Salesforce.com under pressure; RadioShack lower; Molycorp plans mandatory; Nielsen on tap

By Rebecca Melvin

New York, Jan. 24 - Salesforce.com Inc.'s convertibles changed hands Monday at about the midpoint of the trading range of the underlying common stock, which was under pressure after a Barron's article pointed out that the client-relationship management company has good growth prospects but not good enough to justify its high stock price.

RadioShack Corp. was indicated lower, but not seen trading, amid a 11% drop in the underlying shares after the Forth Worth, Texas-based electronics retailer warned on fourth-quarter profit and announced its chairman and chief executive Julian Day will retire in May.

On the upside though, Ciena Corp.'s 0.25% convertibles due 2013 were trading at 97 versus a share price of $23.70 amid higher shares.

Meanwhile, MannKind Corp.'s 3.75% convertibles crossed at 62 bid, 62.375 offered, which was in line with where they traded on Friday, when the MannKind paper was initially lower at 57.5 but then higher at 62.5 bid, 63 offered.

Overall, convertible bonds Monday put in a quiet session, which was generally a remake of Friday's session given that a big chunk of the day's activity was focused on just a few names. Namely activity came from Teva Pharmaceuticals Industries Inc., which has seen its Teva Ds at the top of the volume charts since that paper was called earlier this month, Amgen Inc. and EMC Corp.

It was "all benchmark kind of names" in trade, which "wasn't too interesting," a New York-based sellside trader said.

It was a "very big chunk of Tevas," and an equally large amount of about $70 million of EMC bonds, the trader said.

In the primary, Greenwood Village, Colo.-based Molycorp Inc., a producer of rare earth oxides, announced plans to price $172.5 million mandatory convertible preferred stock. That deal was seen coming some time next week along with a $500 million common stock secondary offering.

In addition, the books on Nielsen Holdings BV's $250 million mandatory convertible offering were expected to close at the end of the session, with final terms to be fixed before the open Tuesday, according to a syndicate source.

Price talk on the Nielsen issue is 6.25% to 6.75% for the coupon, with an initial conversion premium of 15% to 20%. The three-year mandatory is coming with a concurrent $1.5 billion initial public offering of common stock.

Salesforce.com under pressure

Salesforce.com's 0.75% convertible bonds due 2015 traded intraday at 163 versus a share price of $128.35, which looked to be several points lower compared to previous levels but not as low as they looked at the close.

The 163 trade came with a share price that was about where they opened and right in the middle of the day's trading range of $130.58 at the high end of $126.50 at the low end.

"It was right at the midpoint of the stock," a New York-based sellside trader said, adding that shares reacted, but didn't over react, to the Barron's article.

"There wasn't too much reaction in the stock; not huge," the sellsider said.

Salesforce shares have risen 92% in the past year, and an article in the weekend edition of Barron's pointed to how difficult it is to justify the meteoric rise, citing whiffs of the dot-com bubble.

Investors are enamored with the San Francisco-based client relationship management company's cloud computing basis.

The article said that Salesforce may have been first in the field, but that it has yet to show that it can generate revenue from software sales outside its client-relationship management niche.

RadioShack indicated lower

RadioShack's 2.5% convertibles due 2013 were indicated at 102.353 bid, compared to a previous bid level of 104.623. But a sellsider said he didn't see any of the convertibles in trade, which wasn't too surprising given that it was a very slow day, sources said.

But shares of the electronics retail chain fell $1.99, or 11.3%, to $15.62 in ultra heavy volume.

RadioShack warned that it expects to earn 50 cents to 54 cents per share for its fourth quarter, which was lower than the 66 cents a share profit that analysts had been expecting.

Margins are narrower, as preliminary total net sales for fourth quarter increased about 4% to $1.37 billion, while same-store sales rose 1%.

Molycorp plans mandatory

Price talk wasn't immediately available on the Molycorp mandatory deal, which was seen pricing next week, according to a syndicate source.

The mandatory and concurrent $500 million secondary stock offering are being made to help fund expansion of the company's Mountain Pass facility in California. It is the only rare earth production facility that will be operating in the West, and restarting it is a response to China, a dominant producer, which has cut its export quota.

J.P. Morgan Securities LLC and Morgan Stanley & Co. Inc. are the joint bookrunners for the proposed Molycorp offerings.

The principal selling stockholders in the secondary offering are affiliates of Resource Capital Funds, Pegasus Capital Advisors LP, and the Traxys Group, which are the three main investors that led the purchase of the Mountain Pass Rare Earth Facility in 2008.

The proposed secondary offering will provide additional public float with respect to the company's common stock.

Mentioned in this article:

Amgen Inc. Nasdaq: AMGN

EMC Corp. NYSE: EMC

Ciena Corp. Nasdaq: CIEN

MannKind Corp. Nasdaq: MNKD

Molycorp Inc. NYSE: MCP

RadioShack Corp. NYSE: RSH

Salesforce.com Inc. NYSE: CRM

Teva Pharmaceuticals Industries Inc. Nasdaq: TEVA

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