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Why Comcast May Covet DreamWorks For China, Millennial TV Content

Comcast ’s ( CMCSA ) interest in acquiring DreamWorks Animation ( DWA ) likely goes beyond movies and stretches to content for Web TV streaming services, especially programming targeted at millennials. In addition, both DreamWorks and Comcast, which owns NBCUniversal, have been expanding in China. Comcast has been racing against  Verizon Communications ( VZ ) to make investments in original content for millennials, aged 18 to 34. Millennials spend more time watching Netflix ( NFLX ), Alphabet ‘s ( GOOGL )  YouTube and social video on Facebook ( FB ) than they do viewing traditional TV, according to studies. DreamWorks stock surged 18% to 32, hitting a two-year high, in midday trading in the stock market today on reports that Comcast is in talks to acquire the movie studio. Comcast did not directly comment on the DreamWorks speculation during its Q1 earnings conference call early Wednesday. “DreamWorks has a robust TV business, owns (millennial-focused) AwesomenessTV and has access to China via DreamWorks Oriental,” said Stan Meyers, a Piper Jaffray analyst, in a research report. “Comcast management has discussed launching a number of (Internet video) services, so we believe teaming up with DreamWorks would provide access to exclusive content.” Verizon in early April acquired a 24.5% stake in DreamWorks’ AwesomenessTV for $159 million. Both Comcast and Verizon have been pursuing original content for millennials, a demographic coveted by advertisers. Benjamin Mogil, an analyst at Stifel, says Comcast is likely eyeing a few DreamWorks assets. “China operations, which Universal could likely expand, is likely one area of focus,” wrote Mogil in a report. “On the Awesomeness TV front, we see the ability to carve out a window outside of Verizon’s mobile window for such content on a cable video-on-demand service, which would be attractive for Comcast.” DreamWorks’ current films include “Kung Fu Panda 3,” while its earlier box office hits include “Shrek” and “How to Train Your Dragon.” DreamWorks has also been developing TV shows for video streaming services. Customers include Netflix and Amazon.com ( AMZN ). NBCU owns cable channels including USA Network, SyFy and Bravo. Amid falling audience ratings, the cable channels also need better original content to compete with Web streaming services, analysts say. Aside from Universal Films, Comcast owns Focus Features and Illumination Entertainment, the latter of which developed the “Minions” movies. NBCU’s filmed entertainment revenue jumped 46% to $7.3 billion in 2015, thanks to the box office success of “Minions,” “Jurassic World,” “Furious 7” and “Fifty Shades of Grey.” NBCU’s film and entertainment revenue, however, fell 4.3% in Q1, to $1.38 billion.

Ultimate Software Gains Momentum, Beats Street, Raises Forecast

Shares of enterprise software maker  Ultimate Software Group ( ULTI ) jumped 6% in morning trade before settling back, following Tuesday’s impressive first-quarter report, which beat Wall Street’s top and bottom lines. Ultimate, which specializes in HCM SaaS — human capital management software as a service — reported first-quarter EPS up 40% to 73 cents minus items, eight cents beyond consensus, on sales up 29% to $187 million, where Wall Street expected $180 million. With 2016 gaining momentum, Ultimate also raised its full-year forecast to 26% sales growth from 25% “and now claims 99% visibility into this goal,” noted Evercore ISI analyst Kirk Materne. Materne raised his price target to 200 from 195 “based on the continued acceleration in the business, especially in the midmarket,” he said in a Wednesday research note, reiterating a hold rating. “All in all, we believe the company remains on track to hit its $1 billion revenue target in 2018; and with the company’s current (2016) guidance implying (an approximately) 275 basis-point decline in recurring revenue growth in (the second half vs. the first half), we expect that estimates could potentially have room to move higher over the course of the year.” More bullishly, FBR analyst Samad Samana said in a Wednesday research note, Ultimate ultimately “can deliver accelerating revenue growth and margin expansion in 2016.” Samana raised FBR’s price target on Ultimate to 220 from 205 while maintaining an outperform rating. Climbing the right side of a 25-week cup base, Ultimate stock jumped 6% to 209.71 in morning trade before settling back to a 0.5% gain near 198 in the stock market today , 8% off a 216.27 record high set Nov. 9. Ultimate’s enterprise rivals and peers were mixed Wednesday, with Salesforce.com ( CRM ) down 1.5% to 75.05, while SAP ( SAP ) was up 1.2% to 80.43, less than 1% from recent highs. Legacy software developer Oracle ( ORCL ) was down fractionally. Microsoft ( MSFT ) was off 1%. One stock in IBD’s Computer Software-Enterprise industry group, that of cloud advertising software developer Rubicon Project ( RUBI ), enjoys a slightly better IBD Composite Rating than Ultimate: Rubicon’s best-possible 99 vs. Ultimate’s 98. Salesforce carries a 93 CR and SAP 72. Outside the group, Oracle is rated 60 and Microsoft 43. Ultimate’s 40% EPS growth rate was the best in eight quarters, but its 29% sales pace was the best in at least 19 periods. For the second quarter, Ultimate guided its adjusted operating margin to 20% and total sales to $187 million. Analysts polled by Thomson Reuters are expecting earnings of 77 cents per share minus items on revenue of $185 million. A year ago in Q2, Ultimate earned an adjusted 62 cents per share on sales of $147 million. Needham analyst Scott Berg said he was “impressed” that Ultimate reported consecutive quarterly deferred revenue growth exceeding 30% in the first quarter and year-to-year deferred revenue up 34.5%, its best in at least six years. He reiterated a buy rating with a 220 price target.

CyberArk Pulls Symantec, Intel, FireEye Onto Platform Bandwagon

CyberArk Software ( CYBR ) launched an alliance Wednesday, tapping FireEye ( FEYE ), Intel ( INTC ) and Symantec ( SYMC ) for what it called tighter best-of-breed integration, which offers an alternative to security platforms from such companies as Palo Alto Networks ( PANW ), Check Point Software Technology ( CHKP ) and Fortinet ( FTNT ). In total, the C3 Alliance has 15 members across cybersecurity, enterprise software and infrastructure. They include  Qualys ( QLYS ), Rapid7 ( RPD ), Varonis Systems ( VRNS ) and Belden ( BDC )-owned Tripwire. CyberArk tech will be integrated into the partners’ software. Megabreaches like that of retailer Target ( TGT ) in 2014 have highlighted the need to secure credentialed accounts, says Adam Bosnian, CyberArk’s executive vice president of global business development. Privileged account protection is at CyberArk’s core. “We saw more and more organizations becoming aware of being exposed by these power accounts,” Bosnian told IBD. The C3 Alliance aims to “solve these challenges and leverage the valuable data that comes off that security.” CyberArk’s technology will be integrated in a variety of ways, Bosnian said. C3 member Tenable Network Security, a continuous monitoring and vulnerability management company, requires credentialed access to perform deep-dive hunting for vulnerabilities, Tenable strategist Cris Thomas told IBD. A hacker needs only one credential to wreak havoc. “When a hacker attacks an organization, they compromise one specific point,” Thomas said. “To move, they need a Zero Day (vulnerability). … The easiest way to do it is to steal credentials. Those are the prized goals of an attacker.” Integrating technology from CyberArk and Tenable lets Tenable’s 20,000 customers store credentialed passwords using CyberArk software, he said. It also gums up any holes existing between the vendors’ software, making intrusion that much more difficult. Bosnian doesn’t foresee “one-off, snowflake” integrations. He sees CyberArk tech, in conjunction with partners’ software, providing a platform-like infrastructure, constantly evolving as new integrations are added to the mix. Customers are still leery of the platform, which might be “best-of-breed in one piece of the platform but not in another,” Bosnian said. The C3 Alliance, however, is comprised of best-of-breed tech woven into one unified solution that shares data bidirectionally, he says. C3 is not a monolithic alliance, he said. “These partners are improving how they use privileged accounts in their environment,” he said. “The real magic is when there are use cases built on top of that to solve real problems. That’s what we’re trying to do.” CyberArk stock was up 2% in midday trading in the stock market today .