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Morning Commentary: Intel richens on swap after earnings beat, job cuts; Yahoo! eyed
By Rebecca Melvin
New York, April 20 – Intel Corp.’s convertible bonds were trading actively and higher on an outright and dollar-neutral basis early Wednesday after the Santa Clara, Calif.-based semiconductor giant posted earnings and revenue that were better than expected and announced that it is cutting 12,000 jobs, or 11% of its workforce.
Intel’s 3.25% convertibles due 2039 were seen around 158, which was up about 0.75 point on a swap basis, a New York-based trader said.
A second trader put the market at 157.75 versus an underlying share price of $32.00.
Intel’s 2.95% convertibles due 2035 traded around 127, which was up 0.375 point on swap.
Shares were up 34 cents, or 1%, to $31.93 last on the Nasdaq stock market.
The Intel 3.25% convertible was trading best in the early going, the trader said.
“For all earnings thus far, the thinking is that estimates have come down far enough, so that companies are beating, and the market is shrugging off misses as one-time blips,” the trader said. “There are long-only buyers buying the dips.”
For Intel, the layoffs will create a $1.2 billion charge but help it transition away from PC-oriented sales and toward cloud and the Internet of Things instead.
Yahoo! Inc. was also in focus early Wednesday, with the underlying shares up 3% at $37.49 after its earnings beat estimates and as headlines continued to fly regarding potential deals for a sale of its internet business.
“It’s all noise,” a trader said.
Yahoo!’s 0% convertibles due 2018 traded about 0.375 to 0.5 point higher in the early going to 100.87 and 100.97, according to Trace data.
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