Micron gains outright, flat to weaker on hedge after strong earnings; Qihoo 360 improves

By Rebecca Melvin

New York, Jan. 8 - Micron Technology Inc.'s myriad convertible issues traded up on an outright basis on Wednesday but were flat to slightly weaker on a dollar-neutral, or hedged, basis, after the Boise, Idaho-based chipmaker posted fiscal first-quarter results that beat earnings and revenue estimates.

The Micron 3% convertible due 2043 added 2 to 3 points on an outright basis to 106.375 bid Wednesday versus an underlying share price of $24.25. The Micron 3.125% convertibles due 2032, or the C series, jumped 22 points to about 150.

"They have been relatively unchanged on a dollar-neutral basis or even down a little; although outright they are up," a New York-based sellsider said.

Elsewhere, the convertibles of China-based companies were doing a little bit better, the trader said.

Qihoo 360 Technology Co. Ltd.'s convertibles led the pack of China names on news from the internet company that former Google China executive John Lui was named Qihoo's chief business officer effective immediately. The company is seeking strategies to monetize search and other areas.

Also trading in the convertible market was Archer-Daniels-Midland Co.'s 0.875% bond, which has an upcoming maturity Feb. 15, 2014. The paper changed hands between 103 and 103.44 in the early going, compared to 103 to 103.6 on Tuesday, according to Trace data.

The ADM issue was expected to lose some value heading into its upcoming maturity date, a trader said.

LifePoint Hospitals Inc.'s 3.5% convertible due May 15, 2014 was another issue that may be "leaking" value "here and there" heading into maturity, the trader said.

No new issues launched or priced during the session. The absence of new paper has buoyed the secondary market overall, a sellsider said.

"Things have been doing a little bit better amid the lack of new issues; we'll see if that continues," the sellsider said.

Equities ended flat to mixed and U.S. Treasuries were lower, sending the 10-year yield back up to near 3%.

In economic data, December job growth in the private sector increased a better-than-expected 238,000 from 215,000 in November, according to Automatic Data Processing and Moody's Analytics. The number of jobs added was expected to slip to 200,000.

The S&P 500 stock index ended flat at 1,837.49, which was down 0.39 point; the Dow Jones industrial average shed 68.20 points, or 0.4%, at 16,462.74; and the Nasdaq stock market edged up 12.43 points, or 0.3%, to 4,165.61.

Micron jumps outright

Micron's 3% convertibles due 2043 were seen at 106.375 bid versus an underlying share price of $24.25 early Wednesday, a New York-based trader said.

Micron's 3.125% convertibles due 2032, or the C series, were quoted at 250, which was up 22 points from 228 previously.

Micron's other convertible issues including series B, D, E, and F were also quoted near 250 from 228.

Micron's shares added $2.14, or nearly 10%, to $23.87.

"On a dollar-neutral basis they were little changed or down a little bit," a trader said of the 3% convertibles, while the 2014 notes and series B-F convertibles were little changed.

"They all traded small in size, but relative to the movement in the equity, they didn't move much," the trader said.

Micron said that excluding one-time items, it earned 77 cents a share on revenue of $4.04 billion for its fiscal first quarter. Analysts were expecting earnings of 51 cents a share on $3.7 billion in revenue. The company's results benefited from its acquisition of Elpida Memory Inc. at the end of July.

Qihoo trades better

Qihoo's 2.5% convertibles due 2018 traded at 111.75 with the underlying shares at $87.17.

Shares of the China PC and mobile internet security products provider gained $7.60, or 9.3%, to $89.00 on the day.

News that the company has hired a former Google executive to help it develop strategies to monetize search engine capabilities encouraged investors.

The company priced $600 million of the 2.5% convertibles in August.

A sellsider said that not only Qihoo but other China-based issuers including Ctrip.com and NQ Mobile Inc. were better on Wednesday.

Mentioned in this article:

Archer-Daniels-Midland Co. NYSE: AMD

LifePoint Hospitals Inc. Nasdaq: LPNT

Micron Technology Inc. NYSE: MU

Qihoo 360 Technology Co. Ltd. Nasdaq: QIHU

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