Weekly Tech Biz Rearview: Facebook Follies, Pandora Prevails
The current weakness in consumer spending in China causes Samsung to speculate that tech spending is also being impacted. The firm forecasts that the tech goods market in that country might grow at a rate of only 7 percent in 2012, compared to 10 percent in 2011.
The day after its disappointing IPO, shares of Facebook (NASDAQ:FB) are down more than 10 percent, even though they are almost 23 times sales, and 75 times trailing earnings per share. BTIG began coverage with Neutral, which was in-line with its worries concerning FB’s valuation, slowing growth, and problems with advertising monetization. Berkeley/Stanford prof. Steve Blank goes one further, saying that Friday’s IPO ‘marks the end of Silicon Valley’s golden age’, as he concludes that Facebook and other social media/mobile players focus upon delivering huge returns in the short term, so that now venture capitalists do not like to fund companies doing major work in science and technology challenges, that promise only long term paybacks. Blank opines that only Google (NASDAQ:GOOG) and Tesla’s (NASDAQ:TSLA) Elon Musk might be still capable of that effort. On the other hand, Bill Gurley defends Facebook’s performance on Monday, as he cites the fact that Amazon (NASDAQ:AMZN) shares also fell below its May 1997 IPO afterwards, and didn’t regain the losses until July.
Internet Explorer (NASDAQ:MSFT) has lost its premier position as the world’s most popular borwser, to Google Chrome, according to StatCounter‘s most recent data. For the week of May 14 to 20, Chrome’s share was 32.76 percent, compared to 31.94 percent for IE, 25.47 percent for Firefox. Chrome’s share was only 19.37 percent a year ago this time, which representsa rise of almost 70 percent. However, NetMarketShare‘s figures contradict those of StatCounter, and imply that IE still has a ‘major lead’. At the same time, Google’s YouTube users are currently 72 hours of video every minute, according to the site, which is way up from the 48 hours claimed a year ago, and 24 hours in March 2010. The increases are credited to its efforts to promote channel subscriptions and professional content.
Facebook’s blue Monday is Apple’s (NASDAQ:AAPL) boom day. Shares of the latter take off as investors view them as values compared to those of the former. Morgan Stanley’s Adam Parker noted that Apple could soon have the S&P highest market weight since 1986, as it currently comprises 9 percent of the exchange’s trading volume, and more than 1 percent of the portfolios of 26 percent of large hedge funds, with more than 10 percent of the portfolios of 4 percent of hedge funds.
Shares of Splunk (SPLK) move up subsequent to Barclays analyst Raimo Lenschow, who contends that the market potential for the firm’s software, which is used to analyze machine data, is actually larger than is currently thought, as its solutions for analyzing petabytes (thousands of terabytes) of data daily, are “creating a whole new market”. At any rate, who could not like a name like ‘Splunk’?
Google’s (NASDAQ:GOOG) antitrust woes continue, as the FTC accelerates its inquiry by asking for information from the company’s competitors – including eBay (NASDAQ:EBAY) – regarding its behavior, according to a Bloomberg report. On Monday the European Union said that Google has only “matter of weeks” to settle an investigation and avoid possible penalties. Meanwhile, the company closes on its purchase of Motorola Mobility (NYSE:MMI), which will remain a separate unit. The latter’s CEO Sanjay Jha has resigned and was replaced by “long-time Googler” Dennis Woodside, who was President of Google’s Americas region. The new CEO has already begun an executive shakeup.
If Monday was bad for Facebook (NASDAQ:FB), Tuesday is far worse. Trading was halted before noon and remains so until closing, as the shares’ fall tripped a circuit breaker and triggered restrictions on short selling; Finra data shows that 23.6 million shares were shorted on Friday and 6.4 million Monday. As if that were not enough, the SEC and Finra might be preparing to bring separate inquiries into the company’s IPO. Allegations are in the air that analysts for the lead underwriters gave negative views about FB to their select clients before Friday, which Finra Chief Rick Ketchum says is “a matter of regulatory concern”. Further along in what is becoming a feeding frenzy, Morgan Stanley (NYSE:MS), the lead underwriter, is being blamed for the shares near-crash on Monday; Nasdaq (NASDAQ:NDAQ) for the tech problems on Friday; and Facebook for everything else. First among the criticisms, is that the share price was too high and too many of them were sold.
Don’t Miss: RED FLAGS: Why Facebook is a BAD Deal?
Is this really a good thing? Microsoft (NASDAQ:MSFT) now includes facial expression-recognition capabilities in its Kinect motion sensor, via a software update, which enables the Kinect to track joints in the upper body, as well as to identify users while sitting. It could be of use as Microsoft continues with its plans to bring the Kinect to PCs.
Sony (NYSE:SNE) predicts that its sales in India will increase by 30 percent in the current fiscal year, from the $1.1 billion last year, due to rising incomes in that country. In another move, the company introduces an iOS app for its Music Unlimited service, as it enters the crowded mobile music market. Competing with services from Apple, Google, Pandora, Spotify and others, Sony’s version charges $3.99 per month for access to “core” online music stations and a user’s collection, and $9.99 per month for full access to Sony’s library and “premium” stations.
BrandZ‘s annual study says that Apple (NASDAQ:AAPL) still has the world’s most valuable brand, which value has increased by 19 percent year-to-year to $182.9 billion. Number two is said to be IBM (NYSE:IBM) with an increase of 15 percent, with Google at third and McDonald’s (NYSE:MCD) at fourth.
Top TV makers Sony (NYSE:SNE) and Samsung (SSNLF.PK) are pressuring retailers to pull back on discounts of their products, which would protect the manufacturers’ margins and also allow retail chains such as Best Buy (NYSE:BBY) and Target (NYSE:TGT) to remain competitive versus the online discounters.
Wednesday’s Facebook (NASDAQ:FB) news concerns what its IPO underwriters told their clients ahead of Friday’s first trading. The current version is that FB’s growth in revenue had been (publicly) falling for more than a year, even as a new class-action suit alleges that both Mark Zuckerberg, and the underwriters concealed the “severe and pronounced reduction” in growth forecasts. Jeff Matthews notes that it was public knowledge that growth was sliding, and that peer Zynga’s (NASDAQ:ZNGA) growth is decelerating at an even faster rate. The analyst concludes that “People wanted to buy Facebook, no matter what.”. In a late development, Facebook is said to be mulling a proposal from the New York Stock Exchange for the company to list its stock there, reports an inside-FB source to Reuters.
Oracle (NASDAQ:ORCL), not to be outdone by its nemesis SAP which plopped down $4.3 billion for Ariba, is said to be paying more than $30 million for Virtue, which is a developer of a cloud-based social media marketing platform. The acquisition, which competes with Constant Contact (NASDAQ:CTCT) and Bazaarvoice (BV), integrates well with the cloud customer support solutions Oracle realized via its purchase of RightNow. On the downside Wednesday, Oracle loses its patent infringement case against Google (NASDAQ:GOOG), as a jury found that company innocent of all 8 infringement claims. The former had sought huge damages over Android’s use of APIs related to the Java programming language.
Microsoft (NASDAQ:MSFT) and WPP (NASDAQ:WPPGY) are partnering in a three-year arrangement that will enable them to place and sell online advertisement for the brands and Internet publishers they work. The goal of the agreement is to play more effectively off the supply and demand of ad inventory. A plus is that MSFT partners AOL and Yahoo (NASDAQ:YHOO) should also benefit, and will thus be permitted access to premium ads.
Shares of Apple (NASDAQ:AAPL) bounce back Wednesday following word from IHS’ Dale Ford that the firm, alone, bought $23 billion worth of chips in 2011, and that he forecasts its chip purchases increasing to a minimum of $27 billion in 2012 and $29 billion in 2013. Chip stocks are significantly affected by Apple, and less so by its rival and top component supplier Samsung, which bought $15 billion in chips in 2011, and Hewlett-Packard (NYSE:HPQ), which purchased slightly less. On another note, Apple’s stock turnaround might have to do with its iPad beating Dell’s (NASDAQ:DELL) lackluster notebook sales, and that company’s notable first fiscal quarter miss. However, even Apple gets bad news, as it’s rumored that a court-suggested meeting between Apple and Samsung’s CEOs “yielded no compromise”.
Sony (NYSE:SNE) intends to divest all of its investment in Sharp Display Products Corporation, which will effectively dissolve its LCD joint venture with Sharp (SHCAY.PK). In return, Sony will be payed ¥10 billion ($125.8 million), which means that it gets its money back, but not more.
Motorola Mobility (NASDAQ:GOOG) loses an infringement suit in Germany regarding its Android devices, to Microsoft (NASDAQ:MSFT). The patent is related to a process of breaking up and reassembling a text message, and Motorola is hereby disallowed in the production. This decision follows a ban by the ITC, in which importation into the United States, of Motorola devices infringing another Microsoft patent was prohibited and that indicated that the Xbox 360 should face an import ban for violating Motorola patents, pending a final ruling.
Shares of Pandora (NYSE:P) take off, following its fiscal first quarter beat, which was driven by gains in shares, and monetization improvement, plus an encouraging fiscal year 2013 guidance. Positive notes from three analysts are not exacting hurting anything: Maxim Group says Buy, as it remarks that the figures show that the company’s sales investments are working; Needham (also Buy) views the results as evidence that Internet radio is a “winner-take-most” market; and Rocco Pendola at SA likes Pandora’s earnings call commentary, which he believes is additional proof of Pandora’s disruptive impact on the radio industry.
Market shares of Research In Motion’s (NASDAQ:RIMM) smartphone and the BlackBerry Messenger (BBM) are going down in tandem, even though the latter’s messaging and contact-list features are praised by many. In a matter of disagreement between RIM’s former co-CEO Jim Balsillie, and the new chief Thorsten Heins, the former is said to have advocated the licensing of the BBM and the access to the company’s network, but the latter put the kabosh on that, as he believes that “RIM shouldn’t pursue licensing deals in general”.
Facebook (NASDAQ:FB) is moving forward following its you-know-what last week, and is poised to introduce a standalone photo-sharing app called Facebook Camera. The app does not utilize anything directly from integration with Instagram, as that purchase is still being evaluated by the FTC, an so is the invention of FB’s photos team, which did borrow from the startup, and shows the extent to which Facebook saw its intended acquisition as a direct rival.
Hewlett-Packard (NYSE:HPQ) gives backs part of its share gains that came from its fiscal first quarter beat and announced layoffs. Not helping are worries about the firm’s $10 billion purchase of Autonomy, which now seems to have been a bad idea in light of its year-to-year fall in license revenue, even though it was reporting adequate growth at the time of the acquisition. At any rate, Autonomy founder Mike Lynch was sacked in reaction, and sources to The Guardian say that he and his team were not good matches for H-P’s “bureaucratic” culture.
Shipments of Google’s (NASDAQ:GOOG) highly anticipated 7″ Nexus tablet will commence in June, says a Digitimesreport. But not all is copacetic, as shipments of only 2 to 2.5 million units are forecast, out of a total of 106 million that will be marketed. Also, competition from the 9.7″ iPad, the Nook Tablet, the Kindle Fire, and maybe even an “iPad Mini”, not to mention Apple’s (NASDAQ:AAPL) gigantic lead in available tablet apps, should ensure many sleepless nights for Google strategists.
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