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Technology Round Up - May 2, 2012
There have been a number of noteworthy developments in the technology space recently. They will likely have a material impact on the companies in the sector and the markets they serve.
A number of technology companies have announced noteworthy results for the first quarter in recent weeks. This includes Amazon.com (AMZN). The company’s revenue has benefited from strong sales of its Kindle Fire tablet (which remains its best-selling item). Share earnings of $0.28 exceeded consensus expectations, though remained well below the prior-year tally. Infrastructure investment has pressured margins in recent times. Investment in technology and infrastructure ought to pay off in the coming years, though. Meanwhile, Apple (AAPL) reported impressive results for the recent period. Share-net surged during the quarter, and easily exceeded expectations. The company benefited from favorable component pricing and strong demand for smartphones in China. This more than offset unimpressive sales of the new iPad, which were hurt by supply constraints. Elsewhere, eBay (EBAY) reported strong growth in revenues and share earnings. Its electronic payment processing business, PayPal, experienced growth in active registered accounts and net total payment volume, thanks partly to continued merchant and consumer adoption. The company’s Marketplaces line also reported solid results, with healthy growth in merchandise volumes and items sold. In addition, Netflix (NFLX) reported higher revenues for the first quarter. A share loss of $0.08 was less than expected. The company experienced healthy growth in streaming members during the recent period, and the rate of decline in DVD membership has abated significantly from the fourth quarter. However, guidance for domestic streaming customer additions for the second quarter was below expectations, and it remains to be seen if Netflix can reach its targeted seven million domestic streaming additions for the current year.
Microsoft’s Venture with Barnes & Noble
Microsoft (MSFT - Free Microsoft Stock Report) and Barnes & Noble (BKS) have agreed to form a strategic partnership to capitalize on the fast-growing market for digital content in the consumer and education segments. This will result in a new Barnes & Noble subsidiary, which will include the company’s digital and college businesses. Microsoft will invest $300 million in exchange for a 17.6% equity stake in the venture, temporarily dubbed Newco. Barnes & Noble will own the remainder of the new business, which will have an ongoing relationship with its retail stores. This will result in a NOOK application for Windows 8, which will significantly extend the reach of Barnes & Noble’s digital bookstore. The deal should allow Microsoft exposure to the fast-growing market for e-books, and ought to enhance Windows 8 as a platform for tablets and e-reading. It will allow Barnes & Noble more capital, which should help the Nook compete against Amazon’s Kindle.
Amazon.com’s Kindle Fire Success
Amazon.com’s Kindle Fire has benefited from rapid adoption among tablet buyers since its release last fall. The Kindle Fire’s relatively low price of $199 has made it an attractive alternative to consumers unwilling to spend significantly more for an iPad, placing the two tablets in a separate category. According to data from comScore, the Kindle Fire increased its share of the U.S. Android tablet market (devices running Google’s (GOOG) Android operating system) dramatically in the months following launch, to 54.4% by February. As mentioned above, the success of this offering has benefited the top line in recent quarters.
Facebook’s New Initiative
Facebook has announced an initiative that will allow organ donors to display their status on the social network. Members can indicate if they are organ donors on their profile’s timeline, and those who are not donors can find links to official organ donation registries. This initiative should facilitate the organ donation process, and provide the company some positive press shortly before its upcoming initial public offering (IPO). Facebook is expected to complete its IPO in the near future. Be sure to read next month’s Technology Roundup, where we will provide complete coverage of the company’s trading debut.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.