Salesforce.com trades in line to slightly better; MF Global lower outright on earnings

By Rebecca Melvin

New York, May 20 - Convertible bonds were slightly firmer Friday but still generally thinly traded as has been the case for much of the past week amid economic uncertainty and directionless equity markets.

"It seemed like there was uncertainty this week about whether the general risk trade was coming off or staying on or coming back on," a New York-based sellside trader said.

A second sellsider said it was not clear whether equity markets were going to run higher or roll over, and "absent having any direction or idea, investors do nothing."

On Friday, Salesforce.com Inc.'s convertibles moved up in line to slightly better with a jump in the underlying shares on an 88% to 90% delta, after the San Francisco-based software company reported strong first-quarter earnings and a better-than-expected forecast for the second quarter.

MF Global Holdings Ltd. was lower outright in active trade after the futures and options broker reported a loss in its fiscal fourth quarter, which was smaller than the year earlier, but representing its eighth loss out of nine periods.

There was also some action in Liberty Media LLC-related convertibles after word that the company has offered to buy Barnes & Noble Inc. for about $1 billion.

Liberty is an Englewood, Colo.-based owner of electronic retailing, media, communications and entertainment businesses.

Liberty's 3.125% convertibles exchangeable into Time Warner Inc. shares traded at 121.25 versus a share price of $57.80. The Liberty 3.5% convertibles exchangeable into Motorola Solutions Inc. and Motorola Mobility Holdings Inc. shares traded at 56.5 versus a share price of $9.75. The Liberty convertibles exchangeable into Viacom traded at 86 versus a share price of $39.10, according to a New York-based sellside desk analyst.

Salesforce in line to better

Salesforce.com's 0.75% convertibles due 2015 traded at 179 versus an underlying share price of $146.00.

Shares of the San Francisco-based cloud computing company closed up $10.69, or 8%, at $146.50.

The bonds were at an 85% delta for the last week or so, including last night, and they traded up Friday on about an 88% to 90%, market sources said.

On a parity basis, the paper stands at about 8 points of premium over parity, which was slightly less than previous levels.

Amgen Corp. accounted for most of the day's trading volume, but Salesforce trades made up a chunk of it as well.

The software maker reported strong first-quarter results and issued a better-than-expected forecast for the current period.

First-quarter net income fell to $530,000, or break-even on a per-share basis, from $17.7 million, or 13 cents, a year earlier. Excluding items, earnings were 28 cents a share, which beat by a penny the average estimate of analysts.

For the current quarter, excluding items, earnings will be 29 cents to 30 cents a share, with sales of $526 million to $528 million. Analysts had been expecting profit of 27 cents and revenue of $505.2 million for the period ending in July.

On March 30, Salesforce agreed to buy Radian Technologies Inc. for about $340 million. That deal brought into Salesforce repertoire software that tracks what's being said about companies on the web.

Salesforce said the acquisition will boost its fiscal 2012 revenue by about $45 million to $50 million and reduce earnings per share, excluding items, by about 11 cents.

MF Global lower outright

MF Global 9% convertibles due 2038 printed at 115.15, which was down nearly a point outright as of midsession Friday.

MF Global 1.875% convertibles due 2016, which priced in February, slipped beneath par to trade at 98.188, down nearly 3 points on the day, according to Trace data.

Sources queried had not seen the paper trade themselves.

Shares of the New York-based dealer-broker closed down 40 cents, or 5%, at $7.45.

The company said Thursday that it had a smaller loss in its fiscal fourth quarter than it had a year ago, in line with expectations.

The company reported a net loss of $51.5 million, or 31 cents per share, compared with a net loss of $96.5 million, or 78 cents per share, in the year-ago period.

Excluding one-time items, MF Global chalked up earnings of 5 cents per share, which matched expectations.

Revenue grew 24% to $616.5 million from $498.2 million due to higher client volumes.

For the year, MF Global lost $154.4 million, or $1 per share, compared with a loss of $167.7 million, or $1.36 per share, in the previous year. Stripping out special items, the company would have earned 25 cents per share.

Revenue for the year totaled $2.23 billion, up 12 percent from $1.99 billion in 2010.

Mentioned in this article:

MF Global Holdings Ltd. NYSE: MF

Motorola Mobility Holdings Inc NYSE: MMI

Motorola Solutions Inc. NYSE: MSI

Salesforce.com Inc. NYSE: CRM

Time Warner Inc. NYSE: TWX

Viacom Inc. NYSE: VIA

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