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Mylan Will Buy Meda For $9.9 Billion, Q4 Earnings Miss; Stock Dives

Generic-drug giant Mylan ( MYL ) announced a $9.9 billion buyout of Swedish counterpart Meda late Wednesday, as it also reported Q4 earnings that missed estimates. The stock tumbled in after-hours trading. Mylan said that the acquisition will be immediately accretive to earnings, adding 35 to 40 cents to EPS next year. That will allow the company to hit its previously stated target of $6.00 a share to earnings a year earlier than the expected 2018. The deal will hike Mylan’s annual revenue by about 25%, and bring $350 million in annual cost savings, Mylan said. Mylan is offering a mixture of cash and stock that adds up to 165 Swedish kronor per Meda share, which including Meda’s net debt adds up to $9.9 billion. “This transaction builds on everything we have put in place around the world, including our recent acquisition of the Abbott ( ABT ) non-U.S. developed markets specialty and branded generics business,” Mylan CEO Heather Bresch said in a statement. “Meda brings us greater scale, breadth and diversity across products, geographies and sales channels, and together we will have an even stronger global commercial infrastructure.” Mylan also said that its Q4 earnings totaled $1.22 a share, up 16% from the year-earlier quarter but 6 cents below analysts’ consensus, according to Thomson Reuters. Revenue climbed 20% to $2.49 billion, more than $200 million short of consensus. For the full 2015, EPS rose 21% to $4.30 while revenue gained 28% to $9.45 billion. Mylan also offered 2016 guidance that assumes that the Meda deal will close at the end of Q3, with $10.5 billion to $11.5 billion in sales and $4.85 to $5.15 in EPS. Analysts did not include Meda in their consensus of $5.00 in EPS and $10.6 billion in sales, but Bresch said the firm is “committed to our 2016 guidance ranges with or without Meda.” Mylan stock, which holds a strong Composite Rating of 89, fell 0.4% in regular trading on the stock market today to close at 50.54. Mylan lost 9% to 45.85 after hours.

Expedia Sees Currency As Less Of An Issue In 2016; Stock Up Late

Online travel agent Expedia ( EXPE ) late Wednesday posted Q4 earnings and revenue that missed Wall Street expectations, but executives said currency would be less of a factor this year and that they’ve seen no impact, at least not yet, from the steep drop in global stock markets at the start of this year. Shares were up after hours. Ahead of the earnings report, analysts were cautious  on global macroeconomic concerns and competition with rivals  Priceline ( PCLN ), TripAdvisor ( TRIP ) and privately held Airbnb. Expedia stock, though, was up 13% in after-hours trading, as executives seemed to assuage some fears in comments on the company’s earnings conference call with analysts. Shares of Priceline and TripAdvisor were each up 4% after hours. For Q4, Expedia said sales grew 29% to $1.7 billion, while earnings per share ex-items dropped 22% to 77 cents. The consensus estimate of analysts polled by Thomson Reuters called for $1.71 billion and $1 EPS ex items. In Q4, recently acquired Orbitz and HomeAway added $177 million and $20 million, respectively, to Expedia’s top line — which would have been $1.5 billion without them. Gross bookings rose 40%, in Q4, driven by a 28% increase from the company’s acquisitions. The strong dollar cost the company 5% of Q4 revenue growth and 9% of gross bookings growth, Expedia said. Expedia purchased HomeAway, which is focused on vacation rentals, in part because it’s a hedge against Airbnb, a firm that lets people rent out accommodations in their home to travelers. Private investors have valued Airbnb at over $20 billion — though as of late, mutual funds have been under fire for failing to properly value hot startups, such as ride-booking firm Uber and cloud storage provider Dropbox. Barclays analyst Paul Vogel said the Orbitz and HomeAway acquisitions would make it tough to estimate Expedia’s results. Expedia spent over $6 billion on those acquisitions. “There are a number of moving parts within Expedia that we believe have created an uncertain backdrop around forecasts and expectations,” Vogel wrote in a research note Tuesday. TripAdvisor is set to report Q4 earnings Thursday after the close, while Priceline is set to report earnings Feb. 17 before the open.

Apple Supplier ARM Topples On Mobile Decline; Eyes IoT, Cloud

U.K.-based  Apple ( AAPL ) supplier ARM Holdings ( ARMH ) stock toppled Wednesday, as its earnings disappointed despite Q4 sales topping Wall Street expectations, amid a strategic shift into the Internet of Things and cloud markets. ARM stock fell 8.8% Wednesday, to 37.74, and touched its lowest point since July 2013. Shares under-performed IBD’s 41-company Electronic Semiconductor-Fabless industry group, which fell a fraction after touching a 16-month low this week. ARM isn’t pretending the smartphone market hasn’t stalled, Rene Haas, the company’s executive vice president and chief commercial officer, told IBD. But ARM still has headroom for growth, he said. “It’s nothing we haven’t been expecting nor planning for,” he said. “But about half our revenue comes from outside smartphones.” For Q4, ARM reported $407.9 million in sales and 8.2 pence (12 cents) earnings per share ex items. Both measures were up 14% year over year, ARM said. The consensus of 11 analysts polled by Thomson Reuters modeled $398.1 million and 38 cents (26.2 pence). The designer of mobile chips saw sales rise 15% for the year, to $1.49 billion. EPS rose 25% to 30.2 pence (44 cents). Fourth-quarter licensing sales fell 2% to $1.58 million, but royalty sales rose 31% to $216.7 million. Software/tool sales rose 19%. However, smartphone-chip sales fell 3%. ARM guided to 2016 sales “broadly in line with market expectations” at roughly 9.7% year-over-year growth to $1.63 billion in sales, William Blair analyst Anil Doradla wrote in a research report. Doradla reiterated his outperform rating on ARM stock, but Canaccord Genuity analyst Matthew Ramsay cut his price target to 55 from 60, citing continued macroeconomic semiconductor uncertainty. He maintained his buy rating on ARM stock. ARM Finagles Stalled Mobile Industry Roughly 45% of ARM’s sales stem from smartphones, down from 60% in 2010. The smartphone slowdown won’t slug ARM nearly as hard as its rivals, Haas told IBD. During Q4, ARM shipped 4 billion chips. Half of the smartphone chips shipped contained ARM’s 64-bit processor, which commands higher royalty fees than ARM’s older, 32-bit processor. About 40% of smartphone chips shipped contained ARM’s graphics processing unit (GPU), Mali, and 10% held eight or more cores. “What that means is that even as growth slows from a unit standpoint, we still have good room to grow because underneath the hood we have three strong factors that drive growth in the market,” Haas said, referring to processors, GPUs and cores. ‘Cars Are Just Getting Smarter’ In 2016, ARM expects to grow further into the cloud and Internet of Things markets, Haas said. Licensing in both segments could be a boon. Networking market share grew to 15% in 2015 vs. 10% in 2014, and ARM now counts Broadcom ( AVGO ) and Marvell Technology Group ( MRVL ) among its networking chip clients. Advanced Micro Devices ( AMD ), Nvidia ( NVDA ) and Qualcomm ( QCOM ) also use ARM-based server chips, according to ARM. “That (5% jump in networking) is a pretty big jump, given what’s going on in that marketplace and given that those markets have some stickiness once you’re inside,” Haas said. In the Internet of Things market, Haas expects ARM to benefit from burgeoning automotive intelligence. Most “embedded technologies” — thermostats, motors, drones and vehicles — use older technology. But the 8-bit micro-controllers powering those technologies are rapidly being replaced by the 32-bit architecture, Haas says. “The fact is cars are just getting smarter,” he said. “There are cars today that could have 100-plus chips inside them. A smartphone might only have one or two chips using ARM technology.”