It's another week and another dollar for tech investors. Earnings announcements continue to roll in for the industry, and we are beginning to see a defined pattern. New devices as well as dwindling personal computer sales continue to make or break profits. Mobile and social media continue to be "where it's at." Overall, tech had a decent week, with the broad sector measure - the Technology Select Sector SPDR (ARCA:XLK) - finishing around 1%. Here's your recap of the big happenings in the sector last week.
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Schmidt Lightens up on Google
Internet search giant Google's (Nasdaq:GOOG) Executive Chairman Eric Schmidt made headlines last week, when he decided to sell a portion of his holdings in the firm. Schmidt will sell 3.2 million shares of Class A common stock - roughly 42% of his holdings in Google - through a stock trading plan. Those shares are worth an estimated $2.51 billion and represent 2.3% of the total outstanding stock and roughly 8.2% of the voting power in Google.
Analysts were quick to jump all over the move, speculating on whether Schmidt knows something or if the chairperson was calling a top in Google shares. Shares of Google are trading at all-time highs and are near record prices of over $785 per share. Several have questioned his motives as shares have hit these peaks.
However, the bulk of analysts seem to think that Schmidt's role with Google is "evolving," and that asset sale is just a way for him to diversify his wealth. Some have even speculated that he is planning to give the bulk of it away to charity. Nonetheless, Schmidt will still own a significant amount of stock in the company.
Either way, it can be viewed as a little troubling when an insider sells a major portion of his holdings in a firm's shares. Over the last 10 years, Schmidt has been a major reason why Google has turned out to be a powerhouse in the tech sector.
SEE: What Investors Can Learn From Insider Trading
LinkedIn Is a Social Media Money Maker
Several social media IPOs, like Zynga (Nasdaq:ZNGA) and Pandora Media (NYSE:P), have struggled since becoming public companies in 2011. The vast bulk of social IPOs of the last year weren't profitable when they went public. Earnings and share prices have dwindled. However, business and professional-related site LinkedIn (NYSE:LNKD) have flourished where many of these firms have failed.
The networking portal has consistently beat Wall Street's high expectations for earnings, and its latest numbers continue that trend of profitability. LinkedIn reported an 81% jump in sales for the year. While considered not as "sexy" as other social media darlings, the company's multiple revenue streams have continued to post big returns.
The biggest boost was its job-recruitment tools segment. Sales for the business segment rose 90% over the last year and accounted for more than half the company's overall revenue. Likewise, the firm saw a big jump in overall users, with mobile usage skyrocketing as well. Overall, the social network's success and outperformance could be the final nail in the coffin for more traditional job search website competitors such as Monster Worldwide (NYSE:MWW). Monster recently reported a $73 million loss and decided to exit some foreign markets to focus on its U.S. business.
While it's been in the works for weeks now, computer maker Dell (Nasdaq:DELL) made the announcement that it is finally going private.
SEE: Why Public Companies Go Private
A partnership involving private equity firm Silver Lake, Microsoft (Nasdaq:MSFT) and company founder Michael Dell plans to buy the PC firm for $13.65 a share. That's about 25% higher than where Dell was trading before rumors of the buyout began to surface in mid-January. If successful, the deal would be one of the largest leveraged buyouts in history at roughly $24.4 billion.
Since the widespread adoption of tablets and mobile devices, personal computer sales have fallen hard as many consumers have purchased the more portable gadgets as their second "PC." Additionally, businesses have pushed back the computer-refresh cycle amid the lousy economy. These factors have weighed heavily on Dell shares, and the PC producer has fallen on hard times.
While most investors have cheered the buyout as it would free Dell from analysts' scrutiny about its turnaround plans, many hate the idea of Mr. Softy getting into the fray. Microsoft will lend Dell roughly $2 billion to help finance the deal. The tech giant counts Dell as one of its biggest customers, and analysts speculate that the loan is more about saving its own future than helping Dell. Additionally, by having Microsoft as a partner, Dell may not be able to do everything it really wants to right its ship.
Shareholders will ultimately get the final say on whether the deal goes through. However, based on the number of shares Michael Dell holds, odds are that the deal will go through.
Apple's Latest Device Is a Wristwatch?
Much of Apple's (Nasdaq:AAPL) growth story has been its focus on creating all the gadgets that you never knew you needed but now can't live without. From its iPod to the iPhone, the Cupertino-based firm has changed the various markets it decides to enter. However, with its performance and edge slipping over the last few months, speculation on what its next hit device will be continues to grow.
According to The New York Times, Apple may have decided to go a little low tech. The newspaper reported that Apple is apparently experimenting with the design of a device similar to a wristwatch that would be made with curved glass. Operating on the same platform as the iPhone, the "iWatch" would signal a new potential growth category for tech devices.
Sony (NYSE:SNE) currently produces a wearable watch-like device called the SmartWatch, based on Google's Android software. However, that device has proved to be unpopular with consumers. Apple has, however, found success with its iPod Nano as a wrist watch. Bands are available that allow consumers to wear the devices as a watch. Sales of these bands have been swift, and its success could mean that Apple may move forward with a dedicated iWatch.
Separately, The Wall Street Journal also reported that Apple has already discussed the iWatch with its major manufacturing partner, Hon Hai Precision Industry, and has been working on technologies that could be used in wearable devices.
While it's just speculation at this point, the success of its iPod Nano watch system could mean that a full-fledged iWatch will be the next device that the tech giant unveils. That could even happen before the so-called iTV. That device has been in the rumor mill for years now.
The Bottom Line
Overall, last week was a good one for tech-related firms. While earnings remain mixed, those firms not tied too heavily to personal computer sales continue to put up decent numbers. Going forward, the trend of more M&A and the adoption of hot new devices will be the major growth drivers. For investors, betting on these trends should continue to produce technology portfolio gold.
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.