Clearwire tumbles; NetApp, Salesforce.com edge higher dollar neutral; CEDC, Jefferies gain

By Rebecca Melvin

New York, Nov. 18 - Clearwire Corp. was a big focus of trade late Friday after a Wall Street Journal report said the Kirkland, Wash.-based wireless broadband service is considering not making a debt payment Dec. 1.

The article referred to a debt payment of a couple hundred million dollars on several billion dollars' worth of debt, including the convertible debt.

The Clearwire convertibles dropped off a cliff in mid-afternoon to the 27 bid, 30 offered range. Last week, the Clearwire convertibles traded at 46.5 to 48.

Earlier in the session, NetApp Inc. was trading actively and down another point outright, but better on a dollar-neutral basis by 0.125 point to 0.25 point, and still carrying a lot of premium over parity. The data-storage technology company provided weaker-than-expected guidance in its midweek earnings report.

Another casualty of weaker guidance in terms of its shares, but not for hedged players, was Salesforce.com Inc., which saw its convertibles lower on an outright basis but improved on a dollar-neutral basis by 0.25 point to 0.375 point on Friday depending on the market player's delta, a New York-based trader said.

Among more yield-type names, there was also a little improvement on Friday after a generally weaker, thinly traded week.

Central European Distribution Corp.'s convertibles were better Friday, with trades up at 52, which was higher along with the underlying shares. But shares slid into the close, erasing gains. The better number followed a sharp move down on Monday when a few players sold large positions in the paper, sending it down to about 46.

Jefferies Inc.'s convertibles were also a tad better Friday after moving down sharply on Thursday amid investor worries surrounding the mid-sized investment bank's funding.

All in all, "vol. names that had a big vol. event did OK," one trader said Friday, but it would still have to be considered a quiet session.

Prospects for trade next week, heading into the Thanksgiving holiday break, weren't looking too promising: "It's been dead," a trader said, adding that there was nothing on his radar screen for the upcoming week.

Clearwire tumbles

Clearwire's 8.25% convertibles due 2040 pitched lower Friday to 27 bid, 30 offered, with the shares also sharply lower at $1.47 which was down 39 cents, or 21%.

"I would say [Clearwire] was probably the biggest focus" Friday afternoon, a convertibles trader, specializing in technology names, said.

The abrupt slide came after a report that said the cash-strapped wireless company was considering not making a Dec. 1 coupon payment for its debt, including senior secured, first-priority and convertible debt. The article cited a comment made by the company's chief executive.

The Clearwire convertibles priced almost a year ago on Dec. 10, 2010. The initial conversion price on the $729.25 million issue is $7.08.

NetApp extends outright loss

NetApp's 1.75% convertibles due 2013 traded down again on Friday to 123.5 versus an underlying share price of $35.00. On Thursday, the NetApp 1.75% convertibles were reported in trade at 126.5 versus an underlying share price of $36.30.

That represented an outright decline of another 3 points or so, but they were said to have improved on a hedged basis by as much as 0.25 point.

That $35.00 share price represents an almost 50% decline for the shares from highs hit in the first quarter of this year.

The bonds still have a strong premium, given that parity is 110, a New York-based trader said. If the stock goes back up, that premium comes in, the trader commented.

The paper is relatively short-dated with 19 months to go before maturity. A trader compared the NetApp convertibles to FTI Consulting Inc.'s 3.75% convertibles due 2012, which are also short dated and with similar qualities.

NetApp fell after forecasting earnings between 36 cents and 40 cents a share for its current fiscal third quarter, or between 56 cents and 60 cents a share excluding items, on revenue of $1.52 billion to $1.61 billion.

Analysts were expecting adjusted earnings of 63 cents a share on $1.65 billion for this period, which ends in January.

The company cited weak demand for its data-storage products for the declines. The Sunnyvale, Calif.-based company said that the Thailand floods shouldn't affect supplies of hard disk drives for the current quarter, but production problems in that nation may affect revenue and margins in 2012.

Salesforce holds

Salesforce's 0.75% convertibles due 2015 traded Friday at 152 versus an underlying share price of $118.00.

But shares of the San Francisco-based cloud computing company fell $12.66, or 10%, to $113.00 on Friday.

That meant a slight improvement on a hedged, or dollar-neutral, basis.

Salesforce has a much longer duration than NetApp but less than half the coupon. Parity at 131.5 is much higher than for NetApp, but, "a lot more could go on there, with a duration of 2015," a sellsider said.

For the current quarter, Salesforce forecast profit, excluding items, of 39 cents to 40 cents per share, compared to Wall Street's estimate of 40 cents.

It also reported a loss for the most recent quarter. But earnings excluding items and higher sales beat analysts' estimates.

The $575 million deal priced in January 2010. The initial conversion price is $85.36.

Mentioned in this article:

Central European Distribution Corp. Nasdaq: CEDC

Clearwire Corp. Nasdaq: CLWR

Jefferies Inc. NYSE: JEF

NetApp Inc. Nasdaq: NTAP

Salesforce.com Inc. NYSE: CRM

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.