With only a month until the end of the third quarter of the calendar year, most earnings announcements center on firms with fiscal year ends that differ from the calendar one. This week will see the release of results from only a couple of technology firms, though one should lend solid insight into communication trends for the year-to-date. Additionally, last week saw the announcement of a major and unlikely electronic transaction deal between two industry leaders. Ratings firm Moody's just weighed in with its opinion on the news.
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Last week, electronic payment leader PayPal, which is owned by eBay (Nasdaq:EBAY), announced a major agreement with credit card player Discover Financial Services (NYSE:DFS). Beginning in 2013, consumers will be able to pay their bills at stores and physical service providers by using PayPal at any of the 7 million merchant locations that currently accept the Discover card. PayPal described it as extending its "offline strategy" while Discover benefits through processing additional payments on its network that stem from consumers using PayPal.
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On Monday, rating firm Moody's weighed in with its view on the announcement. It sees the move as a credit positive for both parties and detailed that there is global potential beyond the 7 million domestic merchants that are part of the agreement. It estimates increasing payment volumes by the second quarter of next year, though it could take a few years for the partnership to really gain traction. It also believes it will help Discover better compete with industry giants MasterCard (NYSE:MA), Visa (NYSE:V) and American Express (NYSE:AXP). For eBay, it sees this as a solid move to fend off the digital ambitions of all the credit card players and also for closer rivals such as Google (Nasdaq:GOOG) wallet.
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On Wednesday, digital video recording (DVR) firm TiVo (Nasdaq:TIVO) releases its third quarter earnings results. Analysts project very solid sales growth of nearly 10% and total sales north of $54 million. However, challenging industry conditions, including intense competition from cable providers that provide their own DVRs for a nominal monthly fee, will likely mean an earnings loss of 24 cents per share. Full-year projections tell a similar story, with an estimated sales growth above 18% to $225 million but a loss of around 67 cents per share.
Thursday will see the release of Ciena's (Nasdaq:CIEN) third quarter results. Ciena sells communications equipment and services, such as systems that help voice, video and data traffic travel over fixed line, mobile and Internet channels. As with TiVo, top-line growth should be great and close to 9% as analysts project total sales of nearly $474 million. However, the industry environment remains extremely challenging and will likely result in a loss of 2 cents per share. Full-year sales could advance more than 7% to $1.9 billion, but Ciena is currently projected to lose 3 cents per share.
SEE: Can TiVo Replay Its Early 2006 Success?
The Bottom Line
There are still at least six weeks until third quarter earnings season officially kicks off. Until then, results from firms with different fiscal years will continue to trickle in. The end of the week also means the end of Labor Day, and Wall Street should return from vacation to start what should be a busy fall season.
At the time of writing, Ryan C. Fuhrmann was long shares of Discover (since 2008) but did not own shares any other company mentioned in this article.