Intel jumps on strong earnings; Ford, Micron, Microsoft up on optimism; Mylan to buy rival

By Kenneth Lim

Boston, July 14 - Intel Corp. gained on Wednesday following stellar quarterly results, as the convertible market had a mixed session amid choppiness in equities.

Ford Motor Co. also improved on expectations that it will also report strong quarterly results.

Mylan Inc. was up a touch after the company said it had received approval to sell a generic arthritis drug. The company also announced after the market closed that it would buy an Irish rival for $550 million in cash.

Transocean Ltd. continued to be active, oscillating up and down during the day to close mostly unchanged.

The convertibles market in general closed the day on an uneven note, although that could have been a natural pause after the strength over the past few days, a sellsider said.

"I would say it's pretty mixed," the sellsider said. "But the last few days have been pretty good, so it kind of eased off a little bit."

Intel gains with results

Intel's 2.95% convertible due 2035 gained about 1 point dollar-neutral following the company's strong quarterly earnings.

The convertibles traded at 100.625 versus a common stock price of $21.75. The common stock closed at $21.36 apiece, up by 1.67% or $0.35.

Intel is a Santa Clara, Calif.-based semiconductor chip maker.

"Stock's up a little, and the bonds are up on a dollar-price basis anyway," a sellsider said.

The company reported late Tuesday that its net income for the quarter ended June 26 was $2.89 billion, or 51 cents per share. That was well above Street expectations of 43 cents per share, and it was Intel's best quarter in about a decade.

Intel also forecast that revenue will be $11.2 billion to $12 billion for its third quarter, above analysts' estimates of about $10.9 billion.

"This was an outstanding quarter for them in all respects," a convertible analyst said. "I think the really interesting part is enterprise spending was a big driver for them, and it will probably be a big driver in the second half."

The company's optimistic outlook for the rest of the year is also positive, although the analyst advised some caution.

"I know the second half is historically a better half, but I think there's a feeling going around that there's a risk of being over-optimistic here," the analyst said.

"There's a lot of real concern right now about the economy going into the second half, and I'm not so sure that the chip makers can really go against the current."

Intel's strong results also helped to pull up the rest of the tech sector.

"Intel is the 800-pound gorilla in the sector," the analyst said. "People are more bullish about tech names across the board."

Micron Technology, Inc. saw its 1.875% convertibles due 2014 add about 1.5 points outright to trade at 91.25 versus a common stock price of $8.70.

Shares of Boise, Idaho-based Micron, a memory chip maker, gained 0.23% or $0.02 to close at $8.75 apiece.

Microsoft Corp.'s zero-coupon convertible due 2013 was marked at 102.05 against a common stock price of $25.50 per share. The common stock closed at $25.44 per share, higher by 1.23% or $0.31.

Microsoft is a Redmond, Wash.-based software developer.

Ford gains on optimism

Ford's 4.25% convertibles due 2016 rose half a point to trade at 142 versus a common stock price of $11.80 amid expectations that the auto maker will report strong quarterly results.

The company's common stock closed at $11.81, higher by 1.29% or $0.15.

Ford is a Dearborn, Mich.-based auto maker.

"Ford's have done really, really well," a convertible trader said.

"Compared to two or three years ago, they really look like they've engineered a turnaround. Anyone who bought these last year are really sitting pretty on money right now."

Ford has been reducing its debt exposure, and the company reported a 15% increase in sales in June.

"Just looking at sales alone, it looks like they're going to have another good quarter," the trader said.

Mylan rises, eyes rival

Mylan's 3.75% convertibles due 2015 were seen at 147.625 against a stock price of $17.80 on Wednesday. The 1.25% convertibles due 2012 were marked at 102.75 versus $17.85.

Mylan common stock closed unchanged at $17.85 per share.

The Canonsburg, Pa.-based company is a generic drugs maker.

The company said early on Wednesday that it received approval from the Food and Drug Administration to sell its generic version of an arthritis drug. That news, however, was not seen as a major event.

"It's not going to be a major product for them," a sellside analyst said. "And they're not the first on the market with these generics, so they're not even going to be a dominant player for these."

But Mylan said after the market closed that it planned to buy Irish drug maker Bioniche Pharma Holdings Ltd. for $550 million in cash. Mylan said the acquisition will give it a foot in the North American market for injectable treatments.

Mylan will not take on any of Bioniche's debt or cash. Bionich had $130 million in revenue in the year ended May 31.

Transocean continues volatility

Transocean's 1.5% series A convertible due 2037 traded at 98.125, while its 1.5% series C convertible due 2037 changed hands at 88.625 outright. Both were flat on the day.

Shares of the Vernier, Switzerland-registered offshore drilling contractor closed at $52.36 on Wednesday, a gain of 0.71% or $0.37.

The Transocean series A and series C notes have been more active than its 1.625% series B convertibles due 2037. That is partly because the B paper is in somewhat of a no-man's land between the A and C notes, a sellsider said.

"If you have an opinion on it, it's easier to express it with the As or the Cs," the sellsider said.

Mentioned in this article:

Ford Motor Co. NYSE: F

Intel Corp. Nasdaq: INTC

Micron Technology, Inc. Nasdaq: MU

Microsoft Corp. Nasdaq: MSFT

Mylan Inc. Nasdaq: MYL

Transocean Ltd. NYSE: RIG

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