Convertibles quiet; Salesforce better dollar neutral; Micron reports disappointing loss

By Rebecca Melvin

New York, Dec. 21 - Salesforce.com Inc.'s convertibles slipped on an outright basis but were slightly better on hedge Wednesday as the underlying shares of the cloud computing software company fell in sympathy with Oracle Corp., which posted weaker-than-expected fiscal second-quarter earnings.

The convertibles of RightNow Technologies Inc., which Oracle has offered to buy for cash, weren't heard in trade, a Connecticut-based trader said.

Shares of other companies in the information-technology sector were under pressure after Oracle's weak earnings stoked investor fears of a possible sector wide sales slowdown given that the U.S. economy continues to struggle to gain steam. But the moves in equities didn't seem to translate into trading in convertibles.

Action in the convertible bond market began to tail off Wednesday compared to Tuesday as the financial markets begin to shut down in earnest ahead of the Christmas and New Year's holidays.

"It's been very slow as the year grinds down. The more liquid names are the more active names," the trader said.

Active names included Amgen Inc., Archer-Daniels-Midland Co. and EMC Corp. They are names with larger issues where there is some natural liquidity.

After the market close, Boise, Idaho-based Micron Technology Inc. reported its second straight quarterly loss, which was weaker than expected. Revenue was also lower and slightly worse than expected.

Lower prices and demand for memory chips were cited by the memory chip maker for the disappointing results.

Salesforce.com slips outright

Salesforce.com's 0.75% convertibles due 2015 were seen trading at 135 and later at the session's close at 134.25, and those trades would have likely been versus a $99.00 share price, a sellsider said.

The Salesforce.com bonds, which trade on a heavy delta, were seen as slightly stronger, although the price didn't move much on an outright basis, the sellsider said.

On a dollar-neutral basis, the price should have been about 133, the sellsider said, so at 134.25, it was better.

Shares of the San Francisco-based cloud computing company ended the session down $5.29, or 5%, at $99.03.

Salesforce.com and the "whole sector was being dragged down by the Oracle news," the trader said.

The business software giant cited delayed customer purchases as the reason behind its core software business growing less than expected and revenue in its newer hardware division declining more than expected.

Micron misses

Micron's 1.875% convertible due 2014 changed hands on Wednesday at 95.625, which was little changed on the day, according to Trace data.

Shares of the memory chip maker were 1.4% lower in after-hours trade, after having finished the session down a quarter, or 4.3%, to $5.54 in relatively quiet trade.

"It's going to be lower," a convertibles sellsider said upon observing the earnings miss.

Micron lost $187 million, or 19 cents a share, in the latest quarter, compared with net income of $155 million, or 15 cents, a year earlier. Some analysts had expected a loss of 8 cents a share.

Revenue in the first quarter ended Dec. 1 fell 7.2% to $2.09 billion. Some analysts had expected sales of $2.12 billion.

The price of dynamic random access memory, or DRAM, which provides the main memory in PCs, dropped as much as 30% in the recent quarter, and floods in Thailand have left PC makers short of hard-disk drives, leading them to trim orders of other components, chipmakers have said.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

Archer-Daniels-Midland Co. NYSE: AMD

EMC Corp. NYSE: EMC

Micron Technology Inc. NYSE: MU

RightNow Technologies Inc. Nasdaq: RNOW

Salesforce.com Inc. NYSE: CRM

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