Earnings season generally kicks off with the release of results from aluminum giant Alcoa (NYSE:AA), which reports on Monday. The coming weeks will see a steady rise in the number of companies reporting. This week does not contain any major technology earnings or industry data releases, but a couple of credit-related developments have just been released.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
On Monday, ratings agency Moody's weighed in on Dell's (Nasdaq:DELL) intentions to acquire software provider Quest Software (Nasdaq:QSFT) for $2.4 billion in cash. It finds the deal to be a credit positive to Dell, as it will boost growth and margins from the larger and mature hardware operations, such as desktop and laptop computers that are experiencing difficult growth trends in the face of tablets and smartphones. It also stated that the purchase is the largest since Dell's acquisition of Perot Systems back in 2009. Perot ended up adding profitable, but slower-growing service revenue to the mature core businesses.
SEE: A Primer On Investing In The Tech Industry
Moody's also found the announced acquisition of cell phone distributor Brightpoint (Nasdaq:CELL) by technology distribution firm Ingram Micro (NYSE:IM) to be a credit positive. The deal is valued at around $650 million and adds the distribution of smart phones, which have been growing briskly and at the expense of Dell computers and other computer providers. Brightpoint also offers mobile logistics services and cell phone repair, both of which tend to carry high margins. Moody's sees Ingram diversifying its revenue base and geographic reach as a result of the purchase.
SEE: Technology Sector Funds
Technology-related earnings will start heating up next week. Semiconductor firm Xilinx (Nasdaq:XLNX) is on deck for Monday, July 16, and will set the stage for giant archrival Intel's (Nasdaq:INTC) report on Tuesday.
SEE: Are Technology Stocks In Trouble
The Bottom Line
Overall, merger and acquisition activity remains subdued in the marketplace, but has been somewhat steady in the tech space. The larger firms continue to be interested in boosting their growth prospects in an anemic economy and are choosing to increase market share by buying out rivals. For Dell and the more mature firms, it is proving one of the only ways to grow. Throughout July and second quarter earnings season, investors will learn how the organic growth trends are faring.
At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.