The weak started slow with Google (GOOGL - Analyst Report) appointing its new CFO but ended with a bang on rumors of Intel’s (INTC - Analyst Report) Altera (ALTR- Analyst Report) acquisition.
Intel Planning to Buy Altera
Intel is apparently in advanced talks to buy Altera, which is a leading field programmable gate array (FPGA) maker. Altera already has an exclusive 14nm foundry agreement with Intel. The buyout could bring the companies closer both in terms of chip design and manufacturing process.
But from chip design to prototyping to beta testing and volume production can be a lengthy process, so it’s unlikely that there will be any near-term benefit to Intel. Unless, of course, you consider the addition to revenue once the results are consolidated, since Altera’s faster-growing top line will add a few percentage points of growth to Intel’s.
Google CFO Has Work Cut Out
Ruth Porat, Morgan Stanley veteran of 28 years, is replacing Patrick Pichette as the new CFO at Google. The search giant has done well to bring someone from Wall Street since the growing competition, changing nature of its business, new growth opportunities and long line of “moonshots” require financial discipline to be executed effectively.
And investors have high expectations. They want more clarity on Google’s new lines of business (Google Play, YouTube, etc), they definitely want forward guidance and they would like more granularity on the core business. So the new CFO has her work cut out.
She’s being well compensated: a cool $70 million over the next two years including a base salary of $650,000, a sign-up bonus of $5 million, restricted stock units worth $25 million and a biennial grant of $40 million.
Microsoft Could Have the Answer to Chromebooks
On Friday, Digitimes published an article about two new budget tablets from Microsoft (MSFT - Analyst Report). The 11.6-inch tablets to hit the market in mid-2015 will be powered by Intel’s Bay Trail processors and priced at $149-$179. According to Joanne Chiene of Digitimes, this is Microsoft’s defense against Chromebooks in the education, consumer and very low end segments of the market in developing countries.
For comparison, Google’s Chromebook is priced at $179, but prices could go down if Google starts using Rockchip solutions as planned. Google’s devices are available in 3 sizes, with the largest being 16.5 inches.
Last week also saw Microsoft take additional measures to stem the growth of Android devices (or take them over). It is also announced agreements with popular regional hardware makers to get its apps pre-installed on select Android devices. The heat is on.
What Drove Share Prices This Past Quarter
With the first quarter behind us, technology stocks are showing mixed trends. Of the bellwethers tracked in this roundup, the top gainers were Apple (AAPL - Analyst Report), Facebook and Google with the biggest losers being Intel Microsoft and Yahoo.
Apple gained from the Watch hype, but that isn’t all. There were reports of the company taking meaningful share in several important Asian markets, including China and Korea.
Facebook’s (FB - Analyst Report) user base, ad revenue momentum and growing share of digital ad dollars were positive factors driving shares.
Google was the least impressive of this lot, but it signed some important agreements with carriers that will help adoption of its payments solution, launched Android for Work and introduced some kids’ products. Rising Play Store sales and a new CFO were other positives.
Intel and Microsoft were battered by the stronger dollar and PC market slowdown that proved worse than expected. The continuing uncertainties in Yahoo’s (YHOO- Analyst Report) core business hurt its share prices.
Company
|
Last Week
|
Last 3 Months
|
Last 6 Months
|
AAPL
|
-2.10%
|
+8.11%
|
+23.10%
|
FB
|
-0.60%
|
+3.12%
|
+5.44%
|
YHOO
|
+0.12%
|
-11.33%
|
+11.27%
|
GOOG
|
-2.15%
|
+2.68%
|
-4.86%
|
GOOGL
|
-1.31%
|
+2.96%
|
-5.15%
|
MSFT
|
-4.45%
|
-14.42%
|
-11.77%
|
INTC
|
+0.69%
|
-14.77%
|
-8.31%
|
CSCO
|
-4.61%
|
-4.29%
|
+8.00%
|
GOOG = Class C shares (new, non-voting)
GOOGL = Class A shares (old, 1 vote per share)
Other stories you might have missed-
Corporate
Apple Planning Trade-in Program in China: Apple is planning an iPhone trade-in offer wherein consumers giving up their old iPhones will get credits to help them purchase new versions. Apple supplier Foxconn (Honhai) will buy and re-sell the phones. A similar program successfully boosted sales in the U.S.
Google Has Plans for SMBs: Google has launched a program called “Lets Put Our Cities on the Map,” comprising 30,000 customized websites that will help them provide the kind of information that will get them found easier on Google search, Google Maps or Google Plus. This program is an offshoot of the “Get Your Business Online” Program designed for small and medium businesses. Google is also coordinating with organizations like small business development centers and chambers of commerce to host events and shows that could further help small businesses.
Google High-Speed Internet Reaches Salt Lake City: Mayor Ralph Baker has announced that Salt Lake City is next in line to receive Google’s high-speed Internet. The rates have not been finalized but are likely to be the same as in Provo, Utah (a free 5 megabit connection, a high-speed 1 GB connection for $70 a month or the high speed connection plus TV service for $120 per month).
Yelp Launches in Taiwan: Yelp (YELP - Snapshot Report) announced its entry into Taiwan, where consumers can access the service through free iPhone or Android apps or on their desktops in any one of the 16 languages it currently supports. A free suite of business owners’ tools called Yelp For Business will also become available.
H-P Passing on Chinese Unit Control: Hewlett-Packard (HPQ - Analyst Report) is nearing a deal to sell a 51% stake of its data networking business in China to Tsinghua Unigroup Ltd, which emerged the highest bidder. This is another indication that its growing increasingly difficult for U.S. companies to operate on Chinese soil.
New Technology/Products
Yahoo Launches Digital Magazine No. 12: Yahoo’s 12th digital magazine, which deals politics, will be headed by Yahoo News Group Editor-in-Chief Megan Liberman, the magazine’s Editor-in-Chief Garance Franke-Ruta and Yahoo News Deputy Editor Dan Klaidman. Yahoo has signed on other big names that are expected to add credibility.
Micron and Intel Launch New 3D NAND Memory: The companies have said that their 32-layer device can store up to 256 GB or 384 GB, depending on the version, or up to 3X the capacity of current 3D NAND products made possible by the floating gate technology being used. This is a big positive for the connected devices of today since they are getting increasingly smaller and thinner.
YouTube Takes on Twitch: Google may have lost Twitch to Amazon (AMZN -Analyst Report), but it certainly isn’t sitting on the sidelines. The search giant now has its own engineering team of 50+ and live streaming product. YouTube is also on almost every gaming console, giving it a fighting chance against the hugely popular Twitch. But there are technical difficulties as of now, so only time will prove the effectiveness of the efforts.
Google Targets TV Ads: Google is currently tracking TV ad views in Kansas City (where it provides high-speed Internet+TV), in order to better target ads depending on shows and audience that is likely to be most effective for advertisers. This may not be such a big deal today because Google’s service isn’t far-reaching, but the implications could be huge. If Google’s strategy is effective it will start to directly attract TV ad dollars.
Collaborations and M&A
Microsoft Acquires LiveLoop: Microsoft has confirmed the acquisition of Liveloop, which makes collaboration tools, particularly with respect to PowerPoint. The integration of the service will enable the conversion of a PowerPoint presentation to a URL, without the need to open any other apps such as GoToMeeting, WebEx or Join.me.
Analyst Opinion
Piper Downgrades EMC, NTAP: These traditional storage providers saw rating and price target cuts due to increased competition from new players like Nimble, Tegile, Tintri, Pure Storage and Nutanix; public cloud migration; and weakening of the euro.
Microsoft Target Price Cut: UBS, Barclays, BGC and Morgan Stanley analysts have lowered their price targets on Microsoft shares. The reasons aren’t new: PC market slump and stronger dollar, but Microsoft shares came under pressure.
NVIDIA Moving Away from TSM?: Analyst Doug Freedman mentions conversations with NVDIA (NVDA - Analyst Report) management that indicate that the company is already second sourcing its requirements from Samsung. Moreover, since NVIDIA’s royalty payments from Intel are set to expire some time in 2017 (Intel started paying NVIDIA for its contribution to x86 architecture after it agreed to back off from its further development), the company may be tempted to shift some manufacturing to Intel to generate additional patent licensing revenue. The analyst believes that NVIDIA’s sizeable foundry business could tempt Intel.
Some Numbers
Apple Music Service for $10: Apple tried to negotiate with music labels to get a sweeter deal for its customers, but media reports now indicate that its subscription service won’t come for less than the standard $10. But there’s hope yet, as the company makes progress with its Beats app and may also be able to garner prominent albums exclusively for itself. Apple’s large and paying user base will provide leverage in this respect.
Facebook Messenger Now Has 600 Million Users: As part of its Messenger announcements at F8, Facebook said that its messenger app was now had by 600 million monthly active users, up by 100 million since November. WhatsApp also added 100 million users from Aug 2014 to Jan 2015 when it touch 700 million.
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