The Zacks Analyst Blog Highlights: Roche Holdings, Illumina, Leap Wireless International, Clearwire and Sprint Nextel
CHICAGO, March 16, 2012 /PRNewswire/ — Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Roche Holdings Ltd. (OTC: RHHBY), Illumina, Inc. (Nasdaq: ILMN), Leap Wireless International Inc. (Nasdaq: LEAP), Clearwire Corporation (Nasdaq: CLWR) and Sprint Nextel Corp. (NYSE: S).
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Here are highlights from Thursday’s Analyst Blog:
Update on Roche’s Illumina Buy
Roche Holdings Ltd. (OTC: RHHBY) recently announced that the Federal Trade Commission (FTC) has requested for additional information regarding the company’s proposed acquisition of Illumina, Inc. (Nasdaq: ILMN). The request, termed as a ‘second request,’ seeks additional information about Roche’s microarray business.
The second request extends the waiting period, imposed by the Hart-Scott-Rodino Antitrust Improvements Act, by 10 days after Roche complies with the request. The extension can be increased voluntarily by Roche or terminated sooner by the FTC.
We note that Roche had first announced its bid earlier this year in January, to acquire all shares of Illumina at an offer price of $44.50 per share (aggregate value $5.7 billion) in cash.
Roche had made multiple efforts in the past to strike a deal with Illumina, but the latter was unwilling to participate in substantive discussions. This led Roche to commence a tender offer to purchase Illumina’s outstanding shares.
Post the potential acquisition, Roche intends to combine Illumina with its Applied Science business, thereby strengthening its current offerings in the Life Science market. Roche operates through two segments – Pharmaceuticals and Diagnostics. Applied Science is a wing under the company’s Diagnostics division.
Roche believes that this acquisition will strengthen its position in the sequencing and microarrays market. Moreover, it will help address the growing demand for genetic/genomic solutions.
We currently have a Zacks #2 Rank (short-term Buy rating) on Roche. We believe that this transaction will add to the company’s portfolio, thereby driving long-term growth.
Leap Teams with Clearwire
In order to provide enhanced service to its pre-paid customers Leap Wireless International Inc. (Nasdaq: LEAP), which mainly operates in the low-end wireless market, entered into a five year contract with Clearwire Corporation (Nasdaq: CLWR), which provides wholesale Long Term Evolution (LTE) support to different telecom carriers.
The launch of Muve Music, which offers unlimited music download facilities for 3G wireless subscribers, has created huge demand among users. The company also gained nearly 413,000 subscribers in fiscal 2011, up 65.9% year over year. So in order to maintain smooth network traffic across its network as well as to offer faster downloading service to its customers, LEAP teamed up with Clearwire to offer LTE support to its users.
Earlier in 2011, LEAP entered into an agreement with LightSquared to provide roaming service across its LTE 4G networks. However, the deal seems to be a distant dream as it is believed that LightSquared’s network is violating the GPS navigation standard installed in the mobile devices.
In 2010, LeapWireless entered into a $300 million 5-year roaming wholesale agreement with Sprint Nextel Corp. (NYSE: S). Through this agreement, the company’s wholly-owned subsidiary Cricket will offer its products and services using Sprint Nextel’s 3G networks.
We believe that management’s plan to postpone its LTE roll out stems from the fact that 4G/LTE network deployment requires huge set-up costs. Moreover, it also requires huge spectrum, which will further bolster the cost for LEAP Wireless. Furthermore, higher demand of smartphones and tablets has induced increased network usage. So in order to seize the current opportunity of upgrading their service quality, which will help them to gain as well as retain subscribers, LEAP partnered Clearwire and Sprint at a much less cost as compared to the acquisition of spectrum license.
We maintain our long-term Neutral recommendation for LEAPWireless International Inc. Currently, LEAP has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
Based in San Diego, California, Leap Wireless International Inc provides digital wireless communication services in the U.S. under the “Cricket” brand primarily through its wholly-owned subsidiary Cricket Communications Inc.
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