Dell to Buy 3PAR; U.S. Stocks Drop

Arthi Gupta
16 Aug, 2010
New York City

U.S. stock trade lower after Japan reported second quarter GDP expanded at 0.1%. China, now the second largest economy in the world after Japan recorded smaller GDP in the second quarter. Dell agreed to buy 3PAR for $1.15 billion. Lowe''s earnings rose 9.6% but lowers forecast.

[R]9:35 AM New York – U.S. stock trade lower after Japan reported second quarter GDP expanded at 0.1%. China, now the second largest economy in the world after Japan recorded smaller GDP in the second quarter. Dell agreed to buy 3PAR for $1.15 billion. Lowe''s earnings rose 9.6% but lowers forecast.[/R]

Asian markets traded mixed on disappointing second quarter GDP data from Japan and European stocks pared early gains dragged by financials.

China surpassed Japan after Japan reported second quarter GDP at $1.28 trillion, lower than the $1.33 trillion GDP in China. China is expected to maintain 10% growth rate in the current year and Japan is estimated to expand at less than 1%.

China after rapid growth of double digits in the last three decades is also the largest exporter in the world and the largest passenger car market.

Kansas City Federal Reserve President Hoenig warned zero interest rates could destabilize the economy and bank regulators closed down Palos Bank and Trust Co.

The Cabinet Office in Japan stated gross domestic product grew 0.1% in the second quarter of 2010 compared to a revised 1.1% growth in the first quarter. On an annualized basis, GDP for the quarter was up 0.4%, compared to 4.4% annualized growth in the first quarter. The report further noted that nominal GDP declined 0.9% on quarter and 3.7% on annualized basis.

U.S. President Barack Obama on Friday signed into law the legislation to secure the country''s border with Mexico by steeply hiking work H-1B and L-1 visa fees.

The legislation raises the fees on H-1B visas for companies who have more than 50% of their employees on such visas for highly skilled professionals from $320 to $2,320. Similarly the fee on L-1 visas given to multi-national transferees is raised from $320 to $2,570.

The measure is intended to tighten security along the U.S.-Mexico border by adding another 1,500 agents, deploying more unmanned vehicles to stop the flow of illegal immigrants and drug mafia.

Watson Pharmaceuticals, Inc. said on Friday that it plans to launch oral emergency contraceptive ella in the fourth quarter of 2010.

The announcement follows the approval of ella by the FDA as safe and effective in preventing unintended pregnancy for up to 120 hours, or five days, post-unprotected intercourse or contraceptive failure.

ella, whose chemical name is Ulipristal acetate, was developed by HRA Pharma specifically for emergency contraception and is not intended for routine contraceptive use. The drug will be marketed by Watson in the United States under terms of an exclusive distribution agreement announced earlier this year.

Kansas City Federal Reserve President Thomas Hoenig warned during a speech in Nebraska on the destabilizing effects of overly accommodative monetary policy, suggesting that zero interest rates were ""a dangerous gamble.""

Hoenig further added he does not believe that keeping constant the size of the Federal Reserve''s holdings of longer-term securities at their current level was required to support a return to the Committee''s policy objectives.

Federal bank regulators on Friday closed the Palos Bank and Trust Co., making it the 110th U.S. bank and the fourteenth bank in Illinois to fail in the year.

The Federal Deposit Insurance Corp., which was appointed as receiver, said it entered into a purchase and assumption agreement with Itasca, Illinois-based First Midwest Bank, a subsidiary of First Midwest Bancorp, Inc. to assume all of the deposits of Palos Bank.

First Midwest Bank will pay the FDIC a premium of 1% percent to assume all of the deposits of Palos Bank. First Midwest agreed to purchase essentially all of the assets of Palos Bank. As of June 30, Palos Bank had about $493.4 million in total assets and $467.8 million in total deposits.

The FDIC and First Midwest Bank also entered into a loss-share transaction on $343.8 million of Palos Bank. First Midwest Bank will share in the losses on the asset pools covered under the loss-share agreement. The FDIC said it estimates that the failure of Palos Bank will cost its Deposit Insurance Fund $72 million.

National Incident Commander Thad Allen on Saturday issued a directive to BP plc to conduct more pressure testing on the busted well in the Gulf of Mexico ahead of plans to resume drilling of a relief well.

In a letter to BP chief managing director Bob Dudley, Allen said BP needs to provide additional analysis and plans that will ensure no more oil is released when the company drills a relief well and pumps mud and cement to the bottom of the Macondo well to permanently kill it in a procedure known as ""bottom kill.""

Dell Inc. signed an agreement to acquire 3PAR, a global provider of virtual storage solutions with advanced data management features, including dynamic tiering and thin provisioning, for cloud-computing environments. The transaction is valued at about $1.15 billion, net of 3PAR''s cash.

As per the terms of the deal, Dell noted that it will commence a tender offer to acquire all of the outstanding common stock of 3PAR for $18 per share in cash. The transaction is expected to close before the end of the year.

Based on current estimates, the transaction is expected to be accretive to Dell non-GAAP earnings in its fiscal year 2012.

Earnings Review

Lowe''s Companies, Inc. ((LOW)), the home improvement retailer reported second quarter sales increased 3.7% to $14.4 billion, from $13.8 billion in the second quarter of 2009 on comparable store sales rise of 1.6%. Net earnings in the quarter grew 9.6% to $832 million or 58 cents per diluted share compared to net earnings of $759 million or 51 cents per share in the same period a year ago.

Waytronx, Inc. ((WYNX.OB)), the company focused on the commercialization of thermal management solutions reported second quarter revenues surged 77% to $10.72 million. On a sequential basis, revenues grew 40% quarter over quarter. Net earnings in the quarter were $3.49 million or 2 cents per diluted share.