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Technology Round Up - March 5, 2013
There have been many noteworthy developments in the technology space recently. Some of these will likely have a material impact on the companies in the sector and the markets they serve.
Notable Earnings Releases
Hewlett-Packard (HPQ - Free Hewlett-Packard Stock Report) exceeded investor expectations with its January-quarter earnings release, and the stock advanced sharply. The company posted share net of $0.63, somewhat below the $0.73 earned in the prior-year period, but well above expectations of around $0.34-$0.37. This was also a welcome change from the steep losses incurred in the last two quarters of fiscal 2012, due to a write down of the company’s Autonomy software business and restructuring charges. Performance in the recent period benefited as several large service contracts did not conclude during the quarter, as had been expected. (Instead, the service contracts will expire in the current period.) Efforts to control operating costs also contributed. Even so, results for the recent period weren’t all that impressive. Revenues in all five of the company’s product groups declined. Weakness in notebook computers and softness in consumer revenues hurt performance at the Personal Systems line. Elsewhere, a decline in storage systems revenues negatively impacted the Enterprise Group line, though this was partly offset by improvement in networking products revenues. Looking forward, prospects for the current year remain difficult, though turnaround efforts may well bear fruit, over time.
Cisco Systems (CSCO - Free Cisco Stock Report) has recently reported its second-quarter results (ended January 26th). The company posted moderate top-line growth of around 5%. Performance benefited from impressive growth from the Wireless segment, and a healthy revenue advance from the Service Provider Video unit. Meanwhile, the Switching business reported modest top-line growth. However, router sales declined 6% for the period, and revenues from collaboration products continued to fall. Non-GAAP earnings per share of $0.51 advanced 9%, exceeding consensus expectations.
Dell Going Private
Dell (DELL) has agreed to be acquired by its founder, Chairman, and CEO, Michael Dell, and technology investment firm Silver Lake Partners, for $24.4 billion. Stockholders (excluding Mr. Dell and certain members of management) will receive $13.65 in cash for each share owned. The transaction is to be financed by a number of sources, including a $2 billion loan from Microsoft (MSFT - Free Microsoft Stock Report), which makes software for personal computers and intends to support that industry. The board of directors (excluding Mr. Dell) has approved the deal, which remains subject to regulatory and unaffiliated shareholder approval. Assuming this occurs, the transaction will probably close by the end of the company’s July quarter.
Sony’s PlayStation 4 Unveiling
Sony (SNE) officially announced the PlayStation 4 at a press conference on February 20, 2013. The new console is expected to launch in the fourth quarter of the current year. It will have a number of new features and applications. These include the PlayStation App, which will allow owners to turn tablet computers and smartphones into a second screen to enhance gameplay. It will also feature Gaikai, a cloud-based gaming service that hosts downloadable games and content. The company is looking to place greater focus on social gameplay with this generation.
The actual console has yet to be revealed, however, as the company is putting the finishing touches on the design and specifications. The architecture will be similar to those found in personal computers, which should make it easier for studios to develop titles for the new console. The PS4 will feature the DualShock 4 controller, the PlayStation Eye, and support a variety of companion devices, such as the PlayStation Vita. A number of upcoming titles have already been announced for the new platform, and there will certainly be much more to come.
Intel to Build Set Top Box
Intel (INTC - Free Intel Stock Report) is looking to introduce a television set top box in the near future. The company’s Intel Media group will build a device that combines live television, DVR, and applications. Rather than requiring a subscription from a regular pay-television provider (like cable), Intel will offer its own different packages. This would allow the customer greater freedom to choose different combinations of channels, and maybe save money in the process. The company has yet to confirm how its bundles will be arranged, and what pricing options will be available.
At the time of this article’s writing, the author had no positions in INTC.