With the markets closed on Monday, Jan. 21 to celebrate Martin Luther King's civil rights work, tech investors had an extra day to digest the past week's events. It was a pretty mixed week, to say the least. Several tech bellwhethers reported "less-than-stellar" earnings, while others puzzled investors with their newest offerings. Hopefully this last weeks' worth of tech-related bad news isn't a sign of what's to come throughout 2013. The recent M&A chatter, however, is enough to give hope for portfolios.
SEE: A Primer On Investing In The Tech Industry
Facebook Unveils a Bombshell?
After much fanfare, social networking kingpin Facebook (Nasdaq:FB) finally revealed its latest and greatest contribution to its website - a search engine. Dubbed "Graph Search," the program will be able to scour the website to answer complex questions. Currently, Facebook's search function is able to only return the name of a person, organization or business. Graph Search, however, will be able to answer questions and search for things like "People who play Ultimate Frisbee and live in Chattanooga, Tenn." or "Which friends of my pal Steve are engineers and went to Penn State?"
Facebook sees Graph Search as a way for individuals to access the wealth of data already on its site. The social network has roughly one billion profiles, 24 billion photos and one trillion connections. While privacy concerns have already been raised, Facebook says that users will only be able to see info that was already "open" to them before. This means a stranger couldn't get access to your profile - just the information you have made public. Any other queries would be filled by Microsoft's (Nasdaq:MSFT) Bing search engine.
The real question, however, remains just how Facebook plans on using Graph Search to make money. So far, it doesn't have an answer.
SEE: 6 Career-Killing Facebook Mistakes
Intel Feels Some Anti-PC Hate
It seems that consumers really are taking a shine to tablets such as Apple's (Nasdaq:AAPL) and Barnes & Noble's (NYSE:BKS) Nook. Chipmaker Intel (Nasdaq:INTC) reported a huge 27% decrease in quarterly profit as PC sales took a dive in the fourth quarter. According to tech research firm Gartner, worldwide PC shipments fell by 5% in the fourth quarter and 3.5% for all of 2012. This was the first time since 2001 - when the dotcom bust happened - that PC shipments fell from one year to the next. That caused Intel to sell 6% fewer PC-related chips in the fourth quarter. Those chips make up roughly two-thirds of the company's revenue.
Shares of the firm fell 4% in after-hours trading, and Intel's problems could send shockwaves throughout the entire PC-related subsector of technology.
SEE: How Tablets And E-Readers Can Save You Money
Dude, You're Getting an LBO!
Poor PC sales could also be a blessing for long-suffering shareholders in computer maker Dell (Nasdaq:DELL). In what could be one of the biggest leveraged buyouts in a long time, Dell is considering going private. Meeting with private equity firm Silver Lake Partners as well as other investment banks, Dell could be going private after being public for 20 years. As it has taken on an aggressive investment strategy to diversify away from its core PC business into servers, software and services, Dell stock has fallen around 40% since last year.
While there are plenty of reasons why it might not happen - high debt loads and the sheer size of the firm - analysts predict that Dell will get the deal done and go private by the end of the quarter.
The Battle for Clearwire
Also in merger/buyout news, the fight for Internet provider Clearwire (Nasdaq:CLWR) continues to get interesting. While telecom company Sprint (NYSE:S) was thought to be a shoo-in to snatch up the firm, Clearwire received an unsolicited bid from Dish Network (Nasdaq:DISH). That's caused some shareholders to demand a higher counter-bid from Sprint.
Sprint already owns more than half of Clearwire and wants to buy the rest of the company and has argued that its $2.97 per share bid is "superior," because its existing stake in the company means a deal is assured. Dish Network offered a bid of $3.30 per share. As with the Dell leveraged buyout, either bid should provide some solace to suffering long-term Clearwire shareholders.
The Bottom Line
While some recent announcements - such as poor earnings - aren't necessarily so great for the tech sector, M&A activity continues to push the industry forward. That will at least satiate investors in the short term. Hopefully the tech sector can get its act together and get moving.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.