Moving the Market

Infoblox (BLOX $25.10 +3.10) reported third quarter earnings of $0.11 per share, $0.05 better than the Capital IQ consensus of $0.06, while revenues rose 33.6% year/year to $58 million versus the $55.89 million consensus. The company issued guidance for the fourth quarter with EPS of $0.08-0.09 versus the $0.07 Capital IQ consensus and revenues of $58-59 million versus the $58.03 million Capital IQ consensus. "In the quarter, we saw strong demand across all geographic regions, with no major concentration in any particular verticals. We also had a strong quarter from a profitability perspective, with non-GAAP gross margin, operating margin and earnings per share all exceeding our previous targets. Infoblox's balance sheet was further strengthened, as we exited the third quarter with $192 million in cash, cash equivalents and short-term investments."

Salesforce.com (CRM) reported first quarter earnings of $0.10 per share, in-line with the Capital IQ consensus of $0.10, while revenues rose 28.5% year/year to $893 million versus the $887.3 million consensus. Cash generated from operations for the fiscal first quarter was $283 million, an increase of 33% on a year-over-year basis. Total cash, cash equivalents and marketable securities finished the quarter at $3.1 billion. Deferred revenue on the balance sheet as of April 30, 2013 was $1.73 billion, an increase of 30% on a year-over-year basis, and 31% in constant currency. The company issued in-line guidance for the second quarter with EPS of,$0.11-0.12 versus the $0.12 Capital IQ consensus and revenues of $931-936 million versus the $935.39 million Capital IQ consensus. The company issued guidance for fiscal year 2014 with EPS $0.47-0.49 versus the $0.50 Capital IQ consensus and revenues of $3.835-3.875 versus the $3.87 billion Capital IQ consensus.

Marvell (MRVL $11.90 +0.59) reported first quarter adjusted earnings of $0.19 per share, $0.05 better than the Capital IQ consensus of $0.14, while revenues fell 5.3% year/year to $734.4 million versus the $721.55 million consensus. Non-GAAP gross margin for the first quarter of fiscal 2014 was 54.6 percent, compared to 53.2 percent for the fourth quarter of fiscal 2013 and 54.5 percent for the first quarter of fiscal 2013. The company issued guidance for the second quarter EPS of $0.17-0.21, excluding non-recurring items, versus the $0.18 Capital IQ consensus and revenues of $770-810 million versus the $762.96 million Capital IQ consensus. Under the share repurchase program, Marvell repurchased ~20 million shares for a total of $200 million in the first quarter of fiscal 2014. Over the past eleven quarters, Marvell has repurchased and retired ~204 million shares, or about 29 percent, of its outstanding shares. "Our results in the first quarter were at the high-end of our guidance mainly due to better than normal seasonal demand and share gains in our storage and networking end markets. Starting in the second quarter of fiscal 2014, we expect many of our investments and key initiatives across all of our end markets to produce tangible results. More specifically, we expect growth to be driven by increased traction in areas such as mobile handsets, tablets, connectivity and SSDs."

Pandora Media ( P $19.20 +2.04) reported first quarter loss of $0.10 per share, in-line with the Capital IQ consensus of ($0.10), while revenues rose 59.0% year/year to $128.5 million, including $3.0 million in revenue relating to co's subscription return reserve versus the $123.96 million consensus. Total listener hours grew 35% to 4.18 billion for the first quarter of fiscal 2014, compared to 3.09 billion for the first quarter of fiscal 2013.  The company issued guidance for the second quarter with EPS of ($0.02)-$0.01 versus the $0.02 Capital IQ consensus and revenues of  $155-160 million versus the $149.73 million Capital IQ consensus. The company issued in-line guidance for fiscal year 2014 with EPS of ($0.02)-$0.08 versus the $0.02 Capital IQ consensus and revenues of $615-635 million versus the $617.76 million Capital IQ Consensus Estimate.   "Mobile listening hours and mobile ad revenue reached record highs, with growth in mobile ad revenue exceeding growth in mobile listening hours.  During the quarter, we successfully implemented a mobile listening limit, enabling us to manage our content acquisition costs with minimal impact on listenership or revenue growth. Pandora's subscriber base surpassed 2.5 million, adding more net new subscribers in the quarter than in all of fiscal 2013, giving Pandora the largest US streaming subscriber base of any music service." 
 

Sears Holdings (SHLD $51.01 -7.16) reported first quarter adjusted loss of $1.29 per share, $0.69 worse than the Capital IQ consensus of ($0.60), while revenues fell 8.8% year/year to $8.45 billion versus the $8.37 billion two estimate average. The decrease in revenue was primarily due to the effect of having fewer Kmart and Sears Full-line stores in operation, lower comparable store sales and the separation of the Sears Hometown and Outlet businesses which occurred in the third quarter of 2012.  Domestic comparable store sales declined 3.6%, comprised of decreases of 4.6% at Kmart and 2.4% at Sears Domestic. The decline at Kmart reflects decreases in most categories, with the largest declines occurring in our highly competitive transactional categories such as grocery & household, pharmacy and drugstore. The decline at Sears Domestic of 2.4% predominately was driven by weather related declines in the lawn & garden category. Excluding lawn & garden, comparable store sales would have increased 0.3%. This slight increase was due to increases in the apparel and home categories, which were partially offset by declines in the consumer electronics and tools categories.

The Sears Domestic apparel category has achieved comparable store sales increases for seven consecutive quarters. As compared to the prior year, Kmart's gross margin rate for the first quarter declined 220 bps primarily due to decreases in the apparel and grocery & household categories, resulting from increased clearance markdowns and timing of vendor allowances, respectively.  Sears Domestic's gross margin rate declined 250 basis points for the quarter primarily due to selling merchandise to SHO at cost pursuant to the terms of the separation, which accounted for ~160 bps of the decline. We also experienced a decrease in the automotive category due to increased commodity costs. "Our recent financial performance has not been acceptable, although we have seen some positive momentum as sales per member increased and our online business grew 20% in the quarter." As one of a number of options available to us, we are currently in the process of evaluating strategic alternatives for our Protection Agreement business, including a possible sale, joint venture or recapitalization of the business, or some combination of these alternatives. These alternatives could, if successful, create additional liquidity, in excess of our minimum target of $500 million, but there is of course no assurance that we will complete any transaction relating to the Protection Agreement business in 2013."

Durable goods orders rose 3.3% in April after declining an upwardly revised 5.9% (from -6.9%) in March. The Briefing.com consensus expected durable goods orders to rise 1.6%. The sawtooth pattern in transportation held up despite Boeing (BA) announcing lower aircraft orders in April. Transportation orders rose 8.1% in April as defense and nondefense aircraft orders increased 25.7%. Excluding transportation, durable goods demand was solid all-around and increased 1.3% in April after declining 1.7% in March. The consensus expected these orders to increase 0.5%. The strong gain outside of transportation stood in contrast to the weakening regional and national manufacturing surveys. Other than computers, all of the durable goods sectors saw positive orders growth. Business investment demand was strong. Orders for nondefense durable goods excluding aircraft increased 1.2%. That was up from a 0.9% gain in March. Shipments, which factor into GDP growth, were down 1.5% after increasing 0.5% in March. Shipments growth should rebound strongly over the next month or two as manufacturers pare down the 0.9% increase in April backlogs.

The tech sector is trading lower today, along with losses in the broader market. Semiconductors are showing weakness as well with the SOX trading 0.7% lower on the session. Within the chip index, SPRD (-2.3%) is a notable laggard. Among other major indices, the SPY is trading 0.7% lower today, while the QQQ and the NASDAQ are both trading 0.6% higher on the session. Among tech bellwethers, AAPL (+0.4%) is showing notable strength, while ORCL (-1.9%) is under pressure.

In tech earnings last night: CRM (-7.8%) posted an inline qtr and offered inline guidance MRVL (-0.2%) reported a slight beat but guided slightly below consensus MENT (+0.7%) posted a beat and raise. In rumors, GOOG (-1.1%) is considering purchase of mapping company Waze for more than $1 bln; according to reports. FB (-1.4%) was previously speculated as a potential buyer. In notable analyst upgrades this morning in the tech space, ADS (+0.6%) was upgraded to Outperform at William Blair. Among notable downgrades in tech, CRM (-7.8%) was downgraded to Neutral at Wedbush, MRVL (-0.2%) was downgraded to Mkt Underperform at JMP, CRUS (-1.2%) was downgraded to Hold at Canaccord, and CHL (-0.6%) was downgraded to Neutral at Goldman.