CAM Investment Grade Weekly Insights

Fund Flows & Issuance: Per Bloomberg, investment grade corporate issuance for the holiday shortened week was $11bn. Investment grade corporate issuance so far for the month of April is $31.1bn.

(Forbes) Defying Critics, Apple Continues To Gain On PC Rivals

• If you read enough tech news, you “know” that Apple is blowing it with the Mac. For months now, the headlines have been clear: “How Apple Alienated Mac Loyalists,” Bloomberg wrote back in December. And just yesterday on FORBES, Ewan Spence reported on a Laptop Mag report about Apple’s dwindling customer satisfaction ranking in “Apple Losing Out As Consumers Reject New MacBook Pro.” With this kind of drumbeat, it wouldn’t be surprising to learn Apple is indeed losing market share. Except that it isn’t. On the contrary, the two firms that track PC sales both agree Apple is gaining share in the PC market — as it has nearly every quarter for the past several years.
• Here are the figures for Q1 of 2017: Gartner says Apple sales were up 4.5% over a year ago and market share rose from 6.3% to 6.8% worldwide. That puts Apple in Gartner’s top 5 ahead of flagging Acer. Apple’s total is just 7% behind fourth-place Asus in shipments, suggesting the Mac maker could leapfrog it as well soon. IDC has slightly different figures, with Apple’s Mac total rising 4.1% and share growing from 6.7% to 7.0%. In Gartner’s math, Apple is already fourth. Both agree Apple delivered a bit over 4.2 million computers, a figure which Apple always clarifies by offering a precise number with earnings. (Those are due in a few weeks.)
• Notably, Gartner thinks the PC market contracted by 2.4% over 2016 while IDC sees it growing by a mild 0.6%. Part of that difference is methodology: Gartner doesn’t include Chromebooks in its numbers but does include 2-in-1s like the Surface (iPad Pros? nope). IDC includes Chromebooks, which it credited for at least part of the overall increase, but excludes all detachable tablets — so that means Surface and iPad Pro are out.
• But no matter how you slice and dice the data, it’s good news for Apple, which saw 4%+ unit growth against a flat or shrinking PC landscape. While Apple remains a small slice of the market, it helps to have some perspective on how that slice has grown. Back in 2010, the PC market was a robust 351 million units for the year (per Gartner). Apple wasn’t in the top 5, but searching through its earnings reports yields a total of 14.4 million Macs that year. That was good for just over 4% of the PC market.

 
(Moody’s) Moody’s says AT&T’s $1.6 billion acquisition of Straight Path is positive

• Moody’s Investors Service, (“Moody’s”) said AT&T Inc.’s (Baa1, review for downgrade) planned acquisition of Straight Path is positive. AT&T announced yesterday a definitive agreement to purchase Straight Path Communications for $1.25 billion in stock plus certain liabilities of Straight Path that values the transaction at approximately $1.6 billion. Straight Path is one of the largest holders of wireless spectrum licenses in the 28 GHz and 39 GHz bands, which AT&T intends to deploy in conjunction with its proposed 5G wireless architecture.
• We view this transaction as a strategic positive as it gives AT&T access to key infrastructure elements to pursue its 5G wireless capabilities and keeps AT&T on pace with Verizon in this effort. The relatively small purchase price will result in a very large spectrum position for AT&T, at least on par with Verizon’s 5G holdings following its 2016 acquisition of XO Communications.
• We believe that 5G wireless services are unlikely to reach scaled deployment for at least 3 years. Carriers have articulated plans to deploy 5G as a fixed wireless solution initially, with more advanced mobile applications to follow. We think the technology will be competitive with traditional broadband services, but we think the economics of a fixed 5G architecture may not be competitive with cable broadband’s embedded cost structure. Therefore, we think that wireless carriers must offer additional functionality with 5G to differentiate it from traditional broadband in order to drive the inevitably higher price points that will lead to a profitable business.
• Despite its large pending acquisition of Time Warner, AT&T continues to assemble assets that support its core wireless business. In addition to the Straight Path transaction, AT&T announced in January that it will acquire FiberTower, a holder of 24 GHz and 39 GHz licenses for an undisclosed amount. We view these deals as strategic positives, but not material to the near term (0 to 3 years) financial performance. However, these small strategic asset purchases are essential to AT&T remaining competitive and perpetuating its market share.

(Bloomberg Gadfly) Walmart Fights Amazon With Cheap When People Want Easy

• Wal-Mart Stores Inc. on Wednesday unveiled a new discount program to entice customers to pick up online orders from its stores. The idea is: If it’s cheaper for Walmart to get stuff to its 5,000 stores, rather than millions of individual households, than why not pass along part of that discount? It has the extra benefit of getting customers back into stores to buy more.
• In an era where Amazon.com Inc. has trained shoppers to be so lazy that they can order cardboard boxes and packing tape an hour before they are ready to pack up their goods and move to another apartment, it’s unclear consumers are going to want to work that hard just to save Walmart, and themselves, a buck or two.
• For many of Walmart’s low-income customers, every penny counts. But the retailer has said one reason it bought Jet.com last year was that Walmart’s online customers tended to be wealthier shoppers who would spend more for the higher-end brands Jet.com could offer.
• It can’t hurt for Walmart to try the discount program out — testing and learning about what its customers want. But it will likely realize that instead of trying to figure out how to make things easier for Walmart, it should worry more about making things easier for people to shop with the retailer. If not, any advantage Walmart is building online will have a short shelf life.