Business & Finance
Business and Finance
Business and Finance
Mon, August 9, 2010
Fri, August 6, 2010 Bank of America Corporation, Goldman Sachs, Citigroup, VeriSign and Symantec
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Bank of America Corporation (NYSE: [ BAC ]), Goldman Sachs (NYSE: [ GS ]), Citigroup (NYSE: [ C ]), VeriSign, Inc. (Nasdaq: [ VRSN ]) and Symantec Corp. (Nasdaq: [ SYMC ]).
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Here are highlights from Wednesdaya™s Analyst Blog:
BofA Spins Off Private Equity Firm
Bank of America Corporation (NYSE: [ BAC ]) has spun off its private equity wing Banc of America Capital Investors to form Ridgemont Equity Partners. Ridgemont will manage a portfolio of about $1.5 billion or approximately 23% of BofAa™s private equity portfolio as of June 30, 2010.
The decision to spin off the private equity division followed the regulatory reform bill that became law in July 2010. Since the enactment of the law, this is the first private equity business to have branched out from a bank.
Banc of America Capital Investors has invested over $3 billion in 140 companies since 1993. Now the principals of Ridgemont will continue to manage the legacy Banc of America Capital Investors portfolio on behalf of BofA. Ridgemont intends to raise a new private equity fund in the near future to focus on middle-market buy-out and growth equity investments of $25 million to $100 million.
Headquartered in Charlotte, Ridgemont will target companies in basic industries, consumer & retail, energy, healthcare, telecommunications, media, technology and financial services. The team will have 19 investment professionals.
According to the regulatory reform, banks will be restricted from investing more than 3% of their capital in private equity in the long term. There is significant regulatory pressure on banks to put more capital against such private equity investments. Also, banks are experiencing decreasing returns from private equity. As a result, many of the banks have been contemplating divestments of their private equity arms.
Among the major U.S. banks, Goldman Sachs (NYSE: [ GS ]) and Citigroup (NYSE: [ C ]) have significant private equity exposures. These banks are considering a number of options to comply with the new regulations.
BofAa™s second quarter earnings came in at 27 cents per share, 3 cents ahead of the Zacks Consensus Estimate of 24 cents. However, this compares unfavorably with the earnings of 33 cents in the prior-year quarter.
Lower credit costs and sale of non-core assets were primarily responsible for the better-than-expected results. However, pressure on trading and mortgage banking income was the primary offsetting factor. An increased charge related to the U.K. payroll tax was also among the negatives.
Though continuing pressure on trading revenues will hurt the profitability of BofA in the upcoming quarters, a slowdown in loan loss reserves like other large banks will support the bottom-line.
VeriSign Misses
VeriSign, Inc. (Nasdaq: [ VRSN ]) reported revenues of $169 million from continuing operations for the second quarter of 2010, up 4% from the prior quarter and up 9% from the same quarter in 2009. The results underperformed the Zacks Consensus Estimate of $203 million.
Continuing operations primarily consist of Naming Services (comprising Registry Services and Network Intelligence and Availability (NIA) Services). NIA includes iDefense and the Distributed Denial of Service (DDoS) mitigation business.
Results related to the Authentication Services business for the second quarter have been reclassified as discontinued operations following the announced sale of this business to Symantec.
On May 19, 2010, VeriSign announced a definitive agreement to sell its Authentication Services business to Symantec Corp. (Nasdaq: [ SYMC ]) for approximately $1.28 billion in cash.
Naming Services generated revenues of $168 million, up 9% sequentially. The non-core Content Portal Services (CPS) business reported $1 million of revenues.
Revenues from discontinued operations were $102 million during the second quarter.
Both Naming and Authentication Services continue to see improvements driven by the rebounding economy. Increases in advertising and e-commerce spending should positively impact the company's business.
The base of registered names in .com and .net totaled 101.5 million active domain names, up from 99.3 million names at the end of March and growing 9% year over year. The company added 2.2 million net domain names in the quarter, in line with management's guidance of 2 million to 2.3 million names. During the quarter, VeriSign processed 7.9 million new registrations, down from the record 8.1 million new registrations in the quarter, but up 13% year over year. Renewal rate was strong at 72.1%, up from 71.2% in the previous quarter.
On July 1, VeriSign increased the price for .com and .net new and renewing names from $6.86 to $7.34 and from $4.23 to $4.65, respectively.
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