With the air starting to feel crisp and the leaves on the trees starting to turn bright colors, autumn is in full swing. It also means the start of the critical fourth quarter is upon us. For the technology sector, the quarter is starting with a bang. Investors can expect a plethora of earnings announcements and product launches just in time for the holiday season. At the same time, there are plenty of interesting developments, mergers and acquisitions, and deals on the horizon.
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Just after T-Mobile decided to snatch-up smaller wireless provider MetroPCS (NYSE:PCS) for $1.5 billion, Sprint (NYSE:S) may have finally found a suitor. According to Reuters, Japan's Softbank - that nation's third-largest mobile carrier - is in talks to buy a majority stake in the beleaguered wireless firm for more than $12.8 billion. Sources told the press wire that the company is in talks with several banks to borrow money to finance a bid and could offer a 27% premium for the American wireless carrier.
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Analysts estimate that Sprint could be attractive to Softbank due to its majority interest in Clearwire (Nasdaq:CLWR) which owns 2.5GHz spectrum as well as the fact that the deal would allow Softbank to acquire smartphones and other mobile devices cheaper.
While you may never have heard of tiny-tech firm Vringo (NYSE:VRNG), the company is quickly becoming a firecracker in the industry. The relatively small company is becoming a major player in the wireless and mobile patent wars as its intellectual property portfolio covers various aspects of search and mobile technologies.
The company has a litigation machine and in 2011 filed a lawsuit against Google (Nasdaq:GOOG), AOL (NYSE:AOL) and InterActiveCorp (Nasdaq:IACI) stating that they violated two acquired patents. Google recently denied a motion for a summary dismissal of Vringo's patent lawsuit. Already a few of the participants have agreed to settle and winning the various damages could be a big deal for the tiny tech firm. Shares of the firm are up more than 381% year to date.
Finally, semiconductor stalwart Intel (Nasdaq:INTC) received a big downgrade from analysts. According to the Associated Press, a Bernstein Research analyst downgraded the chip maker to "Underperform" from "Market Perform." Citing long-term pricing pressures with the PC and ultrabook market, Stacy Rasgon believes that Intel will have trouble growing its revenue over the next year or so. Additionally, the target price went from $24 to $20.
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Next week will feature some earnings announcements from tech heavyweights like IBM (NYSE:IBM). Big Blue is set announce earnings on October 16 and the 24 analysts expect the tech giant to report earnings of $3.61 per share for the quarter. That's roughly 10% higher versus a year ago. Overall, IBM has beaten analysts' estimates the last four quarters and is coming off a quarter where it topped forecasts by 6 cents.
Following IBM this week is Light Emitting Diode (LED) superstar CREE (Nasdaq:CREE). The company develops and manufactures semiconductors in the LED space and continues to be one of the top innovators across both the commercial and residential spaces. Back in May, it introduced the industry's first LED downlight that can match traditional tube fluorescents on price. Analysts expect CREE to see a net income of 26 cents per share - a rise of 4% from the company's earnings for the year-ago quarter.
The Bottom Line
Merger activity as well as patent litigation remains the top headlines in the tech sector. Undoubtedly more of these sorts of developments will play out in the months ahead. In the meantime, earning's season is just getting started with some of tech's heavyweights beginning to report.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.