Tibco holds in after disappointing guidance; Dealertrack up; Cobalt retraces some losses

By Rebecca Melvin

New York, Dec. 20 - Convertibles were mostly quiet on Friday ahead of the upcoming Christmas holiday in the middle of next week, but company-specific news spurred moves in a few individual names.

Tibco Software Inc.'s 2.25% convertibles were pulled abruptly into action and dropped below par after the Palo Alto, Calif.-based business software and services company offered guidance that was below estimates when it reported positive earnings Thursday. But the Tibco convertibles were seen better on a dollar-neutral, or hedged, basis by 0.25 point to 0.5 point at 99.75 versus a share price of $21.00, using a delta of 15%, a New York-based trader said.

Dealertrack Technologies, Inc.'s convertibles popped 12 points to 14 points on an outright basis after the Lake Success, N.Y.-based auto retail software company announced that it is buying Dealer.com in cash and stock worth nearly $1 billion.

Dealertrack's 1.5% convertibles due 2017 changed hands between 137 and 141 Friday, which was up from about 125 to 127 before the news, according to Trace data.

Elsewhere, Cobalt International Energy Inc.'s convertibles stabilized and retraced some losses after taking another leg down Thursday on a disappointing oil well update from the Houston-based oil and gas exploration company.

Cobalt's 2.625% convertibles due 2019 printed at 84.5 early on Friday and ended the session at 88, which was up from 82ish on Thursday, according to Trace data. Cobalt shares added nearly 4% to $15.43.

Equities were higher on Friday after a new revision of U.S. gross domestic product, which lifted the third-quarter rate of growth for the economy to a 4.1% annual rate, according to the Commerce Department. The GDP rate was previously 3.6% for the July through September period.

Although equities ended off their highs they were still higher for the week after rallying Wednesday when the Federal Reserve announced that it would begin cutting its $85 billion-per-month bond purchasing program in January by $10 billion. Outgoing Fed chairman Ben Bernanke said Wednesday that it was possible the program could be trimmed back to almost nothing by the end of next year through a series of moderate and carefully paced cutbacks.

On Friday, the S&P 500 stock index added 8.72 points to 1,818.32, the Dow Jones industrial average edged up 42.06 points, or 0.3%, to 16,221.14, and the Nasdaq stock market gained 46.62 points, or 1.2%, to 4,104.74.

Tibco holds in on hedge

Tibco's 2.25% convertibles due 2032 traded at 99.729 and were quoted at 99.75 versus an underlying share price of $21.00 at late morning Friday.

At the end of trading, Tibco shares were a bit higher, although still down $2.47, or 10%, to $22.01.

Late Thursday, Tibco reported a first-quarter outlook that was below estimates, or earnings of 17 cents per share to 21 cents per share on revenue guidance of $247 million to $253 million. Both figures fell short of consensus estimates of 21 cents, and $255.35 million revenue.

The business software company estimated that its first-quarter license revenue would be $78 million to $84 million. For full year 2014, Tibco said it expects earnings per share to grow in the high-single to low-double digit percentage range. Over the long term, it has a 15% to 20% earnings per share growth target.

For the fourth quarter, Tibco reported net income of $44.5 million, or 27 cents per share, on revenue of $315.5 million. That compared to net income of $48.8 million, or 29 cents per share, on revenue of $296.5 million for the fourth quarter of 2012.

Excluding items, net income for the fourth quarter was $70.8 million, or 42 cents per share, compared with $70.7 million, or 42 cents per share, for the fourth quarter of fiscal 2012.

"We saw strong, accelerating growth in the Americas and a return to growth in Asia this quarter, while closing a record 31 deals over $1 million in license revenue worldwide," said Vivek Ranadive, Tibco chairman and chief executive. "We are building momentum as we enter 2014, and I am very optimistic about our prospects in the year ahead."

On the heels of the results, UBS downgraded Tibco to "neutral" from "buy." It lowered its price target on shares to $25.00 from $31.00.

Dealertrack pops

Dealertrack's 1.5% convertibles due 2017 jumped to 141 from 127 in early trading. At the end of the session the convertibles were seen at 139.

Dealertrack shares surged $5.39, or 12.6%, to $48.19.

The Dealertrack bonds, of which $125 million priced in April 2011, moved up on the company's definitive agreement to acquire Dealer.com for 8.7 million shares of Dealertrack common stock and $620 million in cash.

Dealertrack expects to finance the cash portion of the purchase through cash on hand and with fully committed debt financing. The deal is expected to close in the first quarter.

Mentioned in this article:

Cobalt International Energy Inc. NYSE: CIE

Dealertrack Technologies Inc. Nasdaq: TRAK

Tibco Software Inc. Nasdaq: TIBX

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