Markets slide Tuesday, Proctor & Gamble quarterly disappoints, Tech Stays Afloat

Markets traded lower ahead of the Federal Reserve Interest Rate decision. Consumer staple Proctor & Gamble (PG) was down about 4% as quarterly results disappointed the Street. Technology stayed flat as announcements of announcements from Google (GOOG) and super sales of Apple's (AAPL) Leopard Operating System lifted Techs.

As Halloween approached for the Children, adults focused on the other Wicked Witch of the West; The Federal Reserve. The Fed proved it can move markets tremendously with its last rate cut and Investors are expecting another .25% rate drop this time around. This will be the single biggest trading issue throughout the rest of the week.

Consumer staple Proctor & Gamble fell after it posted results and an outlook that disappointed Wall Street. Traders took the opportunity to get out of this defensive play near its 52-week high. Shares fell almost $3 or 4%. Not to say the selling was only in defensive plays, the expectations game caught up to Casino high fliers Wynn (WYNN) and Las Vegas Sands (LVS). After starting the day higher, nearing $176/share, Wynn drifted lower, eventually closing down almost 3%. Results caused the stock to take a hit in the after market and Wynn gaped down another 5% to $159. While not yet reporting, LVS was hit by the general downtrend, losing 4% in the regular session and another 3% in after hours trading. Steady as a lion MGM Mirage (MGM) lost only a couple percentage points overall maintaining above $90/share.

In Technology news, Google and Apple were both making headlines. Apple announced that it had sold 2 Million copies already of its new Leopard Operating System in its first weekend of release. Pretty amazing considering that an OS upgrade is not something the typical computer user looks forward to, and also given the fact that there are only about 20 Million Mac systems that could upgrade to Leopard. Google announced an announcement of sorts. The Wall Street Journal reported that Google will soon be ready to announce its much anticipated mobile software plans. This was big news to investors and it caused the stock to gap higher approaching $700/share. In fact stopped mere cents from the milestone. Google's well documented attempt to purchase DoubleClick was given the okay in Australia paving the way for further OKs down the line from other Governments.

Tomorrow will bring with it further anticipation, uneasiness and fear regarding the Fed; Investors and Traders alike need to be aware and in fact ready for just about anything. This life brings with it few guarantees and the Stock Market brings even less.

Is the Hype behind the VMware IPO Worth the Investment?

VMware (VMW) is a software service unit that creates various virtualization solutions for a multitude of consumers. EMC Corporation (EMC) is behind VMware and is spinning about 10% of the company in the IPO that is due to open trading August 14th. EMC acquired VMware in 2004 for around $600Million and if the hype machine behind the IPO translates into interested investors, the company will surely reap the benefits. The biggest sell of virtualization software is the ability to run multiple operating systems on the same physical machine at the same time. With the amount of money that is spent on server infrastructure within American corporations this, some argue, is the future of computing. Less physical boxes running simultaneous split operating systems will save incredible amounts of money, use less resources and provide increased flexibility as the world of multi-core computing becomes reality.

VMware also creates smaller scale solutions for consumers, such as its popular desktop virtualization tools that allow Apple (AAPL) Mac users the ability to simultaneously run Windows on their Intel-based iMacs or MacBooks. Apple's own solution called Boot Camp provides a similar functionality however the user is forced to reboot the machine in order to switch between Windows and Mac OS X.

This growing business isn't anything close to small peanuts as VMware did $700Million in Revenue last year and had $87Million in profit. Last quarter the growth continued as VMware reported $300 Million in revenue, representing an 89% increase year-over-year. EMC plans to issue 33 Million shares of the around 375 Million in VMware. That's right EMC is keeping almost 90% of the company out of public hands. VMware has certainly been popular among the huge market tech names as both Cisco (CSCO) and Intel (INTC) have stepped up and purchased small pieces of the firm.

Can VMware make the average investor money on IPO day? It's possible but I would be extremely cautious of over-paying for a tiny piece of this solid, growth company. Investors started to realize that EMC would actually be the safer way to get in on the VMware craze and shares of EMC jumped 8% today to $19/share, giving the company a market cap of $40Billion and a P/E ratio of 31. A company that showed growth of 20% last quarter and posts an estimated growth rate of 19% from this year to next is certainly attractive at P/E levels in the low 30s.

The hype behind VMware is icing on the cake for EMC investors, and this should be the safer, smarter play for those who won't get in on the ground floor when VMware's IPO price is announced. Ranges for the IPO have increased from the mid 20s to the high 20s with some analysts expecting over $30/share. There's also been talk that the company could open as high as $60/share. At $60 that would give VMware an implied market cap of $22Billion. Half the market cap of its owner EMC. That would be extremely high for a company that looks at estimates of $1-2Billion in revenue this year. In contrast, EMC had over $11Billion in revenues last year and sports of growth rate of almost 20%.

Virtually the entire market expects a red hot VMware IPO, no pun intended. Plenty of money will change hands and opportunities will be there, however, a word of caution for investors because if reasonable prices can't be found in the early going I would not recommend the chase. With EMC still owning 90% of VMware anyway, that should be the way to play this one.

Disclosure: Author is long AAPL, INTC and holds no positions in the other stocks mentioned

Innovators within Technology

It's really Apple (AAPL) and Google (GOOG) that are the two driving forces of innovation within the Internet/Computer part of the technology sector. When Google's CEO became an Apple board member there was some signs that the companies would work together on many more projects. We're seeing this now with Google Maps integration into the iPhone, YouTube on AppleTV and the iPhone and Google's search being prominent in Safari and Leopard.

Yahoo (YHOO) also is involved with Apple providing push e-mail to the iPhone, the Stock app and a host of other innovative services, however, it's a company very much in limbo, having just ousted long time CEO Terry Semel. Any reaps from their long-awaited ad platform Project Panama have yet to show major dividends and it seems like Yahoo has a long way to go to steer the ship in the right direction.

Microsoft (MSFT) on the other hand seems stuck in the mud, is a company that has far too many silos for its own good and cannot innovate as quickly as the others. While companies like Apple, Google, and Research In Motion (RIMM) are busy combining all of their products and services over a common platform, Microsoft is missing the party by having completely separate divisions trying to integrate separate products into a common themes. However thus far very few have ended in success and nothing but bad press surrounds this "innovative" company of late with Vista issues, charges on Xbox problems and who could forget the almighty Zune.

Disclosure: Author is long AAPL & GOOG

Thoughts on Apple Inc.

Apple's (AAPL) foundation of software is the driving point within all their products. Not to take anything away from the hardware, because Apple does design some of the best. However that is a smaller issue when you look at the company's successes.

With apple being able to customize everything within a given device due to native software fitting in native hardware, it certainly puts other companies behind from day 1. It would be very hard for a Verizon or a Sprint to come up with something like an OSX for their handsets, and just the same it'll be as difficult for Motorola or Nokia. On the flip-side Microsoft has Windows Mobile but it's designed to work on such a vast array of devices that it works very well on only a few.

The new OS X core of Apple's product lineup (upcoming Leopard Macs, iPhone, AppleTV and soon iPods) bring with it that level of functionality and ease of use that can only happen when a piece of software is designed to work with a piece of hardware. The iPod's success came from it's ease of use and the iPhone is, and will (through software updates) strike(ing) the exact same cord. This will in turn extend to a larger halo effect which will in turn drive more users towards the Mac platform.

Which, in the investment mind frame should launch Apple's future valuation to $150B and beyond.

Disclosure: Author is long AAPL