stop the in process merger with Halliburton (NYSE:HAL).

The argument presented by the regulators views the merger as a bid to create a monopoly in the industry. The suing party is of the view that in the oil services industry, Schlumberger, Baker Hughes and Halliburton are three top rivals and maintain a balance in the industry. The merger of the two will affect the balance adversely and create a monopolistic force able to manipulate prices at will in the absence of equally powerful competition. Both the companies are incorporated in Delaware and the lawsuit was filed in US federal court in the very same state.

The deal was announced towards the end of year 2014, in the month of November, shortly after the oil prices began to fell and was valued at a total consideration of $34 billion. The companies can still persist with the original plans and follow legal route to merger. The merits of the merger remain strong as ever, but, the process of litigation has now reduced the chances of success down to 50%, at most. The risk reward profile between success and failure are roughly equal and the shares are likely to trade within constrained bounds until the process is done.

The analyst downgraded the stock to a Hold and reduced the price target very materially down to $43 from $78. The analyst opinion for BHI has 10 strong Buy, 14 Buy, seven Hold and one Underperform rating. The stock is currently traded at $41.21.

The deal is expected to produce nearly 3,000 megawatts and will take place across as many as ten projects

With the increased awareness of climate change spreading at a rapid pace, energy utilities are being criticized at large. This is because the use of fossil fuels by Big Oil not only affects human health but the entire planet as well. Due to the increased pressure from Green groups, energy giants have rapid paced their efforts for investing in renewables.

Similar is the case with Southern Power, subsidiary of Southern Company (NYSE:SO) that has recently entered into renewables space at large. As per the latest updates, the US-based energy provider announced entering a joint development deal with Renewable Energy Systems Americas Inc. (NYSE:RES).

The deal includes construction of nearly 3,000 megawatts output generator. The development will take place across as many as ten projects and dates for the deal’s commercial aspect happen to be from 2018 to 2020.

Southern Power CEO, Buzz Miller, stated that the latest move came in the wake of company’s renewable development strategy. It goes a long way back in partnering with equipment manufacturers. Also, with the benefit of now having access to wind turbines from two top notch providers, the company can get a strong foothold in wind energy developments in the foreseeable future.

Apart from the aforementioned deal, the company has also procured wind turbine equipment from Vestas and Siemens. Via developing assets covered by long term contracts, Southern Power sets itself apart from other energy providers.

Via the latest move, The Country Caller views Southern Energy as one of the companies that are safe from the hurls of environmentalists and state regulators. The move would shift the energy provider’s sole focus from conventional sources of power to cleaner ones. Lastly, as we head onto the next year, the latest development serves as good news for Green groups.

Alibaba stock falls almost 2% in today’s pre-market trading hours

Alibaba Group Holding Ltd (NYSE:BABA) stock has tanked nearly 2% during today’s pre-market trading hours. The drop in stock price is due to the Taobao’s addition to the “Notorious Market” category once again by United States’ Trade Representative office. 

Taobao is an online marketplace set up by the world’s leading e-commerce giant Alibaba. The company has once again been blacklisted for fakes; the last time it was labeled as notorious was four years back. 

United States’ Trade Representative office disseminated a report that the online marketplace has been discovered with high level of counterfeiting and piracy. Alibaba expressed its disappointment in the decision by the Trade Representative office. Although the e-commerce giant has claimed that its doing everything possible to fight piracy and fakes, the company now finds itself in the same category as torrent website Pirate Bay. 

Taobao’s listing in “Notorious Market” category dents Alibaba’s credibility in the United States and also across the globe; the financial damage is already evident through the plunge in stock price which some industry experts believe can be of a higher magnitude. Jack Ma’s company is also interacting with retailers, entertainment companies along with brands in the US – the relationships may be in jeopardy now. 

The country’s Trade Representative office had already warned Alibaba of the consequences last year, and the company was told to improve on the performance in order to avoid the demotion to a category which is reserved for online platforms discovered with copyright infringement. 

On the other hand, Haitong International Securities Co, which is based in Hong Kong, believes that the situation with Alibaba in the US is more political than anything else. The analyst at the investment firm said: “When people buy on Alibaba it’s not because they intend to buy into a good quality supply, they know what Taobao is.”

The Country Caller takes a look at why Chesapeake is trading in the green today

Almost all of the energy stocks traded in the green today. Chesapeake Energy Corporation (NYSE:CHK) a company which has fallen 73.2% of its stock value was also no exception. The stock, after one hour of the opening bell of the market, had surged up to 2.82%. As crude oil prices are highly correlated with natural gas prices, the company’s stock has therefore risen.

Much of the increase today was associated with a marked recovery in crude oil prices. During trading on Tuesday, the US benchmark for crude oil, West Texas Intermediate (WTI) was up 0.42% at $47.92 per barrel, while the global benchmark for crude oil, Brent Crude was up 0.14% at $49.04 per barrel. Crude oil prices in the last few weeks have also surged, despite Saudi Arabia’ s change in policy of pumping more crude and diversifying their operations.

The policy however has not stopped the oil prices to rise as supply outages from the highly abundant in supply Canadian oil sands and from the oil field of Nigeria have dented supply. Goldman Sachs mentioned that demand was outweighing supply this time around.

The company recently disclosed its financial results for the first quarter of fiscal year 2016. While the company’s adjusted net loss of $1.01 came in line with the expectations of the analysts across the street it showed a massive year-over-year (YoY) improvement.

Another positive for the company came through an increase of 1% in production despite heavy capital spending cuts. Capital spending in the latest quarter declined from $1.5 billion in the same quarter last year to $365 million currently. The company has also negotiated with its debtors and engaged in various swap deals to reduce debt.

We believe that the only thing putting the company down at the moment are oil and gas prices.

Analyst William Featherston from UBS also commended the company’s ability of showing better than expected production with improved liquidity. The research firm increased its price target on the stock but maintained a Sell rating.