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UPDATE 2-Check Point Q3 beats forecasts, upbeat on Q4
* Check Point continues to win market share* Sees Q4 revenue $348-$360 mln, non-GAAP EPS $0.79-$0.82By Tova CohenTEL AVIV, Oct 18 (Reuters) - Internet and network security provider Check Point Software Technologies raised its outlook anew for 2011 and was optimistic for the fourth quarter after it beat estimates in the third quarter with a 15 percent profit gain.”We are seeing strong demand in the United States, Asia and even in Europe where there’s economic uncertainty. All regions showed good results,” Chairman and Chief Executive Gil Shwed told a news conference on Tuesday.While the security market is growing overall, Israel-based Check Point continues to take market share from competitors such as Cisco Systems .”We estimate the whole market is rising by about 10 percent and we are growing by about 15 percent and we are certainly growing our market share,” Shwed said.The company’s software blades, which prevent network intrusion and are bought on an annual subscription basis, are selling strongly and boosting deferred revenue growth, he said.Check Point’s new anti-bot software blade, which it plans to launch in early 2012, is generating strong interest, Shwed said. Bots are small pieces of software that invade networks and are hard to detect.”In 100 percent of our deployments we found active bots,” he said, noting that at one government agency the software found eight different bots, including for industrial espionage.Armed with nearly $2.8 billion in cash, Check Point continues to buy back shares and seek acquisitions.”We certainly expect some smaller acquisitions,” Shwed said.The company posted third-quarter earnings per share excluding one-off items of 72 cents, compared with 63 cents a year earlier. Revenue grew 13 percent to $308.3 million.Check Point was expected to earn 70 cents on revenue of $307 million, according to Thomson Reuters I/B/E/S.The company itself had projected quarterly revenue of $300-$308 million and EPS ex-items of 67-70 cents.”All in all, another solid quarter driven by positive secular trends in the security space,” Oppenheimer analyst Shaul Eyal said.Check Point’s shares, which are up 25 percent year to date, were down 0.5 percent to $57.72 in early Nasdaq trade.”Despite the third quarter bookings outperformance, we believe Check Point could give back some of its recent gains due to the lack of revenue upside,” Cowen & Co analyst Gregg Moskowitz wrote in a note to clients.For the fourth quarter Shwed forecast revenue of $348 million to $360 million and earnings per share ex-items of 79-82 cents. The company is forecast by analysts to earn 81 cents on revenue of $354 million.Check Point slightly raised its full year forecast to revenue of between $1.238 billion and $1.25 billion and EPS ex-items of $2.83-$2.86.It is forecast to post revenue of $1.24 billion and adjusted EPS of $2.82. -
UPDATE 1-Many nations on course to eliminate malaria -WHO
By Kate Kelland, Health and Science CorrespondentSEATTLE, Oct 17 (Reuters) - Nearly a third of all countries affected by malaria are on course to eliminate the mosquito-borne disease over the next 10 years, the World Health Organisation (WHO) said on Monday.In a progress report published by the Roll Back Malaria (RBM) partnership at the start of an international Malaria Forum conference in Seattle, the United Nations health body said “remarkable progress” had been made.Up to a third of the 108 countries and territories across the world where malaria is endemic are moving towards being able to wipe out the disease within their borders, it said.”Better diagnostic testing and surveillance has provided a clearer picture of where we are on the ground — and has shown that there are countries eliminating malaria in all endemic regions of the world,” Robert Newman, director of the WHO’s Global Malaria Programme, told the conference.”We know that we can save lives with today’s tools.”He said the WHO continually monitors progress to ensure countries are supported in their efforts to be malaria-free.Almost half the world’s population — or 3.3 billion people — are at risk of malaria and the parasitic disease killed 781,000 people in 2009, according to the latest data. Most of its victims are in Africa.Malaria elimination — halting the disease’s transmission and reducing infections to zero within a defined area — was first attempted on a large scale during the Global Malaria Eradication Programme from 1955 to 1972.During that time, 20 countries were certified by WHO as malaria-free. But that number dropped to just four countries during the following 30 years when efforts to control the spread of the disease lapsed. “The world sort of gave up on malaria, and we lost ground,” said Newman.Monday’s report said seven countries had recently eliminated malaria and were working to prevent re-introduction, another 10 countries were monitoring transmission to get down to zero malaria cases, and a further nine were “preparing to move towards nationwide elimination of malaria”.”The extraordinary commitment, the … financing, and the coordination of efforts to realise malaria targets over the last ten years have resulted in a situation today where we could see 10 more countries reaching a malaria-free status in a relatively short time,” said Awa Marie Coll-Seck, RBM’s executive director.”This will save many many more lives.”PROGRESS MADERBM said in a report in September that a rapid scale-up of a range of malaria control measures — such as insecticide-treated mosquito nets, indoor spraying, faster and more accurate diagnosis and access to anti-malaria drugs — has saved an estimated 1.1 million lives in Africa over the past 10 years.International funding for the fight against malaria has also risen substantially in recent years, reaching about $1.5 billion in 2010, up from $100 million in 2003.David Brandling-Bennett, deputy director for malaria at the Gates Foundation, which was hosting the Seattle conference, said it was vital for global health authorities, donors and national governments not to take their eye off the ball.”The reality is that malaria does fight back … and we don’t want to lose the momentum from these gains,” he said.Newman said that with all the highly effective tools currently available, “no one should die of malaria”. He urged international donors and national governments to push harder to ensure all those who needed them had access to them.Only then, he said, would the “global goal of eradicating this ancient scourge” become a reality.The Malaria Forum is hosted and funded by the Gates Foundation, a $34 billion fund run by the billionaire Microsoft founder Bill Gates. The foundation is devoted largely to health projects in poor countries.In 2007, Gates and his wife Melinda urged the international community to fight for the global eradication of malaria, saying that to aspire to anything less would be “timid”. -
Geithner says growth too slow, need jobs bill
The bill was blocked by Senate Republicans last Tuesday but President Barack Obama wants Congress to begin voting next week piece by piece on the proposals.Geithner told a news conference that U.S. growth was “somewhat stronger” in the second half than earlier in the year when he said a hard fight over raising the debt limit had sapped business and consumer confidence.He added that Europe’s debt crisis — which G20 members are still struggling to get under cvonrol — also had hurt U.S. growth and was slowing a recovery.”For these reasons, we have proposed in the United States a very substantial package of actions to strengthen growth and job creation, tied to reforms that would reduce our fiscal deficits to a sustainable position over the medium term,” Geithner said.In Washington on Saturday, Obama used a weekly radio address to paint Republicans as obstructionists impeding his drive to revive a slow-growing economy and lower high unemployment.Geithner repeated that China could help restore faster global growth by letting its yuan currency rise faster but said he had not seen comments made by China’s Premier Wen Jiabao earlier who said China’s exchange rate would remain steady to protect its exporters.He suggested it would be in China’s own interest to allow more rapid appreciation, which would tamp down inflation while helping the global economy to reach more balanced growth.”It’s in the interests of the global economy for China to let the exchange rate appreciate more rapidly and more broadly in response to the upward pressure on the currency you are seeing now,” Geithner said. -
S.Korea Sept LNG imports jump 59 pct y/y; coal imports up 30 pct
The country’s LNG inventory stood at over 3 million tonnes as of Tuesday, and the country plans to build nearly 3.5 million tonnes of inventory by mid-November for winter demand, according to a government source on Tuesday.State-run Korea Gas Corp (KOGAS) has sold gas equivalent to 1.95 million tonnes of LNG domestically in September, up 15.8 percent from a year earlier and led by strong demand for power generation. The amount was equivalent to 86.3 billion cubic feet of natural gas.For coal, the country’s September imports rose 30.3 percent to 11.45 million tonnes from 8.79 million tonnes a year earlier, data from the Korea Customs Service also showed on Saturday. -
New bankruptcy ripples may emerge in tough economy
Companies in a range of businesses, including hair salons, restaurants, renewable energy, and the paper industry, have tumbled into Chapter 11 in the past few months.The weak economy, lackluster consumer spending, a shaky junk-bond market and increasingly tight lending practices are also threatening struggling companies in industries as diverse as shipping, tourism, media, energy and real estate.AMR Corp’s American Airlines may need to go to court to restructure its labor contracts, though a spokesman for the airline reiterated on Monday that bankruptcy is not the company’s goal or preference.Kodak confirmed that a law firm known for taking companies through bankruptcy has been advising on strategy as attempts to overcome the loss of its traditional photography business falter. It has denied any intention of filing for bankruptcy.Some bankruptcy and restructuring experts warn a fresh U.S. recession could trigger a string of failures to rival the one that followed Lehman Brothers, which in 2008 filed the biggest bankruptcy in U.S. history.”It’s getting busier for everyone I know,” said Jay Goffman, the co-head of the Global Restructuring Group at law firm Skadden Arps, Slate, Meagher & Flom. “I think 2012 will be a busy year and 2013 and 2014 will be extraordinarily busy years in restructuring.”No one is currently predicting a second Lehman-type collapse. Its $639 billion bankruptcy came after a loss of confidence in the investment bank as asset values plummeted, leading to the drying up of credit lines.In fact, predicting a bankruptcy wave at all is a tricky task, experts say. It could depend on several unknowns: how much money banks and other institutions are willing to lend troubled companies, whether the economy lands in a double-dip recession and what happens in the European debt crisis.The sovereign debt crisis in Europe could be the most important X factor. Even the experts who say that a bankruptcy crisis is not coming because current low interest rates make it easy for companies to get cash to finance their way out of trouble, say that the euro zone’s problems could trigger defaults here.”It is possible that one or two sovereign debt defaults would increase the pressure we’d feel in the U.S. credit market. Then we might see an environment like we had in 2008,” said Peter Fitzsimmons, president for North America for turnaround advisory firm AlixPartners LLP.MORE FILINGSChapter 11 filings are picking up, bankruptcy data show. Ten companies with at least $100 million in assets filed for bankruptcy in September, the most since 17 filed in April, which was the busiest month since 2009, according to Bankruptcydata.com.For a graphic click here link.reuters.com/nuw34sp:Recent failures included renewable energy companies Evergreen Solar and Solyndra. The latter collapsed in a politically-charged bankruptcy after taking a $535 million loan from the federal government.Other recent bankruptcies include glossy magazine paper manufacturer NewPage Corp, which was the largest bankruptcy of the year and the largest non-financial company filing since 2009; Graceway Pharmaceuticals, which makes skin creams; Hussey Copper Corp., which makes the copper bars used in switchboards, and the Dallas Stars of the National Hockey League.So far this month, five companies with more than $100 million in assets have filed, including the Friendly’s ice cream chain - and wireless broadband company Open Range Communications Inc.It is difficult to predict trends in filings. For example, experts who focused on macroeconomic credit indicators and default projections in 2006 or 2007 wouldn’t in many cases have been prepared for the severity of failures that followed.In 2009, General Motors, Chrysler Group, LyondellBasell Industries and General Growth Properties all filed for bankruptcy, contributing to a record number of filings and topped the list of largest bankruptcies ever.At the same time, some experts were predicting an even deeper and longer list of corporate collapses. But within a year of bankruptcy filings breaking records, banks and other financial institutions were buying debt and lending, making it easy for companies to finance their way out of trouble.Two months after Lehman failed, the U.S. Federal Reserve slashed rates to near zero. Once confidence began to return to the debt markets, investors flocked to high-yield bonds sold by ailing companies, allowing them to refinance.Other failing companies were able to “amend and extend” - or to critics, “amend and pretend” - by striking new borrowing terms with lenders that delayed debt maturities in the hopes the economy would rebound smartly and business would pick up.Those measures often avoided operational overhauls, creating what some experts called “zombie companies” that cut staff and prices to survive, but were too sick to invest in new projects.Bankruptcy court allows troubled companies to shed debt and also become more operationally efficient as they renegotiate labor contracts, as airlines have done, or reject pricey store leases, which retailers often do.But these changes do not always work, especially when companies find little support among suppliers or creditors for their turnaround plans. Bankrupt book chain Borders, for instance, recently closed its doors after failing to find a buyer.In addition, confidence in the economy and easy access to debt allowed companies to complete restructurings in 2009 and 2010 with business plans and debt loads that were based on an economic pickup that has now faltered. That could create the potential for trouble at companies that have already restructured once. -
Envy, desire and basis points
I would like to tell you a story. It’s one about the tempestuous relationship between fund managers and their investors, a tale of envy, desire and basis point negotiations. You may have spotted by now that this is not the plot for this season’s latest blockbuster. My story has recently gained a little extra spice with two old-fashioned heroes riding into view. One from the West – Omaha - and the other from the East - well, his father hailed from Russia – with both willing to make a little less money in order to help their fellow citizens. Warren Buffett and Stuart Rose are not alone; others in France and Germany are also saddling up. These horsemen seem to be heading in the opposite direction from those in the European funds industry. There is one aspect that I’d like to look at to explore this: the fees generated by funds in relation to their assets. And in this case Europe and the US look pretty different. One of the implicit benefits of investing in a mutual fund is that investors enjoy lower annual charges as a result of a fund’s success in increasing assets, in other words that costs fall as more investors join – economies of scale. The following chart illustrates these economies of scale in action for funds sold across Europe. But although the disproportionately high expenses borne by the smallest funds does mean that average total expense ratios (TERs) fall as assets rise, crucially, such economies of scale do not continue through further asset rises among larger funds. View the chart by clicking here. ECONOMIES OF SCALE When comparing the UK to continental Europe there appears, at first, to be a different approach. But on closer scrutiny one can see that the apparent lack of economies of scale being passed on to investors largely reflect the fact that the smallest funds in the UK tend not to let expenses get out of control and create disproportionately high TERs. The more important issue, and one where one begins to question whether European or UK fund companies are acting in investors’ best interests, is that any economies of scale achieved for investment management fees are not passed on to retail investors. This contrasts sharply with practice in the US. Click here to view the chart. Taking US large cap funds to illustrate this, the relationship between fund assets and management fees can be seen as an ‘n’-shape. Management fees (excluding distribution fees, known as 12b-1 fees) are low when funds are smaller because the management company waives most of the fee. Then, as the fund grows, the company waives less so the average fee is higher. Finally the fund reaches levels where real economies of scale kick in – and so-called ‘breakpoints’ are applied – so management fees drop again. In contrast to Europe, the rate of decline in average TERs increases as assets rise. However, it’s worth noting that many European managers would not want individual funds to reach the sizes commonly seen in the US – even if the companies they work for might see the appeal. IT’S A FIX But the story does not end there. One area that has barely been scrutinised in public is the growing practice of fixing TERs. Such moves have been trumpeted as a triumph for transparency – investors know what the annual operating costs borne by their funds will be every year. But the flipside to this is whether the motivation for such a practice is the interests of investors or the revenues of the fund company. The positive aspect of fixing the TER is that if assets fall dramatically, the TER will not rise. Having said this, as many of the groups who take this approach are larger it is not unreasonable to assume that the fixed expenses have been set at levels the companies can afford. In this situation, the fund company earns management fees higher than the percentage quoted. In other words, if the operating expenses incurred (in sterling terms) are lower than the fixed percentage, then the remaining money is taken as revenue – not paid back to the investor. So if a fund with a fixed TER of 1.65 percent, including a management fee of 1.5 percent, has assets of 100 million pounds and bears back-office costs of 100,000 pounds in one year, then the management fee revenue earned will be 1.55 million pounds (or 1.55 percent). The TER stays the same, so the client knows what costs his fund is bearing, but the fund company takes home a larger slice of the pie. Hmmm. One of the key drivers behind this transatlantic divide is the interpretation of fiduciary responsibility in relation to fees. Without such an interpretation in Europe, without regulations for anyone to act in this way, and without a compelling business case for companies to change this situation (which the Retail Distribution Review might bring about in the UK), then however logical it might seem that annual charges borne by investors should fall as fund assets rise, it is unlikely that they will do so. Meanwhile, Warren and Stuart ride off into the sunset, still paying the same tax.
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