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Pfizer To Reorganize After Allergan Buyout, With Saunders President

Big pharma Pfizer ( PFE ) announced Monday that after it closes its acquisition of Allergan ( AGN ) it plans to reorganize its three units into two, pending a possible split-up. Back in 2013, Pfizer reorganized its operations into three business units: Innovative Products; Established Products and Vaccines; and Oncology and Consumer Healthcare (VOC). This was widely viewed as a preparation for a split-up of the company. With its pending $160 billion buyout of Allergan,  Pfizer will be adding a large number of drugs, including the wrinkle treatment Botox and a variety of eye-care and skin-care products. On Monday, Pfizer said it plans to combine the innovative products and VOC businesses into one, but that will include a new subdivision called Global Specialty and Consumer Brands that will include most of Allergan’s products. The larger Innovative Products business will be headed by current VOC head Albert Bourla, replacing Geno Germano who will leave the company. The new Global Specialty and Consumer Brands division will be headed by Allergan executive Bill Meury. The Established Products business will continue to be led by John Young. Allergan’s current CEO Brenton Saunders, meanwhile, is set to become the next president and chief operating officer of Pfizer. It was generally expected on Wall Street that he would land a high-ranking position so that he could be ready to succeed present Pfizer CEO Ian Read. When Pfizer announced the Allergan buyout last year, it said that a decision on a split-up will not be made until 2018, which was a couple of years later than previously expected. Read reiterated this in Monday’s announcement. “We are designing the combined company to preserve and enhance our option to potentially separate the innovative and established businesses into separate companies in the future, and continue to expect to make a decision about any potential separation by no later than the end of 2018,” Read said in a statement. Pfizer stock was down about 1.8% in midday trading on the stock market today , near 28.50. Allergan was down about 3.6% near 264.

Apple Stock Could Struggle Until Second Half Of 2016

With iPhone production data continuing to show weakness, Apple ( AAPL ) stock isn’t likely to perk up until the second half of the year, Mizuho Securities analyst Abhey Lamba said in a report Monday. Mizuho’s Japan team on Monday lowered its iPhone production forecast after checking with various component suppliers. It now expects iPhone unit production to fall 30% year over year in the first half of the year, followed by a 9% increase in the second half. “Supply chain data points could start inflecting in (the second half of calendar 2016), helping the stock perform,” Lamba said in a report. The ramp up of the supply chain would be timed with the production of the iPhone 7, expected to launch in September. Lamba reiterated his buy rating on Apple stock with a price target of 120. Apple was up fractionally in early-afternoon trading near 94 on the stock market today . “We continue to think Apple is undervalued at the current level as investors are likely extrapolating supply chain information indefinitely while the macro environment is not helping,” he said. “However, we expect the stock to work in (the second half of calendar 2016) as data points from the supply chain start to inflect upwards.” The biggest question facing Apple this year is whether the iPhone 7 can jump-start handset sales growth, which has stalled with the iPhone 6S. Mizuho’s survey data indicate that people are holding onto their iPhones for longer periods before replacing them. “Our survey indicated elongation of life of iPhones from about 20 months to about 27 months, but we think it is tough to expect average life of phones to go beyond 2.5 to 3 years,” Lamba said. “Apple still has a significant installed base on pre-iPhone 6 versions and many iPhone 6 users will likely be ready for normal upgrades by 2016-end. We have modest growth assumptions for iPhone 7 over iPhone 6S cycle, while we agree that success of iPhone 6 cycle will be tough to repeat.” RELATED: Morgan Stanley Says Apple Stock Ripe For Picking .  

Cognizant Misses Q1 Guidance As Q4 EPS Beats; Xerox BPO Lurks

Highly rated business process outsourcing firm Cognizant Technology Solutions  gapped down 8% after the Monday stock market opening bell, shortly after management disappointed investors with guidance lower than Wall Street expected for the first quarter and 2016. Cognizant ( CTSH ) beat analysts estimates for Q4 earnings growth and came in short of analysts’ revenue expectations. Its stock fell as low as 53.46 early Monday in a rough market, 23% below its all-time high 69.80 reached Oct. 28. Shares were down 7% midday in the stock market today . Cognizant stock enjoys a high IBD Composite Rating of 90, meaning it’s performing better than 90% of stocks across a variety of metrics. That’s a hair better ranking than its larger business process outsourcing (BPO) rivals Infosys ( INFY ), somewhat better than  Accenture ( ACN ) and far better than IBM ( IBM ). Like Cognizant with huge operations in India, Infosys was down 5% at midday Monday. Accenture about 4.5% and IBM was off 1%. A new concern for BPO companies — not that they haven’t been competing already — is Xerox ‘s ( XRX ) BPO spin-off, announced just 10 days ago. Xerox has been offering outsourcing for years, but as a free-standing publicly traded company its BPO is likely to receive heightened attention in the market. Cognizant declines to discuss Xerox, a spokeswoman said. Xerox stock was down about 5% at midday. Cognizant said the current Q1 earnings per share should reach 78-80 cents on revenue of $3.18 billion to $3.24 billion. Analysts polled by Thomson Reuters thought Cognizant could do better on earnings, expecting adjusted EPS up 12% to 81 cents from 71 cents a year ago, on sales up 14% to $3.319 billion from $2.911 billion in Q1 2015. For Q4 2015, Cognizant said it earned 80 cents per share minus items, up 19.4% from 67 cents a year earlier, on revenue up 17.9% to $3.23 billion. Analysts polled by Thomson Reuters had on average been expecting 78-cents EPS minus items on $3.24 billion in revenue. “Our cash and investment balances, net of debt, grew by $1.5 billion during 2015 due to our strong business performance and strong cash flows,” said CFO Karen McLoughlin in Cognizant’s earnings release. She said Cognizant spent more than $375 million buying back stock in 2015, “reflecting our commitment to drive shareholder value.” Said President Gordon Coburn: “While digital opportunities significantly expand our addressable market, our rapidly growing consulting, infrastructure and business process services and geographic market expansion, continue to be solid drivers of demand for our services.” Cognizant and Infosys recovered in December from heavy flooding in Chennai, India, where they employ tens of thousands of workers.