UPDATE 1-Ubiquiti breaks US IPO drought amid Iran controversy
* Company violated U.S. law; sold to Iran, othersBy Clare BaldwinOct 13 (Reuters) - Wireless equipment maker Ubiquiti
Networks Inc broke a two-month drought in the U.S. IPO market
on Thursday pricing shares in its initial public offering at
the low end of the expected range.The company and its owners sold 7.04 million shares for $15
each, raising $105.6 million. They had planned to sell 7
million shares for $15 to $17 each. Earlier on Thursday the
company lowered its price range from $20 to $22 per share.Prior to Ubiquiti, the U.S. IPO market had been shut for
two months. It closed in August for a traditional summer
holiday, but then failed to reopen as concerns about Europe’s
debt crisis and a weak economic recovery in the United States
made markets volatile.Yet even as Ubiquiti has been successful in completing its
IPO, it faces a big challenge in addressing concerns about its
corporate governance.Ubiquiti, whose shares will trade on Nasdaq under the stock
symbol UBNT.O, makes wireless networking and video surveillance
equipment. It said in its prospectus that certain of its
products were sold to Iran, Cuba, Syria, the Sudan and North
Korea and that some of its encryption components were sold
without the appropriate export authorization.A review of Ubiquiti’s sales to Iran by the Department of
Commerce’s Office of Export Enforcement earlier this year
resulted in a warning letter, but no criminal or administrative
prosecution or other penalties — but Ubiquiti remains under
review by the Department of the Treasury’s Office of Foreign
Assets Control.Depending on the outcome of that review, Ubiquiti could
face fines, lose its ability to export and be referred for
criminal prosecution, it said in its IPO prospectus.Seventy percent of Ubiquiti’s fiscal 2011 revenue came from
overseas. U.S. relations with Iran are particularly sensitive
right now because of an alleged attempt by Iran to assassinate
the Saudi Arabian ambassador in Washington.”Our lack of sufficient familiarity was largely due to our
lean corporate infrastructure, the inexperience of our
management team in these matters and the fact that our products
are manufactured outside the United States and most of our
products never enter the United States,” the company wrote in
its IPO prospectus.The company said it did not mean to violate U.S. law. In
fiscal 2010, it recorded an expense of $1.6 million for export
compliance, which it said is its best estimate of its exposure
to fines. It said its business could suffer if any actual fines
are materially different.Ubiquiti was not available for comment.Nick Einhorn, an analyst at Connecticut-based IPO research
and investment house Renaissance Capital, said Ubiquiti’s sales
to countries such as Iran were unlikely to be a deal-breaker.”The numbers that the company has shown so far are
impressive and definitely enough to interest investors,”
Einhorn said. “They’ve grown very quickly and have good
operating margins.”For the year ended June 30, Ubiquiti posted a net income
attributable to common stockholders of $4.98 million on revenue
of $197.87 million.SMALL OPERATIONAs of June 30, Ubiquiti had about 92 full time-equivalent
employees in four offices globally. It has no direct sales
force, but instead relies on distributors, resellers and
original equipment manufacturers.Chief Executive Robert Pera is a former wireless engineer
at Apple Inc . Other company executives currently
include former Cushcraft Corporation/Laird Technologies
engineers and a lawyer. The Chief Financial Officer is a former
CFO at digital printing company Electronics for Imaging Inc.Ubiquiti said it first learned that its products could not
be sold into Iran or other countries subject to U.S. embargo in
March 2010, in connection with due diligence performed as part
of a transaction with investor Summit Partners.One Ubiquiti distributor continued selling products to Iran
after it was told not to and another was discovered doing so.
Ubiquiti also continued to use incorrect export authorizations
for its encryption components for a time after discovering the
problem because it did not understand how to comply.Ubiquiti said it has since revised its distribution
agreements, disabled software downloads in certain countries
and obtained the appropriate paperwork for its encryption
products.Most of the shares sold in the IPO were expected to come
from Ubiquiti’s owners. The company was only planning to issue
2.4 million new shares, the proceeds of which it said it would
use to repay debt.When Ubiquiti cut its price range on Thursday, it said
Board member John Ocampo, who owned less than 1 percent of the
company, had indicated he was interested in purchasing stock in
the IPO. That indication was nonbinding.The IPO’s underwriters were led by UBS Investment Bank,
Deutsche Bank Securities and Raymond James. The shares are
expected to begin trading on the Nasdaq on Friday under the
symbol “UBNT.”
BlackBerry outages irk India, threaten key RIM market
* Consumer market seen most vulnerable for RIMBy Devidutta Tripathy and Henry FoyNEW DELHI/MUMBAI, Oct 13 (Reuters) - A four-day service
outage has cast a shadow over BlackBerry’s reputation in India,
one of the smartphone maker’s few growing markets, where the
frustration of hundreds of thousands of users could mean a
chance for its rivals to gain ground.The repeated shutdowns of email and messaging services that
left BlackBerry users with only voice calls and SMS text
infuriated Indian customers, including a tennis star and a
Bollywood icon, leaving BlackBerry maker Research In Motion
scrambling to control the damage.”In the capital market, every second matters. Time lost is
money lost. Had it been for couple of hours, that was okay. But
it stretched much beyond that,” said Jagannadham Thunuguntla,
strategist and head of research at SMC Global Securities in New
Delhi.RIM has fixed the root cause of the global disruption of
BlackBerry services and is still working to clear a backlog of
delayed messages, its co-CEOs said on Thursday, hoping to
control the damage.More than a million people use BlackBerry in India, the
world’s second-biggest mobile phone market. RIM has established
a strong, but not dominant, foothold in the price-sensitive
market thanks largely to its cheap models.A large corporate user base that relies on its enterprise
email system, the huge popularity of RIM’s BlackBerry Messenger
platform among young people and competitive pricing mean it
outsells Apple Inc.’s iPhone by around five to one.In the June quarter, BlackBerry accounted for 15 percent of
smartphone sales in the country, researcher IDC said, trailing
Nokia’s share of nearly 46 percent and Samsung’s
21 percent, but far ahead of Apple’s 2.6 percent.The lowest-priced BlackBerry 8520, RIM’s best-selling model
in India, is available at about 9,000 rupees ($184). The
entry-level iPhone 3GS model is around 20,000 rupees.But low-cost competitors, especially those based on Google’s
Android system, are poised to grab market share.”Apple is still a premium user play, but if you look at
others, especially the Android ones, you can have the same
features that BlackBerry is offering pretty much at half the
cost,” said Abhishek Chauhan, Senior Consultant, ICT Practice,
at Frost & Sullivan.BLACKBERRY BOYSBlackBerrys were initially seen as a tool for executives.With rising incomes and a burgeoning middle class in India,
RIM has expanded, targeting young professionals and students
with its youthful “We’re the BlackBerry boys” commercials,
portraying the smartphone as a gadget for the aspiring masses.RIM’s shipment to India quadrupled to 770,652 in 2010, from
191,379 in 2009, according to CyberMedia Research, which
estimates that RIM has sold 1.06 million smartphones in India
over the past three years.”Companies will not switch to Apple or Google phones
overnight, especially given BlackBerry’s secure corporate email
system,” said Romal Shetty, head of telecommunications analysis
in India for KPMG.”But from a youth perspective, there is certainly more of an
impact from these kinds of failures. There is definitely a dent
made in reputations.”BlackBerry’s free instant messaging service, has been a big
draw for India’s urban youth, but rival products from Apple and
Google now mean it is not unique.”The BB service failure surprisingly did affect me, from
being out of touch with my Gmail to not being able to ‘ping’ my
friends. The handicap was overwhelming at times,” said
22-year-old Snigdha Ahuja, who works for a television channel in
Mumbai.”BBM doesn’t work.. I feel handicapped! Makes u realise how
addicted u become of certain electronics,” wrote Indian tennis
star Sania Mirza on Twitter.”Such a dependence on technology (in) our lives today .. no
BBM and it seems like a major portion of your life has shut down
..!!,” wrote Bollywood icon Amitabh Bachchan.
BlackBerry outages irk India, threaten key RIM market
* Consumer market seen most vulnerable for RIMBy Devidutta Tripathy and Henry FoyNEW DELHI/MUMBAI, Oct 13 (Reuters) - A four-day service
outage has cast a shadow over BlackBerry’s reputation in India,
one of the smartphone maker’s few growing markets, where the
frustration of hundreds of thousands of users could mean a
chance for its rivals to gain ground.The repeated shutdowns of email and messaging services that
left BlackBerry users with only voice calls and SMS text
infuriated Indian customers, including a tennis star and a
Bollywood icon, leaving BlackBerry maker Research In Motion
scrambling to control the damage.”In the capital market, every second matters. Time lost is
money lost. Had it been for couple of hours, that was okay. But
it stretched much beyond that,” said Jagannadham Thunuguntla,
strategist and head of research at SMC Global Securities in New
Delhi.RIM has fixed the root cause of the global disruption of
BlackBerry services and is still working to clear a backlog of
delayed messages, its co-CEOs said on Thursday, hoping to
control the damage.More than a million people use BlackBerry in India, the
world’s second-biggest mobile phone market. RIM has established
a strong, but not dominant, foothold in the price-sensitive
market thanks largely to its cheap models.A large corporate user base that relies on its enterprise
email system, the huge popularity of RIM’s BlackBerry Messenger
platform among young people and competitive pricing mean it
outsells Apple Inc.’s iPhone by around five to one.In the June quarter, BlackBerry accounted for 15 percent of
smartphone sales in the country, researcher IDC said, trailing
Nokia’s share of nearly 46 percent and Samsung’s
21 percent, but far ahead of Apple’s 2.6 percent.The lowest-priced BlackBerry 8520, RIM’s best-selling model
in India, is available at about 9,000 rupees ($184). The
entry-level iPhone 3GS model is around 20,000 rupees.But low-cost competitors, especially those based on Google’s
Android system, are poised to grab market share.”Apple is still a premium user play, but if you look at
others, especially the Android ones, you can have the same
features that BlackBerry is offering pretty much at half the
cost,” said Abhishek Chauhan, Senior Consultant, ICT Practice,
at Frost & Sullivan.BLACKBERRY BOYSBlackBerrys were initially seen as a tool for executives.With rising incomes and a burgeoning middle class in India,
RIM has expanded, targeting young professionals and students
with its youthful “We’re the BlackBerry boys” commercials,
portraying the smartphone as a gadget for the aspiring masses.RIM’s shipment to India quadrupled to 770,652 in 2010, from
191,379 in 2009, according to CyberMedia Research, which
estimates that RIM has sold 1.06 million smartphones in India
over the past three years.”Companies will not switch to Apple or Google phones
overnight, especially given BlackBerry’s secure corporate email
system,” said Romal Shetty, head of telecommunications analysis
in India for KPMG.”But from a youth perspective, there is certainly more of an
impact from these kinds of failures. There is definitely a dent
made in reputations.”BlackBerry’s free instant messaging service, has been a big
draw for India’s urban youth, but rival products from Apple and
Google now mean it is not unique.”The BB service failure surprisingly did affect me, from
being out of touch with my Gmail to not being able to ‘ping’ my
friends. The handicap was overwhelming at times,” said
22-year-old Snigdha Ahuja, who works for a television channel in
Mumbai.”BBM doesn’t work.. I feel handicapped! Makes u realise how
addicted u become of certain electronics,” wrote Indian tennis
star Sania Mirza on Twitter.”Such a dependence on technology (in) our lives today .. no
BBM and it seems like a major portion of your life has shut down
..!!,” wrote Bollywood icon Amitabh Bachchan.
UPDATE 2-UTC’s Pratt to buy Rolls share of engine venture
By Karen Jacobs and Tim HepherOct 12 (Reuters) - Pratt & Whitney said on Wednesday that
it will spend $1.5 billion to buy Rolls-Royce Holding Plc’s share of the International Aero Engines consortium that
produces the engine that powers the Airbus A320 plane
family.The two engine makers also said they will form a
partnership to develop engines for mid-size aircraft that in
future years will replace new, revamped versions of the Airbus
A320 and Boeing 737 narrow-body jets.Pratt, a unit of United Technologies Corp and
Britain’s Rolls Royce will hold an equal share in this new
venture, which will focus on geared turbofan technology and
study open rotor technology and other engine configurations.”The buyout of Rolls-Royce is not unexpected; the stunning
part of this announcement is the creation of a new joint
venture to go for the heart of the market with an initial focus
on the geared turbofan,” said Seattle-based aerospace analyst
Scott Hamilton.The move crystallizes a spat between the two leading
members of one of two transatlantic alliances that have quietly
dominated the market for aircraft engines for more than a
quarter of a century.International Aero Engines, founded in 1983 and based in
Glastonbury, Connecticut, brought together Rolls-Royce and
Pratt & Whitney and German and Japanese partners to provide a
four-nation alternative to CFM International, a French-American
joint venture between General Electric Co and Snecma,
now part of French state-controlled group Safran .The two alliances compete to power Airbus A320 passenger
jets, while CFM has a monopoly on Boeing’s rival 737, the
world’s most-sold aircraft. Such aircraft are the backbone of
most airline fleets, generating many thousands of engine sales
and a thriving long-term spare parts business.But Pratt & Whitney and Rolls-Royce disagreed over the next
step as Pratt took a gamble on a new engine known as the Geared
Turbofan.Airbus’s decision to offer the new Pratt geared turbofan
engine and a competing CFM model on a revamped version of its
A320, called the neo, produced a surge of sales and prompted
Boeing this year to announce plans to sell a “re-engined”
version of its 737 called the MAX. But Rolls vetoed the engine
being sold through IAE.NO DIVORCEBoth companies, however, denied that IAE, which has more
than 4,500 engines in service and about 2,000 on order, had
ended in divorce.”IAE has not resulted in divorce. Rolls-Royce is going to
remain a very full partner of IAE for the next 15 years at
least,” said Mark King, president of civil aerospace at the
U.K. company.”The two companies are saying we want to work together in
the future despite the fact that we are not participating in
the (A320) neo,” he told reporters on a conference call.As part of the IAE restructuring, Rolls-Royce will continue
to make engine parts and assemble 50 percent of the V2500
engine that powers the A320 family. Rolls will also get payment
for each hour flown by the current fleet of V2500-powered
aircraft for 15 years.”We have found a way to continue working together currently
and then plan for the future,” said Todd Kallman, president for
commercial engines and global services at Pratt & Whitney.Rolls-Royce and Pratt & Whitney have set out different
visions of what the next generation of engines to be seen from
the middle of next decade might look like, with the U.S.
company expressing little interest in the Open Rotor or
unducted fan concept favored by Rolls-Royce. This would see
engines with twin rows of visible fan blades rather than
powerplants that are fully encased inside engine housings.Rolls and CFM both believe such engines will mark a clean
break from current technology and will be far more efficient,
but they say about a decade of work is needed to develop the
required technology and overcome problems like noise.Though the buyout makes Pratt the majority shareholder in
IAE, the company said it intends to offer a portion of the
Rolls shares it is buying to its other IAE partners: Germany’s
MTU Aero Engines and Japanese Aero Engines Corp.”This looks like a good deal for both parties, allowing
them to focus on their current engine priorities (the Geared
Turbofan for Pratt, and the Trent for Rolls), whilst laying the
groundwork for the successor to the V2500 on the next
generation of narrow bodies in the middle of the next decade,”
RBC Capital Markets analyst Robert Stallard wrote to clients.Rolls-Royce will also make a “modest financial investment”
in the Pratt geared turbofan that is an option for the Airbus
A320 neo narrowbody.Pratt’s geared turbofan engine, which also powers the
all-new Bombardier CSeries jet, has secured more than
1,000 orders.
UPDATE 2-UTC’s Pratt to buy Rolls share of engine venture
By Karen Jacobs and Tim HepherOct 12 (Reuters) - Pratt & Whitney said on Wednesday that
it will spend $1.5 billion to buy Rolls-Royce Holding Plc’s share of the International Aero Engines consortium that
produces the engine that powers the Airbus A320 plane
family.The two engine makers also said they will form a
partnership to develop engines for mid-size aircraft that in
future years will replace new, revamped versions of the Airbus
A320 and Boeing 737 narrow-body jets.Pratt, a unit of United Technologies Corp and
Britain’s Rolls Royce will hold an equal share in this new
venture, which will focus on geared turbofan technology and
study open rotor technology and other engine configurations.”The buyout of Rolls-Royce is not unexpected; the stunning
part of this announcement is the creation of a new joint
venture to go for the heart of the market with an initial focus
on the geared turbofan,” said Seattle-based aerospace analyst
Scott Hamilton.The move crystallizes a spat between the two leading
members of one of two transatlantic alliances that have quietly
dominated the market for aircraft engines for more than a
quarter of a century.International Aero Engines, founded in 1983 and based in
Glastonbury, Connecticut, brought together Rolls-Royce and
Pratt & Whitney and German and Japanese partners to provide a
four-nation alternative to CFM International, a French-American
joint venture between General Electric Co and Snecma,
now part of French state-controlled group Safran .The two alliances compete to power Airbus A320 passenger
jets, while CFM has a monopoly on Boeing’s rival 737, the
world’s most-sold aircraft. Such aircraft are the backbone of
most airline fleets, generating many thousands of engine sales
and a thriving long-term spare parts business.But Pratt & Whitney and Rolls-Royce disagreed over the next
step as Pratt took a gamble on a new engine known as the Geared
Turbofan.Airbus’s decision to offer the new Pratt geared turbofan
engine and a competing CFM model on a revamped version of its
A320, called the neo, produced a surge of sales and prompted
Boeing this year to announce plans to sell a “re-engined”
version of its 737 called the MAX. But Rolls vetoed the engine
being sold through IAE.NO DIVORCEBoth companies, however, denied that IAE, which has more
than 4,500 engines in service and about 2,000 on order, had
ended in divorce.”IAE has not resulted in divorce. Rolls-Royce is going to
remain a very full partner of IAE for the next 15 years at
least,” said Mark King, president of civil aerospace at the
U.K. company.”The two companies are saying we want to work together in
the future despite the fact that we are not participating in
the (A320) neo,” he told reporters on a conference call.As part of the IAE restructuring, Rolls-Royce will continue
to make engine parts and assemble 50 percent of the V2500
engine that powers the A320 family. Rolls will also get payment
for each hour flown by the current fleet of V2500-powered
aircraft for 15 years.”We have found a way to continue working together currently
and then plan for the future,” said Todd Kallman, president for
commercial engines and global services at Pratt & Whitney.Rolls-Royce and Pratt & Whitney have set out different
visions of what the next generation of engines to be seen from
the middle of next decade might look like, with the U.S.
company expressing little interest in the Open Rotor or
unducted fan concept favored by Rolls-Royce. This would see
engines with twin rows of visible fan blades rather than
powerplants that are fully encased inside engine housings.Rolls and CFM both believe such engines will mark a clean
break from current technology and will be far more efficient,
but they say about a decade of work is needed to develop the
required technology and overcome problems like noise.Though the buyout makes Pratt the majority shareholder in
IAE, the company said it intends to offer a portion of the
Rolls shares it is buying to its other IAE partners: Germany’s
MTU Aero Engines and Japanese Aero Engines Corp.”This looks like a good deal for both parties, allowing
them to focus on their current engine priorities (the Geared
Turbofan for Pratt, and the Trent for Rolls), whilst laying the
groundwork for the successor to the V2500 on the next
generation of narrow bodies in the middle of the next decade,”
RBC Capital Markets analyst Robert Stallard wrote to clients.Rolls-Royce will also make a “modest financial investment”
in the Pratt geared turbofan that is an option for the Airbus
A320 neo narrowbody.Pratt’s geared turbofan engine, which also powers the
all-new Bombardier CSeries jet, has secured more than
1,000 orders.
