With many Americans coming out of their turkey-induced comas and doing a bit of frenzied Christmas shopping, the focus for many analysts and investors will be the state of retailers this holiday season. Here in tech-land, however, the sector remains abuzz with activity despite the shortened trading week. New product launches, earning surprises - both good and bad - as well as a spattering of deals continue to make the sector an interesting bet for investors.
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Perhaps the biggest turkey facing tech investors this past week was HP's (NYSE:HPQ) announcement that it was writing down its hefty investment in cloud computing firm Autonomy by roughly $8.8 billion. The reason - serious accounting regularities. Last year under former CEO Leo Apotheker, HP paid roughly $11.1 billion for the firm as a way to quickly expand the former PC maker into more of a software and services firm similar to IBM (NYSE:IBM). The write-down caps off a string of bad deals and acquisitions including its poor buy of mobile device maker Palm. This latest blunder comes just three months after the company took a write-down of almost $11 billion on its EDS services division. Last year, software firm Oracle (Nasdaq:ORCL) had been in talks to buy Autonomy, but passed on the firm.
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The real issue is that HP claims Autonomy's former management inflated revenue and gross margins to mislead potential buyers. According to HP's internal and external investigations, Autonomy executives mischaracterized revenue from low-end hardware sales as software sales and booked some licensing deals with partners as revenue, even though no customers bought products. Overall, the bad deal is a huge black-eye for the struggling tech firm and will take years to play out in the courts.
U.S. Patent Battle Part Two
Speaking of legal drama, the Apple (Nasdaq:AAPL) versus Samsung (OTC:SSNLF) patent infringement war continues to escalate. Just before Thanksgiving, Samsung filed new paperwork citing that Apple's new iPad mini, iPad 4 and iPod Touch had violated its owned patents. At the same time, Apple responded by filing a motion to include several more Samsung devices to a pending court case in 2014. These include the Galaxy Note 2, the popular Galaxy S3 and the Galaxy S3 Mini.
The pair are no strangers to court battles and having been duking it out since April 2011. Recently, Apple was awarded over $1 billion in damages after upholding claims that Samsung had infringed several iPhone and iPad patents with its Galaxy S-series smartphones. Meanwhile, courts in the Netherlands, U.K. and Japan had dismissed Apple's claims of infringement by Samsung.
Super Mario, Donkey Kong and Kid Icarus Come Back
While HP shareholders were suffering last week, gamers got some good news. Japanese video game maker, Nintendo (OTC:NTDOY) launched its first new home console in over six years this past weekend. The new Wii U will build on its predecessor Wii console's family customers by adding more hardcore gamers. Nintendo hopes to lure these customers away from Microsoft's (Nasdaq:MSFT) XBOX 360 and Sony's (NYSE:SNE) Playstation.
While Nintendo plans on selling roughly 5.5 million Wii U units by March 31, the system does face several hurdles, as the gaming industry has shifted towards more mobile platforms such as tablets and smartphones. Early sales figures suggest, however, that the company may have a hit on its hands with video game-focused retailer GameStop (NYSE:GME) reporting that it has sold out of its initial allotments of the console.
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Upcoming Tech Earnings
Earnings in the tech sector continue to come hot and heavy, as the end of the year is quickly approaching. On deck this week is DVR and digital content tech firm TiVo (Nasdaq:TIVO).
Analysts expect the firm to report a loss of 23 cents a share. That's more than the same period last year, but the company is expected to report rising revenue. The company continues to win key patent battles and gain licensing fees from competitors and, as such, the twelve analysts rating the stock view it as a buy. Overall, TiVo remains an interesting bet on the future of home digital content and could become a buy-out candidate, as its rich patent portfolio could prove to be a big win for an acquiring firm.
The Bottom Line
Despite the shortened trading week, the tech sector did not disappoint on the news front. HP proved that not all that glitters is gold, while the focus on patents remains one of the biggest issues facing investors in the mobile and tablet space.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.