Technology Stock Roundup: Intel Raises Guidance, M&A Hits Internet Stocks - Analyst Blog

A lot of things happened last week, not all of which had a material impact on share prices. Here is a brief recap of the top stories-

Intel Raised Guidance

Intel Corp INTC raised its guidance for the following quarter and also sounded more optimistic for the year. The main thing driving share prices is improvement in the core PC business, which is an offshoot to the stabilization in the PC market (recall that IDC now expects PCs to decline 6% this year). Intel gains because tablet cannibalization is petering off, a phenomenon that had the greatest impact on its core desktop business. The fact that Microsoft has withdrawn support to XP thereby pushing enterprise demand is another positive. To top it all, Intel appears to have found itself in the tablet/convertible segment (it seems en route to becoming the partner of choice for both Surface devices and Chromebooks). The recently-announced Broadwell could mean deeper entrenchment within this market in 2015.

Priceline Grabbed OpenTable

Online travel company Priceline.com PCLN agreed to spend $2.6 billion to acquire OpenTable, which focuses on getting people seated at the restaurants of their choice. The purchase price gave OpenTable investors a 48% premium to their holdings when markets closed the previous day. Priceline has proved good at digesting acquisitions in the past: it acquired Active Hotels, booking.com, TravelJigsaw (rental cars) and Agoda.com (China) in the last few years. Restaurant reservation adds a new dimension, but given the history, Priceline is likely to turn it into a success. The deal pushed up valuations of companies in a similar line of business, such as Yelp, GrubHub and Groupon.

PayPal Chief Joined Facebook

eBay's EBAY PayPal suffered a setback as its President, David Marcus decided to leave the company to join Facebook FB. PayPal has been in the news for both good and bad – the business is an extremely profitable, fast-growing one for eBay, so it has stolen a few earnings-related headlines. And eBay management has hung on to it, despite Carl Icahn's repeated attempts to spin it off (which also made headlines). But PayPal is based on solid technology and helps eBay offer the entire range of tools that a traditional retailer requires in order to expand online. It is therefore strategically important. Particularly at a time when technology companies are swarming into the space, the most notable of which are Google and Amazon.    

The departure is a big positive for Facebook, which has been trying to build Facebook Messenger into a successful product. Marcus could help to do that and also improve monetization of other assets.   

GOOG = Class C shares (new, non-voting)

GOOGL = Class A shares (old, 1 vote per share)

Other stories you may have missed-

Corporate

Apple Planning Internal Ad Agency: Apple AAPL has built an internal staff of 1,000 to take care of its advertising efforts, so says AdAge, as quoted by endgadget. The company has apparently gone after top talent from leading advertising agencies and invited advertising firms to pitch in. It's also not pushing outTBWA/Media Arts Labs, which has traditionally handled its advertising. Apple is probably looking to re-build its brand in order to regain its leading position.

Regulatory

EU Rejects Intel Plea

New Technology/Products

Amazon Launches Amazon Payments

Microsoft Is Making a Smartwatch: Microsoft MSFT has announced that it is making a smartwatch that will be compatible with Windows Phone, iOS and Android. It will be a simple band with a screen on the inside of the wrist for the sake of privacy.  It's also being rumored that the device will be similar to Samsung's Gear Fit wearable and use biometrics technology.

Amazon Music Service, Sans Universal: The New York Times says that Amazon AMZN is ready to unleash a music streaming service for its Prime subscribers, for which it has signed on Sony and Warner Music as well as a host of smaller labels. Universal Music Group, the other big provider turned down Amazon's offer. The attraction for the music companies is the 20 million-odd Prime subscriber base, but Amazon is holding the purse strings so tight that no one is willing to offer new releases. This is a business that will cannibalize its own media sales, but Amazon has to make a mark here, first because it needs to follow the market trend to protect and grow sales and second because it yields better margins.

H-P Launches Water-Cooled Apollo

Video Game Stock Roundup: E3 Event

More on M&A

Google acquires Skybox

Rumor: Google Wants Songza: Google is apparently willing to spend around $15 million on a music streaming business called Songza to fall in line with market trends and complement YouTube. The service has 5.5 million active users, which is quite small considering that rival streaming services such as Pandora and Spotify have roughly 77 million and 24 million users, respectively.

IGT Up on Rumored Sale: A Reuters report stating that IGT had singled out Morgan Stanley to assess a sale of the business sent shares soaring. The company, which makes machines for casino games has struggled in recent times because of weak demand and has been trying to sell the business for the last two months.

IBM To Sell its Chip-making Unit to Globalfoundries: Bloomberg reported that IBM is close to finalizing a sale of its chip-making unit to Globalfundries. But since it is lagging-edge facility, Globalfoundries is likely more interested in the engineering talent and IP.

Analyst Comments

Canaccord Lauds Broadcom's Exit From Baseband Market: Canaccord resumed coverage of Broadcom with a buy rating, commending its decision to exit the wireless baseband market. Broadcom was a leading supplier of 3G basebands, a market that many technology companies including Analog Devices, Freescale, Infineon, NXP, ST-Ericsson and Texas Instruments have exited. The 4G-LTE business is owned by Qualcomm, which doesn't look about ready to cede share. Broadcom's investment in the baseband business has impacted its profitability.

Some numbers

Gartner Announces Leading Software Security Makers: Gartner has announced that IBM became the third largest provider of security software in 2013, behind Symantec and Intel's McAfee. As a result, Trend Micro has dropped to number four.

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