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Canaccord Genuity on Citigroup, Microsoft, and Murphy Oil


Personnel changes abound at Citigroup, Microsoft announces pricing for Surface RT, and Murphy Oil gets ready for a spinoff.

The following are excerpts from Canaccord Genuity analysts' commentaries.

Citigroup (NYSE:C): Here today, gone tomorrow.
In a surprise move, Vikram Pandit stepped down as CEO of Citigroup. Pandit has been replaced by the head of the bank's European and Middle Eastern division, Michael Corbat, effective immediately. Citigroup COO John Havens has also departed. The Wall Street Journal reports that Pandit left following a major blow-up with the board. In a memo to all staff, Corbat said, "[T]he environment is a challenging and dynamic one. Regulatory, legislative, and economic changes around the world present headwinds as we redefine our relationships with all of our stakeholders. To thrive, we must be vigilant about how we allocate our resources to ensure we are serving our clients and offering the products with the highest potential in the most productive markets...As a first step, I'm going to take the next several weeks to immerse myself in the businesses and review reporting structures. These assessments will result in some changes, and I will make sure to communicate these changes with you as decisions are made so that you are informed and updated."

Should we expect some changes or major changes? On Monday, Citi reported quarterly adjusted earnings that surged from the year-ago quarter and beat expectations. The growth came as mortgage lending increased and capital markets results rebounded. Excluding the loss on its brokerage unit, a one-time accounting charge, and credit adjustments, the bank reported earning $3.27 billion, or $1.06 per share, up from $2.57 billion, or $0.84 per share, in the same period one year earlier. Citigroup was expected to record earnings per share of $0.96 on revenue of $18.7 billion.

Microsoft (NASDAQ:MSFT): Bill Gates lives in constant fear that Chuck Norris' PC will crash.
Microsoft announced it will sell its first computer, a device called Surface RT, for as little as $499 as the software maker pushes into the tablet market dominated by Apple's (NASDAQ:AAPL) iPad. The first iteration of the device, powered by a chip with technology from ARM Holdings (NASDAQ:ARMH), will be available as a 32GB model for $499. With a black cover, it will cost $599, and a 64GB version will be $699.

Analysts say the world's largest software maker needed a device priced under $500 to lure customers away from the iPad and to compete with Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG), which are pushing prices lower in the tablet category. The snap-on cover, which includes a full keyboard, is one of the key features that make the Surface different from other tablets. Customers can buy the cover for $119.99 in black, white, magenta, cyan, and red. The tablet has a 10.6-inch display and will run the new version of Microsoft's Windows operating system. Both go on sale October 26.
Murphy Oil (NYSE:MUR): Unlocking value.
Shares of Murphy Oil jumped after the company announced that it will spin off its smaller retail gasoline business in the US, review options for other assets, pay a special dividend, and buy back shares as it seeks to return more cash to shareholders. Reuters reported that Tuesday's announcement came days after Murphy Oil said it was talking with shareholders to find ways to increase share value. Murphy's CEO, Steven Cosse, stated, "I think we would be remiss if we didn't listen to shareholders" who have advocated for a spinoff of the retail business and a share buyback.

Murphy Oil will continue to explore for and produce oil in the US, Canada, and Malaysia. Murphy USA will become a separate company focused on selling fuels. Murphy USA operates retail gasoline stations in 23 states. Murphy USA will also operate seven fuel distribution terminals and ethanol production facilities in North Dakota and Texas. Murphy's only refinery, located in the UK, will stay with Murphy Oil, but the company is still trying to sell it so it can focus exclusively on exploration and production.

Editor's note: For more information on Canaccord Genuity, click here.
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No positions in stocks mentioned.
Canaccord Financial and its affiliated companies may have a Corporate Finance or other relationship with the companies mentioned and may trade in any of the Designated  Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage herein.
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