Carbon Black and Xiaomi: trading debut | Calamatta Cuschieri

U.S. stock benchmarks ended off their lows Thursday, and the Dow erased a triple-digit intraday drop to end higher, in choppy action as investors awaited a key reading of monthly employment on Friday.

The Dow Jones Industrial Average rose 0.2% but enough to end a four-session slide. The S&P 500 index fell at 0.2%, to 2,629.75, after also briefly breaking below its 200-day moving average at 2,614.99. The Nasdaq closed lower at 0.2%.

Xiaomi IPO: all we need to know

Xiaomi, a Chinese consumer electronics company, filed for an initial public offering (IPO) on Thursday. The listing could reportedly raise $10 billion and value the company at $100 billion, making it one of the largest IPO since Alibaba in New York in 2014.

The decision to choose to list in Hong Kong is a boost for the territory.

Xiaomi started life in 2010 selling smartphones. Its unique selling point was high-quality devices with top of the range specs, but at lower prices than competitors.

The company rose rapidly to become the biggest smartphone player in China. In the 2016, Xiaomi suffered the competition from other Chinese low-cost players, but eventually began to expand into new areas.

It's all part of its strategy to make the smartphone the center of a connected device ecosystem.

Xiaomi's smartphones run a version of Google's Android operating system that has been modified. The company calls it MIUI. And with this, it is trying to push its own services, including music and video streaming. It also makes money from its own mobile games, and from advertising too.

Xiaomi is the fourth-largest smartphone player by market share. In 2017, it sold 91.4 million smartphones, according to its IPO filing.

Apart from smartphones, Xiaomi has backed dozens of startups producing a wide spectrum of products from wearables to rice cookers. Total sales from its ecosystem doubled to 20 billion yuan in 2017.

The Chinese firm has a significantly lower operating margin. In 2017, this was 10.7 percent. In the first quarter of 2018, Apple reported an operating margin of 38.3 percent, while Samsung's was 47.3 percent. Samsung is helped by high margins on its semiconductor business.

On the services front, Xiaomi made around 9.9 billion yuan in revenues that equate to over $1.5 billion. In the first quarter of 2018 alone, Apple made over $9 billion.

The company said that it has over 3,600 patents registered in China and 3,500 patents abroad. Spend in research and development increased to 3.2 billion yuan in 2017 from 2.1 billion yuan the year before.

"We have changed how hundreds of millions of people live, and we will become a part of the lives of billions of people globally in the future," co-founder Lei Jun wrote in the prospectus for the flotation.

Carbon Black ready to go public

Cybersecurity Company Carbon Black Inc. priced its initial public offering at the high end of its already elevated range late Thursday, and is looking to be the next big IPO in a year that’s seen a big revival in tech startups going public especially those that are focused on cloud-based product offerings.

The company is turning around its IPO in less than a month’s time, having first filed on 9 April and plans to trade on the Nasdaq under the symbol “CBLK.”

The company is going to public as many businesses are trying to make the transition to the cloud from legacy systems. For security, that means a transition from corporate network-based security, where the network itself was the walled-off perimeter that needed to be protected from unauthorized access, to an “endpoint”-based approach, where often thousands of mobile and virtual devices from multiple locations are communicating with a corporate network, which is either based in a cloud-computing service or is a hybrid of a cloud service and legacy network.

In 2017, sales and marketing expenses accounted for more than 66% of revenue, slightly lower than the previous two years. Carbon Black said it plans to use proceeds “to invest further in our sales and marketing activities to grow our customer base, to fund our research and development efforts to enhance our technology platform and product functionality, and to pay anticipated general and administrative expenses.”

Carbon Black said it has technology and go-to-market partnerships with IBM and VMware Inc, and those are key to customer growth. The company said that 94% of its new and add-on business in the quarter ending in December 2017 was closed in collaboration with a channel partner.

Disclaimer:

This article was issued by Linda De Luca, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.