B8| Tuesday, September 13, 2016 THE WALL STREET JOURNAL.
Flash Play
Pure Storage is growing rapidly but the shares are relatively cheap.*estimate†as of Sept. 6 closing of acquisition by Dell
Note: Fiscal years ended January
Sources: the company; FactSet THE WALL STREET JOURNAL.$1,0200400600800FY2013 ’14 ’15 ’16 ’17* ’18*Pure StorageNasdaq CompositeEMC†IBMNetAppNimble Storage2.2.2.1.1.1.Pure Storage revenue, in millions Price as a multiple of forward salesChina’s securities regulator
greenlighted 14 initial public of-
ferings Friday that will raise up
to 11.6 billion yuan ($1.7 billion),
confirming speculation the pace
of debuts is picking up. In the
first half of this year, 67 IPOs
raised 33.2 billion yuan.
—Yifan XieDEUTSCHE BANK
Asset Management
Is Still ‘Essential’
Deutsche Bank AG’s asset-
management business “is and
will remain an essential part” of
the company’s business model,Chief Executive John Cryan told
staff in a letter the bank pub-
lished Monday on its website.
“Do not allow yourself to be-
come distracted by speculation
about alleged mergers or sales
plans,” Mr. Cryan wrote in the
note, one of a series of monthly
updates he plans.
Fees from asset management
deliver stable returns compared
with the bank’s bigger, more-vol-
atile trading and investment-
banking units. Mr. Cryan said in
his note that he wanted to be
“unambiguously clear” about as-
set management’s essential role.
—Jenny StrasburgHere’s a look at some of the
incentives that upscale auction
houses are often willing to offer
when their cupboards start to
look a little less well-stocked:GUARANTEES: An auction
house will sometimes commit
to paying the individual who is
selling, known as the consignor,
an agreed-upon amount—re-
gardless of whether the art-
work actually sells. In effect,
the auctioneer is buying the
consignment, guaranteeing the
seller, say, $4 million for the
painting that has been valued
at $4 million. If the auction
house doesn’t sell the picture,
or sells it for less than $4 mil-
lion, the company eats the loss.PERFORMANCE BONUS:
Consignors can ask—but only
ahead of time—for a cut of
what the auction house charges
the buyer as a premium. The
premium may be 25%, 20% or
12% of the final sale price at
both Christie’s and Sotheby’s.
The higher the sale price, the
lower the percentage. If it is
made part of the agreement, a
work that sells for more than
expected may trigger an extra
payment to the consignor. That
money comes out of the pur-
chaser’s premium as well.AUCTIONEER’S COMMIS-
SION: Auction houses earnBusinesses are taking to
flash memory in a big way,
creating opportunities for
large, established tech giants
as well as upstarts. But in-
vestors remain skeptical of
who will end up with the
most chips in their stack.
Sales of flash-based stor-
age systems used in data
centers and other business
functions are rising rapidly.
That is fueling growth for
Pure Storage and Nimble
Storage , two younger com-
panies that specialize in
these products.
In just four years, Pure
Storage has gone from $
million in annual revenue in
2013 to nearly $585 million
for the trailing 12 months.
Nimble’s annual revenue has
increased from about $
million to more than $
million over the same pe-
riod.
Yet the market has taken
a rather dim view of the two.
Pure Storage has shed more
than 20% of its value this
year and trades at just 2.
times forward sales, only a
slight premium to the Nas-
daq Composite Index’s aver-
age. Nimble, down 9% for the
year, trades at just 1.6 times
forward sales.
The reasons speak to the
brutal competitive dynamics
at play in enterprise data
storage.While flash memory has
long been used in consumer
devices such as smart-
phones, cameras and laptops,
its adoption in data centers
was once limited by its high
cost relative to magnetic
disks and other more tradi-
tional forms of storage.
But that gap is narrowing
and the increasing impor-
tance of running supereffi-
cient data centers has given
flash a new opportunity. It
consumes far less power and
accesses data faster than
other forms of storage. In-
ternet giants like Facebook
that operate huge networks
of data centers were early
adopters, and others are fol-
lowing suit.
Data-storage arrays using
only flash will make up at
least 70% of all primary
data-storage units sold in
2020, according to a forecast
by IDC.
Flash memory will be a
“key catalyst and compo-
nent” in the design of data
centers this year and moving
ahead, IDC analyst Eric
Burgener wrote in a July re-
port.
That means established
data-storage-equipment pro-
viders can’t afford to be left
out. EMC, NetApp , Hewlett
Packard Enterprise , Hitachi
and Oracle all now sell their
own all-flash arrays and areseeing success.
In its most recent quar-
terly report last month, Net-
App said that sales of its all-
flash systems surged 385%
year over year. Its stock
price has jumped by over
one-fifth since that report.
That means more price
competition for the likes of
Pure and Nimble, which still
are losing money and don’t
have a wide portfolio of
other products to fall back
on. EMC, which is in a pat-
ent dispute with Pure Stor-
age, may even be a stronger
threat now, given that it is
part of the closely held Dell
Technologies empire that no
longer will be scrutinized for
its quarterly results. A sur-
vey of technology resellers
in July by Barclays found
81% were seeing “increased
discounting” for most data-
storage vendors.
Still, even smaller compa-
nies with compelling tech-
nology can stake out a valu-
able piece of real estate in
the data center of the future.
And depressed valuations
could make companies such
as Pure and Nimble attrac-
tive buyout targets. Both still
face an uphill battle, but un-
like many other tech up-
starts, their current values
can hardly be considered
flashy.
—Dan GallagherDon’t Race to Bash Flash
HEARD ON THE STREET
Email: [email protected] FINANCIAL ANALYSIS & COMMENTARY WSJ.com/Heard
Deals Fuel
Advances
In Biotech
The needs of big drug-
makers are driving the stock-
price outlook of smaller bio-
tech companies.
That suggests the bright-
ening investment environ-
ment could stick around. The
biotech market has heated
back up after an ugly start to
the year. Placid markets have
lowered the cost of issuing
equity, and deals are back on
the table now after a lull.
The recent sale of Mediva-
tion to Pfizer fetched $
billion including debt, far
more than investors ex-
pected, with no shortage of
suitors. Despite Friday’s sell-
off, the Nasdaq Biotechnol-
ogy Index has returned 8.5%
over the past six months.
Smaller companies generally
have done better.
Modest hints of deals can
send stocks higher. Gilead
Sciences executives said last
week at an investor confer-
ence that the company feels
an urgency to look at outside
deals and that they would be
willing to take a risk on a
company developing a class
of new cancer drugs known
as PARP inhibitors.
That nod came with some
big caveats—but it was
enough to send shares of
Tesaro and Clovis Oncology
up 7% and 15%, respectively.
Buying stocks on deal
speculation appears fool-
hardy, but big drugmakers
must replace maturing prod-
ucts continuously.
Gilead Sciences, facing a
sharp reversal in revenue
growth this year and with
nearly $25 billion in cash
and securities plus easy ac-
cess to the investment-grade
bond market, is motivated
and able to act.
With such companies on
the hunt, finding long-term
biotech bargains is a chal-
lenge. — Charley Grant
Corporate Debt Is
A Ripe BOJ Target
Japan’s corporate-bond
market is taking off just in
time for the Bank of Japan
to play an even bigger role
in it.
In the Japanese central
bank’s vast asset-purchase
program, corporate bonds
have been an afterthought.
With the bank’s entire pol-
icy in flux in advance of a
policy meeting later this
month, the market already
may be anticipating big
changes afoot.
Japan’s corporate-bond
market stands out as a mi-
nuscule ¥57 trillion ($
billion) droplet compared
with the ¥909 trillion ocean
that is the government-bond
market. Because of that, the
BOJ’s corporate-bond-buy-
ing program has been lim-
ited to ¥3.2 trillion a year
since it launched in 2013. By
contrast, it targets pur-
chases of ¥80 trillion of
government bonds.
Making matters worse,
new issuance of corporate
bonds fell in 2014 and 2015,
giving the BOJ fewer bonds
to buy.
But the corporate-bond
landscape has changed of
late. Issuance is up almost
30% so far this year, accord-
ing to data provider Dea-
logic, giving the BOJ a
larger universe of assets to
buy. Under its current pro-
gram, the BOJ can buy up to
¥100 billion of a company’s
bonds, as long as it doesn’t
purchase more than 25% of
the total amount issued. It
buys only investment-grade
bonds excluding those from
financial institutions. Unlike
the European Central Bank’s
program, it doesn’t publish
a menu of corporate bonds
that it will buy.
The BOJ buys only bonds
that have maturities over
the next one to three years.
Issuance of such short-datedBond Party
Issuance of Japanese corporate
bonds, year-over-year changeSource: Dealogic
THE WALL STREET JOURNAL.*Through Sept. 73001020%2009 ’10 ’11 ’12 ’13 ’14 ’15 ’16*bonds has more than dou-
bled in the year so far and
is at its highest since 2013.
Given that the BOJ has so
many restrictions on its cor-
porate-bond program in
terms of size, maturity and
investment grade, an expan-
sion in one form or another
makes sense. That Europe
already has gone down this
path gives the BOJ a track
record to learn from.
Buying more of slightly
longer-dated bonds may
prove the most appealing
option. Bank officials have
signaled a desire to keep
medium-term rates low,
even as they try to restore
relatively higher rates fur-
ther out along the yield
curve.
That can be seen in the
BOJ’s preference for buying
shorter-term bonds in re-
cent months. As a result,
yields on two-year triple-B-
rated corporate bonds have
fallen 0.22 percentage point
since the last policy meeting
at the end of July, and those
on 10-year bonds are up
slightly.
As the BOJ searches for
ways to make a difference,
it may find buying more
corporate bonds is part of
the answer. A little bit of re-
tail therapy never hurt any-
one.
—Anjani TrivediFINANCE & MARKETS
Data as shown is for information purposes only. No offer is being made by
Morningstar, Ltd. or this publication. Funds shown aren’t registered with the
U.S. Securities and Exchange Commission and aren’t available for sale to United
States citizens and/or residents except as noted. Prices are in local currencies.
All performance figures are calculated using the most recent prices available.
NAV —%RETURN—
FUND NAME GF AT LB DATE CR NAV YTD 12-MO 2-YRAdvertisement INTERNATIONAL INVESTMENT FUNDS
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China A-Share Fund Cls A AUD H OT OT HKG09/09AUD 11.94 -5.8 5.3 NS
China A-Share Fund Cls A AUD UnHOT OT HKG09/09AUD 10.90 -9.9 -3.8 NS
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China A-Share Fund Cls A NZD H OT OT HKG09/09NZD 11.74 -5.8 5.3 NS
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China Greenchip-A Units AS EQ CYM09/09HKD 54.84 3.5 5.3 -6.
China Greenchip-A Units AUD H AS EQ CYM09/09AUD 9.24 3.9 6.0 -7.
China Greenchip-A Units CAD H AS EQ CYM09/09CAD 9.03 3.1 4.6 -7.
China Greenchip-A Units NZD H AS EQ CYM09/09NZD 9.47 4.8 6.8 -5.
China Greenchip-A Units USD AS EQ CYM09/09USD 9.08 3.5 5.2 -7.
China Greenchip-A2 QDIs Units AS EQ CYM09/09HKD 9.99 3.5 5.3 -6.
GC Hi Yield Inc - Cls A MDIs GBP HOT OT CYM09/09GBP 9.64 12.5 16.6 NS
GC Hi Yield Inc-Cls A MDIs AUD HOT OT CYM09/09AUD 9.19 13.8 18.8 8.
GC Hi Yield Inc-Cls A MDIs CAD HOT OT CYM09/09CAD 9.23 12.7 16.8 7.
GC Hi Yield Inc-Cls A MDIs NZD HOT OT CYM09/09NZD 9.48 14.3 19.3 10.
GC Hi Yield Inc-Cls P HKD Acc sh OT OT CYM09/09HKD 13.73 13.0 17.2 7.
GC Hi Yield Inc-Cls P HKD MDIs shOT OT CYM09/09HKD 9.06 13.1 17.2 7.
GC Hi Yield Inc-Cls P MDIs SGD HOT OT CYM09/09SGD 9.94 13.2 17.8 NS
GC Hi Yield Inc-Cls P USD Acc sh OT OT CYM09/09USD 13.84 12.9 17.1 7.
GC Hi Yield Inc-Cls P USD MDIs shOT OT CYM09/09USD 9.11 12.9 17.0 7.
GC Hi Yield Inc-ClsA MDIs EUR H OT OT CYM09/09EUR 10.07 11.8 15.8 NS
Hi-Div Stk Cls A RMB H Acc OT OT HKG09/09CNH 10.59 8.0 9.7 NS
Hi-Div Stk Cls A RMB UnH Acc OT OT HKG09/09CNH 12.57 7.9 9.8 3.
Hi-Div Stk Cls A1 OT OT HKG09/09USD 76.72 6.8 7.4 0.
Hi-Div Stk Cls A2 AUD H MDIs OT OT HKG09/09AUD 9.63 7.1 7.9 0.
Hi-Div Stk Cls A2 CAD H MDIs OT OT HKG09/09CAD 9.71 6.2 6.5 -0.
Hi-Div Stk Cls A2 GBP H MDIs OT OT HKG09/09GBP 9.15 5.9 6.4 NS
Hi-Div Stk Cls A2 HKD MDIs OT OT HKG09/09HKD 9.88 7.1 7.7 -0.
Hi-Div Stk Cls A2 MDIs OT OT HKG09/09USD 10.82 6.7 7.3 0.
Hi-Div Stk Cls A2 NZD H MDIs OT OT HKG09/09NZD 9.75 6.5 7.8 1.
Hi-Div Stk Cls A2 RMB H MDIs OT OT HKG09/09CNH 9.33 8.8 10.5 NS
Hi-Div Stk Cls A2 RMB UnH MDIsOT OT HKG09/09CNH 9.65 9.1 11.5 4.
Intel-China Converg Fund-A AUD HAS EQ CYM09/09AUD 9.49 1.0 NS NS
Intel-China Converg Fund-A CAD HAS EQ CYM09/09CAD 10.80 NS NS NS
Intel-China Converg Fund-A NZD HAS EQ CYM09/09NZD 10.82 NS NS NS
Intel-China Converg Fund-A UnitsAS EQ CYM09/09USD 143.39 -1.9 1.3 1.
Intel-Chinese Mainland Foc FundAS EQ CYM09/09USD 39.63 -4.1 2.1 1.
VP Classic-A Units AS EQ HKG09/09USD 278.93 6.1 8.9 4.
VP Classic-B Units AS EQ HKG09/09USD 125.73 5.7 8.3 3.Finance
Watch
CHINA
New IPO Approvals
Still Picking Up Pace
Despite months of weak trad-
ing in a range-bound market,
Beijing is showing no sign of
shying away from launching new
shares.money from both buyers and
sellers, and consignors of de-
sirable items may seek a re-
duction or even elimination of
the commission, which is
sometimes as high as 30%.
“When you know there is com-
petition with other auction
houses, the first place you
cave is with commissions,”
says Leslie Hindman, owner of
Chicago-based Leslie Hind-
man Auctioneers.FEES: Auction houses regu-
larly charge an array of fees for
services including photography,
transportation, storage, insur-
ance and marketing. All of
these fees may be waived if the
auction wants the consignment
enough.ADD-ONS: Consignors can
ask for good positioning in the
sale catalog—even for place-
ment on the cover. A separate
catalog, or a catalog-within-a-
catalog can be a possibility if
the seller has a number of
noted items. Consignors also
may ask the auction house to
advertise the sale (and the spe-
cific consignment) in various
media and to promote the par-
ticular objects in a special—
possibly even touring—exhibi-
tion.
Mr. Grant is a writer in Am-
herst, Mass. He can be reached
at [email protected].This fall isn’t shaping up to
be the best of times for art auc-
tion houses. Which means it
may be a very good time for
people looking to sell their
works of art.
Weakness in the British
pound, the euro and petroleum
prices are all expected to take
their toll on bids in the Novem-
ber sales of impressionist, mod-
ern and contemporary art in
New York City. The U.S. elec-
tions in November, too, are
causing some to worry that the
market that month could be
weak.
Philip Hoffman, founder and
chief executive officer of the
London-based Fine Art Group ,
a private-equity firm specializ-
ing in artworks, fears as much
as a 30% drop in works offered
for sale in November at the
Christie’s , Phillips and So-
theby’s auction houses in New
York.
But what sellers sitting on
the fence need to know is, the
art auction houses have lots of
incentives that can sweeten the
terms for collectors who are
willing to sell valuable pieces in
uncertain times.
To test the waters, experts
advise contacting more than
one auction house to learn
what they’re willing to offer.
The more valuable and rare the
object, the more sellers can
bargain.
“I use all the tools available
to me to get important consign-
ments,” says Peter Loughrey,
president of Los Angeles Mod-
ern Auctions. “At $1 million, I
offer crazy incentives.”
It also may be advisable to
ask an art adviser to handle the
actual negotiations with auc-
tion houses.
BYDANIELGRANT
Art Sellers Are Finding
Auctioneers Want to Deal
Auctionhouses Christie’s, Phillips and Sotheby’s could see a drop
in works offered for sale in November, says Philip Hoffman.SIMON DAWSON/BLOOMBERG NEWSAuction houses have
many incentives that
can sweeten the
terms for sellers.
For information about listing your funds,
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VP Classic-C Units HKD H AS EQ HKG09/09HKD 10.76 4.9 NS NS
VP Classic-C Units NZD H AS EQ HKG09/09NZD 13.11 5.8 8.9 5.
VP Classic-C Units RMB AS EQ HKG09/09CNH 10.69 4.8 NS NS
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