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Wall Street Beat: Tech starts off season on mildly upbeat note

Marc Ferranti | Sept. 9, 2013
Big deals mark the tech landscape as the mobile market grabs the spotlight.

BlackBerry has failed to meet the challenge posed by Android devices and the iPhone, and recent analyst reports indicate that the handset maker's 2013 products are not gaining much traction.

"Our global surveys indicate very weak Z10, Q10, and Q5 sales along with sharply declining legacy BB7 sales," said Canaccord Genuity analyst Michael Walkley in a research note this week.

"We believe the special committee formed by BlackBerry's board to explore strategic alternatives such as joint ventures, strategic partnerships, or a sale of BlackBerry is consistent with our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability," Walkley noted.

In another major deal this week, Verizon Communications said it reached an agreement to acquire for $130 billion Vodafone Group's 45 percent stake in its Verizon Wireless subsidiary. The deal calls for Verizon to take 100 percent ownership of the wireless unit, the largest mobile operator in the U.S. The company said the deal will allow it to offer "seamless and integrated services."

"Verizon will now fully control what we feel is one of the best wireless assets in the world," said Canaccord Genuity analyst Greg Miller. Nevertheless, perhaps concerned about the dilutive effect of the giant acquisition on Verizon's financials, investors dumped shares. Verizon shares closed Tuesday, the day after the deal was announced, at $46.01, down by $1.37, and ended the week at $46.34, regaining only some of the value it lost.

The market's mixed close at the end of the week may have been due more to geopolitical and macroeconomic issues than any particular deal announced during the week. Though stocks recovered somewhat during the day, a weak opening to trading was ascribed to fears about the Syrian conflict, and how involved the U.S. may get. The so-so jobs report was a mixed blessing.

Total nonfarm payroll employment increased by 169,000 in August, but the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported Friday.

"Bottom line: The momentum in the labor market is uneven at best," wrote Sterne Agee chief economist Lindsey Piegza in a research note Friday. "While headline job creation remains positive it is a far cry from robust, sustainable levels of growth suggesting a near-term draw down of available labor. "

Some market watchers see this as a positive thing, because uneven growth may induce the U.S. Federal Reserve to continue its policy of propping up the stock market by buying bonds. "From the Fed's standpoint, tapering plans were predicated on the economy, specifically the labor market, showing confirmed improvement. This morning's employment report gave no such confirmation," noted Piegza.

Tech vendors will not start reporting quarterly earnings for a while, so IT-related stocks may be at the mercy of such macro trends for the near term.

 

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