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3 Reasons To Buy Gilead

The Power Factors System is the backbone of my research service, The Data Driven Investor. It’s essentially a quantitative ranking system that selects stocks based on three powerful and time-proven return drivers: financial quality, valuation, and momentum.

Multiple academic studies have proven that companies exhibiting strong numbers in these three areas tend to beat the market in the long term, and my own backtesting work confirms that the Power Factors Systems can generate impressive performance over time.

The specific details behind the system are not particularly important, the main idea is using a combination of indicators and ratios to select companies with strong metrics in these main areas. Among others, the Power Factors System includes the following metrics:

  • Financial quality: the system looks for companies with superior profitability on sales, considering ratios such as gross profit margin and free cash flow margin. In addition, financial quality includes metrics based on return on capital, such as return on investment and return on assets.
  • Valuation: this covers classical valuation ratios like price to earnings, and price to free cash flow, among several other metrics based on similar concepts.
  • Momentum: the system picks companies that are outperforming expectations, and it also looks for stocks that are doing better than the broad market. In a nutshell, we want companies that are delivering performance numbers above Wall Street forecasts, and we also want the stock price to be reflecting such outperformance.

An equally-weighted portfolio comprised of the 50 best-ranking companies in the system produced an impressive annual return of 26.39% since 1999. By comparison, the S&P 500 produced a far more modest return of 3.77% per year over the same period.

In other words, a $ 100,000 position in the S&P 500 back in 1999 would currently be worth nearly $ 199,100, while the same amount of money invested in the Power Factors portfolio would be worth an exponentially larger sum of $ 7.8 million.

Data and chart are from Portfolio123, and the full list of companies in the system is available to subscribers in The Data Driven Investor.

The ranking system is based on a stock universe that excludes over-the-counter stocks in order to guarantee a minimum size and liquidity levels. Nevertheless, most stocks in the system are relatively smaller than those in the S&P 500, and in many cases far more volatile.

Interestingly, Gilead (GILD) is a noteworthy exception. The company has a market capitalization value of more than $ 109.6 billion, and it ranks remarkably well across the three dimensions in the Power Factors System. These particularities make of Gilead a particularly intriguing name among the stocks selected by the quantitative model.

Case Study: Gilead

Gilead is a leading player in the biotech space. The company is focused on life-threatening infectious diseases, with a big presence in treatments for HIV, hepatitis B, and hepatitis C. Gilead has made a series of acquisitions to expand its portfolio in cardiovascular diseases and Cancer over the past several years. More recently, the company made a big move with the acquisition of Kite Pharma (KITE) for $ 11.9 billion in cash. This deal could provide a big boost to Gilead in cell therapy and oncology treatments.

The business is under pressure due to lower sales and increasing competition in Hepatitis C (HVC) products.

On the other hand, Gilead has a promising pipeline of new developments across different areas, and this should drive increased revenue growth over the years ahead.

Importantly, the company has an impressive track record of financial performance over the long term, and profitability levels are considerably above-average. The following table compares key financial metrics for Gilead vs. other big biotech companies, such as Amgen (OTC:AMGM), Celgene (CELG), and Biogen (IBB).

5 Year Sales Growth.

Return on Assets (ROA)

Return on Investment (ROI)

Operating Margin

Net Margin

























The numbers are quite clear, Gilead ranks above the competition across all of the five indicators: sales growth over the past five years, return on assets, return on investment, operating margin, and net margin.

Financial performance over the years ahead will depend on variables such as demand for Gilead’s new products, and this is always a source of uncertainty. Nevertheless, the company’s track-record and current performance are a positive reflection on its management team and its ability to deliver attractive returns for shareholders.

In terms of valuation, Gilead stock is fairly conveniently priced, if not downright undervalued. The stock trades at a price to earnings ratio around 9.15 times earnings over the past year. This is a huge discount versus the average company in the S&P 500, which trades at a price to earnings ratio around 21.5.

Looking at valuation ratios in comparison to industry peers, Gilead also looks quite cheap in terms of price to earnings, forward price to earnings, price to free cash flow, and price to sales.


Forward P/E























Offering a similar perspective, the following chart shows how Gilead’s valuation has evolved over the past several years, and current entry price looks quite compelling by historical standards in terms of price to earnings, price to free cash flow, and enterprise value to EBITDA.

ChartGILD PE Ratio (ttm) data by YCharts

The bottom line is that Gilead stock is substantially cheap, be it in comparison to the broad market, when compared to industry peers, or by the company’s own historical standards.

Momentum is favoring the bulls. Both revenue and earnings came in above Wall Street expectations last quarter, and analysts are adjusting their earnings forecasts to the upside. The average earnings estimate for Gilead in 2017 was $ 8.35 per share 90 days ago, and it has steadily increased towards $ 8.78 currently.

Stock prices don’t just reflect fundamentals, expectations about those fundamentals are tremendously important. When expectations are on the rise, this generally means that stock prices are rising too. On the back of increasing earnings forecasts, Gilead stock has substantially outperformed the S&P 500 index over the past several months.

ChartGILD data by YCharts

Past performance does not guarantee future returns. However, profitability metrics, valuation, and momentum are all positive forces for investors in Gilead on a forward-looking basis.

Disclosure: I am/we are long GILD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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In France, Snap's Discover news feature gets 10 million monthly users

(Reuters) – Snap Inc, searching for ways to reinvigorate a slowing growth rate and increase advertising revenue for its Snapchat messaging app, said this week it has racked up 10 million users for its Discover news and video feature in France a year after launching there.

The figure, which has not previously been reported, is equivalent to about 15 percent of the country’s population.

Internationally, the Snapchat app has 173 million daily active users, the company said in August, while rival Instagram, owned by Facebook Inc, said this week it has 500 million daily users.

Snap’s partners in France such as Le Monde and Cosmopolitan, which supply video and news for the Discover feature, were getting “significant” revenue from ads, Nick Bell, Snap’s vice president of content, told Reuters, without giving an exact figure.

Snap, which generates revenue from advertisers, shares that revenue 50-50 with its publisher partners.

The company has yet to turn a profit since its messaging app launched in 2012. Since its initial public offering in March, its shares are down almost 18 percent, to around $ 14 per share.

France was the first international launch of Discover. It has also been released in Germany, the Middle East and North Africa, but the company is taking a slow, deliberate approach to expansion as it works at developing strong partnerships with publishers, said Bell.

Reporting By Jessica Toonkel; editing by Anna Driver and Rosalba O’Brien

Our Standards:The Thomson Reuters Trust Principles.


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Ford And Lyft Partner to Bring Self-Driving Cars to Public Roads

Ford Motor (f) has struck a partnership with Lyft to develop and test self-driving vehicles on the ride-hailing company’s growing network of passengers.

Ford, which announced the partnership in a blog post early Wednesday, said that the goal is to put self-driving vehicles onto Lyft’s ride-hailing network. Just don’t expect to see self-driving Ford vehicles shuttling around Lyft customers anytime soon.

The initial aim is to combine the strengths of each company. For Ford, that’s large-scale manufacturing and development of autonomous vehicles technology, which its partner Argo AI is currently working on. Lyft, meanwhile, has a vast network of customers across the United States that has given the startup greater insight in how people move within cities. Both companies have fleet management and Big Data experience, according to Ford’s blog post written by Sherif Marakby, Ford Vice President of autonomous vehicles and electrification.

Ford, which is now being led by CEO Jim Hackett, hopes to learn how to create self-driving cars that can easily connect with a platform like Lyft’s so they can be quickly dispatched to pick up customers. The automaker also wants to use Lyft’s data (and its own) to determine which cities would be worth launching a self-driving vehicle service and what kind of infrastructure would be needed to properly service and maintain a fleet of self-driving vehicles.

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Lyft is taking a more collaborative approach to self-driving cars, unlike rival Uber. Earlier this year, Lyft launched an open platform designed to give automakers and tech companies working on self-driving cars access to its ride-sharing network of nearly 1 million rides per day.

And even before the open platform began, Lyft has been locking in partnerships. The company landed its first major partnership in January 2016 with GM, which like Ford also wants to eventually deploy self-driving cars with Lyft’s network.

Lyft has made at least three other partnerships in 2017, including startups and nuTonomy, and Waymo, the Google self-driving car project that spun out to become a business under Alphabet (googl).


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Alibaba raising stake in Cainiao to majority, investing $15 billion to grow logistics

HONG KONG (Reuters) – Chinese e-commerce giant Alibaba Group Holding Ltd is raising its stake in logistics affiliate Cainiao Smart Logistics Network Ltd to 51 percent from 47 percent by investing 5.3 billion yuan ($ 801.21 million), Alibaba said on Tuesday.

Alibaba also said in a statement it will invest another 100 billion yuan ($ 15.12 billion) in the next five years to expand its global logistics network.

The additional investment will be used in research and development of Cainiao’s logistics data technology, and smart warehousing and smart delivery development, among other things, it said.

Alibaba co-founded Cainiao in 2013, with partners including department store owner Intime Group, conglomerate Fosun Group and a few logistics companies.

Reporting by Kane Wu; Editing by Muralikumar Anantharaman

Our Standards:The Thomson Reuters Trust Principles.


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Mike's Hard Lemonade: Measuring Digital That Drives Retail Sales

It’s refreshing when the head of marketing for a Consumer Packaged Goods (CPG) brand opens up and shares his insights on best practices around tracking and measuring the impact of digital marketing that drive in-store sales. For years, this has been a challenge as the ecosystem between retailers, data providers and manufacturers has been relatively immature.

This summer, I had the opportunity to speak with Sanjiv Gajiwala, VP of Marketing at Mike’s Hard Lemonade and I asked him about how he had effectively streamlined his company’s ability to directly measure the effectiveness of their digital marketing efforts. In addition to this article, you’re welcome to watch the full interview on YouTube.

Matching Facebook Ads to Credit Card Purchase Data

“We work with Oracle and their data provider, Datalogix which actually looks at our Facebook ads and the users that are exposed to those Facebook ads and connects that back to their credit card and purchase behavior,” says Gajiwala. “Datalogix has a way of matching users to their actual purchasing and what we’ve really been able to learn from that has been incredible.”

Gajiwala explains that Datalogix fits within Mike’s Hard Lemonade’s social listening ecosystem. “We’re looking at brand health and what people are saying, but it helps us complete the picture with their purchase behavior,” he says.

Key Learning From This Purchase Behavior Data Layer

“We’ve learned some really incredible things,” says Gajiwala, “People who are exposed to our [Facebook] ads that are Mike’s users are spending 5% more. And 84% of people exposed to Facebook ads on Mike’s definitely would or are very interested in purchase Mike’s after seeing the ad or our content we’re promoting. You start to see that both of these numbers start to synch up, which helps validate what we’re seeing in the soft data versus through the register data.”

Digging in a bit further, Gajiwala acknowledges that this work with Datalogix does not allow Mike’s Hard Lemonade to segment by individual retail store since the data provided is driven by credit card purchases. “Instead of looking at [individual] retailers, we are able to look at the segments of our consumers between heavy, medium and light users and understand what kind of content and what kind of behaviors we can expect from that different type of consumer.”

Breaking Down Geographical Relevance

As Mike’s Hard Lemonade is sold nationally, I asked Gajiwala about how they review the geographical relevance of the sales data driven by their digital marketing efforts. “Datalogix and Oracle are doing the mashination including geographic and penetration data,” he said, with the understanding that some of these insights are a combination of Facebook geographic data and credit card transactional data.

This gives Mike’s Hard Lemonade an additional layer of insights that help with better understanding purchase habits by consumer segmentation (i.e. heavy to light) overlaid with geographical penetration insights to help with better understanding geographical flavor profile preferences and where marketing budgets are best spent on a local geographical level.

Insights Leading to Incremental Investments in Social Strategy

“Through this work we uncovered that there were a whole group of people that, profile-wise, were like our Mike’s heavy users that we weren’t reaching,” Gajiwala said. “They were heavy [Flavored Malt Beverage] users, but they weren’t really engaging with Mike’s. That lead to an incremental investment in our social strategy.”

This allowed Mike’s Hard Lemonade to then track back to see if they are getting the same sort of lift from this new target of previously ignored heavy non-Mike’s users and determine if the incremental investment is performing in a similar fashion to their core marketing investments.

“Our prospecting and our farming strategies are both different on social but just as measurable,” Gajiwala said. That is to say, with a relatively small team, everyone at Mike’s Hard Lemonade is accountable to the data.

What Gets Measured, Gets Managed

The bottom line here is that with the addition of the Datalogix reporting, Mike’s Hard Lemonade is finding new opportunities that it had previously ignored while, at the same time, seeing the direct impact on retail sales from its digital marketing efforts. This is the growing trend at retail. With a growing number of options to track and measure marketing impact, your ability to interpret data gives you a competitive edge. The most effective content and social media ads will receive increased and even incremental budget to ensure brand health and continued sales growth at retail.

For more on this topic, see these two related articles: What It Takes to Exceed Shopper Expectations and Empower Retail Employees and Not All Retailers are Contracting. Here’s the Secret From One That’s expanding.


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This Time It Matters: Why Apple Is Falling

Apple Inc (NASDAQ:AAPL) is dropping hard after its event to announce the new series of hardware, in particular the new iPhone 8, 8 Plus and X as well as the Apple Watch 3.

It’s Different This Time
Normally when Apple stock dives on lukewarm product reviews we stand firmly in our position that the stock market reaction is over blown. Our simple thesis for that response is to look at demand, which is hypnotically strong, every time. That is not the case this time.

A New Risk is Not Obvious But is Enormous
Apple announced a more complicated lineup of iPhones this time around. It introduced the iPhone 8 series which is an upgrade to the iPhone 7, and then it announced the highly anticipated iPhone X (pronounced iPhone Ten).

Then the company made the iPhone 8 available this month, but pushed delivery of iPhone X to early November, which pre-orders stating in late October. That has created a risk.

It turns out that Apple hyped the iPhone X so much, and poured so much new technology into it, that it has left the demand for iPhone 8 lackluster in Apple terms. Here’s what we mean.

If you go to the Apple Store, and try to purchase an iPhone 8, the wait time is essentially 1-3 days for the smaller memory version. Here is an image:

That is for the iPhone 8, in Los Angeles, on Verizon’s (NYSE:VZ) network. The other networks are essentially the same. A normal wait time for a new iPhone release is usually several weeks, let’s say 2-4 depending on where you are in the world.

There are also reports that in store lines are much smaller than before, with one report pinpointing Sydney Australia, where only 30 people were camped out for the new release. Reports from China are similar.

Here are links to two stories:

Turnout for iPhone 8 Launch in Australia “Bleak” as Customers Hold Out for Upcoming iPhone X
The iPhone 8 launch in Sydney saw “a bleak turnout,” reports Reuters, with fewer than 30 people lining up outside of the Sydney Apple Store on George Street. In past years, hundreds of people have lined up for new iPhones on release day.

Apple Falls After Analyst Report Indicates Weak iPhone 8 Demand
Consumers pre-ordered about 1.5 million handsets on Chinese retail website in the first three days, compared with about 3.5 million for the comparable period of iPhone 7 orders.

Tim Cook just said he “couldn’t be happier” with the iPhone release (and Apple Watch 3). While sales are lower than prior models, there is one reason, a big reason, that he may actually be telling the truth.

Is There a Plan?
One of the headlines that surfaced from the Apple Event was that the iPhone X was very expensive, starting at $ 999 and climbing to $ 1,200 based on the configuration.

It’s possible, maybe even likely, that Apple decided to release the iPhone 8 for less to make it appear that it was not forcing Apple loyalists to buy a far more expensive phone by offering a reduced priced new model (iPhone 8).

In fact, it does appear that even in the bearish analyst notes, each tends to comment on the fact that demand reduction for the iPhone 8 is simply a reflection of the outsized demand for the iPhone X.

If that’s true, then Apple will have an average selling price significantly higher than in prior times, and if demand is in fact to the point where Apple also sells more units, then that would bring a windfall of profits larger than any company has ever seen in one quarter. If that sound overly bullish, it’s just the choice of words — Apple already has the largest earnings ever in one quarter, so this would be a breaking of its own record — also known more simply as, “growth.”

Back to Risk
While there is a rather bullish narrative to wrap around this odd iPhone selection, there is also, in earnest this time, a reasonable bearish thesis.

Apple won’t be delivering its iPhone X until well into November, and if demand is very strong, it might not even be able to deliver before the holiday season in the United States. And while, certainly, if all of those sales simply occur later in the year (or early 2018), then that’s fine, but to consider that a foregone conclusion is a step we are not willing to take with blind faith.

Some consumers, perhaps many consumers, will not wait. And while Apple loyalists may stick around for a later date, the all-important “Android switchers” (those smartphone Android owners that switch to Apple) may not — and that is a real risk and worthy of a stock drop, until proven otherwise.

Apple’s market share in the United States is jumping as Android loses market share — an under reported but critical phenomenon. On January 11th, 2017, 9TO5Mac wrote iPhone market share grows 6.4% in USA, takes share from Android in most markets.

Apple gained 9.1% in the UK, mostly at the expense of Windows phones.

The iPhone grew its market share in Australia, France, Italy, Japan, Spain, the UK and USA, with Android seeing its own share drop in all of these countries bar Italy, where its growth was less than half that of iOS.

Those are Android switchers and Apple may have just put that group, or at least that trend, in serious jeopardy.

Now What?
We believe the iPhone X is going to be a knock-down drag-out mega hit, and the elevated price will make it yet an even larger success. But, the risk that Apple took, as of right now, is hurting the company both with iPhone 8 sales, and potentially, with Android switchers. And that is not a false narrative — it is accurate.

That risk means the stock should drop, and is dropping.

But, we’re not done yet. What we did not show you, and is easily missed unless you are really looking, is how hard Apple is focusing consumers on the iPhone X over the iPhone 8 — in our opinion.

I recorded a 45 second video arriving on the Apple Store and looking at iPhones. I have turned to video to allow you to make your own decision, as opposed to snapshots, which are too selective and an be used to weave any narrative the author likes.

When you watch this video (below), decide for yourself if you feel that Apple is purposefully pointing people to the iPhone X over the iPhone 8. Here we go:

That’s hardly headline grabbing footage, but we found it noteworthy.

Apple Watch 3
There have been some pretty poor reviews of the Apple Watch 3 surrounding its LTE connectivity and its battery life. This is one of those times where the reviews are meaningless. Demand is strong and that’s all that matters.

Here is a snapshot from the Apple Store for that product:

We see the Watch becoming a runaway success as people learn to use that wearable device as a standalone product — leaving the phone at home on runs, meetings, swims, hikes, and whatever other times such a convenience could be desired.

We maintain our Top Pick status on Apple, but have certainly tempered our bullishness with an undeniable new risk. It might work out very well, but, it might not, and that is a new risk to Apple stock.

The author is long shares of Apple Inc (NASDAQ:AAPL).

Thanks for reading, friends.

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The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories (“The Company”) does not engage in rendering any legal or professional services by placing these general informational materials on this website.

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Disclosure: I am/we are long AAPL.


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There’s Already a Petition to Save Uber in London

Following the blockbuster news on Friday that Uber would lose its operating license in London, fans of the ride-hailing company signed on to a petition to Mayor Sadiq Khan to keep the service in the city.

A petition on says that the decision by Transport for London, the city’s transportation authority, satisfied a small number of people” while putting “more than 40,000 licensed drivers out of work” and depriving a “convenient and affordable form of transport” to millions of Londoners.

Tom Elvidge, general manager of Uber in London, initially appeared as the petition’s creator, but a change Friday afternoon switched the author to “Uber London.” Uber did not immediately return Fortune’s request for comment on the authenticity and origin of the petition, but its language mirrors a statement Elvidge issued after the TfL decision.

By 3 p.m. BST on Friday the petition had received nearly 70,000 signatures, at one point gaining more than 25,000 in a 20-minute span.

Read More: Uber Just Lost Its License in London

The TfL announced earlier in the day that it had decided to effectively ban Uber in London after determining that the company “is not fit and proper to hold a private hire operator license.” The company’s current license expires at the end of September.

In making its decision, the authority that regulates London’s taxis cited Uber’s inadequate screening and background checks of drivers, its “approach to how medical certificates are obtained,” and the use of its controversial “Greyball” software that blocks regulators from gaining full access to the app. The TfL also—rather damningly—questioned Uber’s “approach to reporting serious criminal offenses” by its drivers—an issue raised in an extensive submission by the Metropolitan Police.

Uber says it plans to appeal the decision, and it will be able to operate in London during that lengthy process.

The petition says it will ask Khan to reverse the decision, but on Friday the London mayor backed the TfL.

Read More: HPE’s Meg Whitman Won’t Be Uber’s CEO. But She Could Be the First Female President

“Any operator of private hire services in London needs to play by the rules,” he said. “I fully support TfL’s decision—it would be wrong if TfL continued to license Uber if there is any way that this could pose a threat to Londoners’ safety and security,” he said.

The petition argues that Uber drivers are licensed by the TfL and have undergone the same “enhanced background checks” as their rival black cab drivers.

“This ban shows the world that London is far from being open and is closed to innovative companies, who bring choice to consumers and work opportunities to those who need them,” the petition says.


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Bain Again Appears to Be Toshiba’s Choice for Its $22 Billion Chip Unit

Japan’s embattled Toshiba (tosbf) has selected a group led by U.S. private equity firm Bain Capital to buy its prized memory chip unit, three people with knowledge of the talks said on Wednesday, a last-minute dramatic twist to a highly contentious auction.

But it’s unclear whether the decision by Toshiba’s board will mean the sale will now proceed smoothly, as rival suitor Western Digital (wdc) has initiated legal action, arguing no deal can be done without its consent due to its position as Toshiba’s joint venture chip partner.

The Bain-led offer for the world’s No. 2 producer of NAND semiconductors is worth some $ 22 billion, sources have said.

It has partnered with South Korea’s SK Hynix (hxscl) and brought in U.S. buyers of Toshiba chips such as Apple and Dell to bolster its bid. Kingston Technology and Seagate Technology are also part of the group.

The make-up of the consortium could spell trouble ahead, said Hideki Yasuda, an analyst at Ace Research Institute.


Early Black Friday Shopping At Toys-R-Us In Times Square

“The large number of stakeholders could complicate decision-making and slow down key investment decisions,” he said, adding that the participation of Toshiba clients would also sap the ability of the chips business to negotiate competitively on pricing.

Bain’s win, first reported by Reuters, has been hard fought as wrangling went down to the wire and late on Tuesday the Western Digital-backed consortium, which includes KKR & Co (kkr), appeared to be in the lead, sources said.

But the California-based firm would not agree to limits to any future stake in the chip business that had been demanded by Toshiba, said one person briefed on the matter.

Sources declined to be identified as they were not authorized to speak about discussions on the sale.

Toshiba declined to comment. A representative for Bain was not immediately available for comment while SK Hynix declined to comment.

After a slew of revised bids and changing alliances among suitors, an agreement comes not a moment too soon for Toshiba. It has has been under pressure from its lenders to clinch a deal this month to ensure enough time for regulatory reviews so that it can finish the sale by the end of the financial year.

If it doesn’t, it won’t have the billions of dollars it needs to plug a huge hole in its finances caused by its now bankrupt U.S. nuclear unit Westinghouse, and could be delisted.

Even without that problem staring it in the face, the semiconductor business requires huge amounts of investment and Toshiba’s chip unit runs the danger of losing its competitive ability as rivals roll out big capital spending plans.

A representative for Western Digital was not immediately available for comment.

The U.S. firm has already taken the dispute to the International Court of Arbitration to prevent the sale and a source with knowledge of the matter has previously said it is prepared to seek an immediate court injunction should the deal not go its way.

The Bain-led group had at one stage been chosen as preferred bidder but those talks lapsed as Japan government investors who had been part of that consortium told Toshiba they were reluctant to close a deal in the face of legal challenges posed by Western Digital.

The Bain consortium has since revised the offer, aiming to get around that problem by inviting the state-backed investors—the Innovation Network Corp of Japan (INCJ) and the Development Bank of Japan—to invest in the business only after any arbitration with Western Digital is settled.

But sources familiar with the talks have said it remains unclear if INCJ will commit to joining the consortium even when the legal dispute is resolved, casting uncertainty over the whether Japanese government will be able to prevail in its desire to have the chip business mainly under domestic control.


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