06 May, 2008

Technology News & Market Notes: May 6th

Techno-Superhero Iron Man delivered almost $100Million at the domestic box office for Marvel (MVL) over the weekend and brought with it a shift in Market News as Technology Stocks have been the focus. Trading started the day lower but drifted towards the green as the day went on, eventually keeping the Dow, Nasdaq & S&P all with gains on the day.

Although Microsoft (MSFT) over the weekend withdrew its bid for Yahoo (YHOO), over a pricing issue, the sentiment across the street is that this deal has may have legs. Microsoft offered to raise its bid to $33/share while Yahoo remained firm at $37. Yahoo shareholders felt the brunt of the pain as Monday the stock lost 15%. A 6% rebound Tuesday, is largely attributed to Yahoo executives reiterating to the press they are still willing to negotiate. Microsoft has a couple choices, and even though they refused to go into a proxy fight to overthrow Yahoo's board of directors once, Traders seem to think a 2nd go-round is likely.

The dance with these two historic tech names will likely continue in the coming weeks and for what its worth, how badly Microsoft needs an effective brand presence in the growing Internet economy makes it pretty certain that the company will continue to pursue Yahoo, hoping this initial backing-away will build shareholder angst at Yahoo and force more favourable negotiations.

Apple (AAPL) made more headlines and extended its recent stock run as it announced partnerships with a couple carriers to expand iPhone distribution. Both deals revolve around the "sometime later this year" time-frame, so the thinking is that the European partners are waiting for the ever-so-coveted 3G iPhone to make its debut at the WorldWide Developer Conference in early June. Apple made deals with Vodafone to distribute the iPhone in 10 counties including India, Australia and Italy. Apple changed its business model for iPhone distribution in Italy by also partnering with Telecom Italia in that region. Other countries on the iPhone slate include Czech Republic, Egypt, Greece, Portugal, New Zealand, South Africa, Turkey and Canada (based on recent announcements by Rogers Communications (RCI.B)).

Disclosure: Author owns AAPL


Anonymous said...

Despite Apple's recent strength over the past 3months, do you think that the recent contracts with Rogers and Vodophone (Canadian/European markets) are sufficient to mitigate the flagging US sales that will be caused by the current recession? The recession might not be apparent in the Q1 numbers but Apple will likely have to cut their guidance for US-based sales in Q2.

Chris Krasowski said...

Yes I do believe so. These impending Europe/Asia/Oceanic/Latin America Deals increase the potential iPhones sales base 5 or 6 fold. I think Apple will beat and may even drastically beat their 10Million sales goal with the 3G iPhone and will continue to build momentum with its partners for the device throughout 2009. As for fledgling US sales, the first quarter of the year didn't show any declines across the board. Apple is in the unique position of having such a popular brand that sales growth rates are at such substantial levels that any consumer concerns are completely wiped out. I believe the Apple guidance game is their own sandbag game and they do it every quarter. I do not foresee cutting guidance in the upcoming quarters, mainly due to iPhone 2, perhaps new iPod touch models and the back to school Mac shopping season.