Wall Street Beat: Tech IPOs, M&A continues to heat up

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Four needling questions for Microsoft as it hosts Wall Street analysts

Microsoft will host financial analysts on Thursday for an afternoon of executive presentations and question-and-answer sessions. Here are four uncomfortable issues CEO Steve Ballmer and his lieutenants should address as they face the Wall Street crowd in Bellevue, Washington:

Will Ballmer’s successor be expected to toe the line and execute on the exiting CEO’s vision and strategy, or will the replacement get some leeway to rethink the current plans?

A sweeping and controversial corporate reorganization plan was one of Ballmer’s last major moves before announcing he would retire at some undisclosed point in the coming year. While the wheels are already turning on the implementation of the changes, it’s very possible Ballmer will be gone before the process is complete.

Since Ballmer’s reorganization has the blessing of the board, one would assume that the incoming CEO will be told to carry it out without major revisions. However, the reorganization plan hasn’t exactly prompted a consensus endorsement from outside observers. After all, it seeks to unify the company even more than it is today, mesh all of its parts and make sure that, for example, the Xbox team is aware of and has input into what the SQL Server team is doing, and vice versa. Ballmer calls this the “One Microsoft” vision.

The problem here is that many believe that’s the wrong direction to take in order to fix Microsoft’s problems and make it more agile when innovating and responding to market opportunities. This camp thinks it would be better to infuse more autonomy into the company and possibly even spin off some of its parts, because the product lines have become too diverse to be contained in the same corporate bottle.

What does Microsoft plan to do from a product perspective if Windows 8.1 and the second-generation Surface tablets fail to ignite enthusiasm?

Windows 8 and the Surface tablet were not a hit and that is a big problem for Microsoft, which is rushing out a major update for the OS due in mid-October and is also working on a second generation for the Surface tablets.

Windows 8.1 is expected to address the main complaints lobbed at its predecessor, whose radically redesigned Modern user interface freaked out many consumers and IT pros. Likewise, the new Surfaces—both the RT and Pro models—are supposed to be faster, more battery efficient and all around better.

However, it’s not entirely a sure thing that Windows 8.1 and the Surface 2 tablets will be able to undo the damage, in which case Microsoft’s tablet problems remains: Windows and the company will still be chasing on foot the runaway train of tablet sales that Apple and Android vendors have been riding to the bank for several years.

In that case, what is Plan B? Would Microsoft be open to rethinking its OS strategy? Some people feel it was a strategic mistake to attempt to have one OS that works both on PCs and tablets, because Microsoft may have ended up with one that isn’t good enough for either. After all, Apple has done very well having MacOS for its desktops and laptops, and iOS for its tablets and phones.

Oh, as long as Ballmer and company are addressing this question, it’d be great to get an update on the grand plan to unify Windows Phone 8 with Windows 8 to have a common, uniform OS code base from the phone through the server. Is that a pipe dream? Is it even wise?

How long will it take for Ballmer’s reorganization plan to be completely implemented and when will its stated benefits begin to be felt?

Sweeping corporate reorganizations are often counterproductive. They can interrupt the flow of operations, create internal confusion and resentments, and trigger doubts among major customers, ultimately hurting sales and product development. There are many examples of restructurings announced with great hope that ended doing more harm than good.

Ballmer should be specific about the timetable for completing the reorganization and about when customers, partners and investors will start to see its first fruits. He should also provide an update on how the acquisition of Nokia’s smartphone business will affect that reorganization plan, possibly complicating it and delaying its completion.

With investors chronically antsy about Microsoft’s stagnant stock price, Ballmer should explain Microsoft’s latest thinking regarding offering a full Office suite for the iPad and for Android tablets, an issue that is perennially on the table. Microsoft’s reticence at doing this has been explained as a defensive move to protect Windows.

However, it’s also true that Microsoft is leaving a lot of money on the table by not providing what millions are clamoring for.

It may be time for Microsoft to revisit whether withholding Office from iOS and Android tablets is still justified in order to prop up the value of Windows.

Juan Carlos Perez covers e-commerce, Google, web-application development, and cloud applications for the IDG News Service.
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Four needling questions for Microsoft as it hosts Wall Street analysts

September 19, 2013 01:22 PM ETIDG News Service - Microsoft will host financial analysts on Thursday for an afternoon of executive presentations and question-and-answer sessions. Here are four uncomfortable issues CEO Steve Ballmer and his lieutenants should address when they face the Wall Street crowd at the Meydenbauer Convention Center in Bellevue, Washington:

-- Will Ballmer's successor be expected to toe the line and execute on the exiting CEO's vision and strategy, or will the replacement get some leeway to rethink the current plans?

A sweeping and controversial corporate reorganization plan was one of Ballmer's last major moves before announcing he would retire at some undisclosed point in the coming year. While the wheels are already turning on the implementation of the changes, it's very possible Ballmer will be gone before the process is complete.

Since Ballmer's reorganization has the blessing of the board, one would assume that the incoming CEO will be told to carry it out without major revisions. However, the reorganization plan hasn't exactly prompted a consensus endorsement from outside observers. After all, it seeks to unify the company even more than it is today, mesh all of its parts and make sure that, for example, the Xbox team is aware of and has input into what the SQL Server team is doing, and vice versa. Ballmer calls this the "One Microsoft" vision.

The problem here is that many believe that's the wrong direction to take in order to fix Microsoft's problems and make it more agile when innovating and responding to market opportunities. This camp thinks it would be better to infuse more autonomy into the company and possibly even spin off some of its parts, because the product lines have become too diverse to be contained in the same corporate bottle.

-- What does Microsoft plan to do from a product perspective if Windows 8.1 and the second-generation Surface tablets fail to ignite enthusiasm?

Windows 8 and the Surface tablet were not a hit and that is a big problem for Microsoft, which is rushing out a major update for the OS due in mid-October and is also working on a second generation for the Surface tablets.

Windows 8.1 is expected to address the main complaints lobbed at its predecessor, whose radically redesigned Modern user interface freaked out many consumers and IT pros. Likewise, the new Surfaces -- both the RT and Pro models -- are supposed to be faster, more battery efficient and all around better.

However, it's not entirely a sure thing that Windows 8.1 and the Surface 2 tablets will be able to undo the damage, in which case Microsoft's tablet problems remains: Windows and the company will still be chasing on foot the runaway train of tablet sales that Apple and Android vendors have been riding to the bank for several years.

Reprinted with permission from IDG.net. Story copyright 2012 International Data Group. All rights reserved.

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Wall Street Beat: Tech starts off season on mildly upbeat note

With the Labor Day holiday marking the unofficial end of summer on the markets, tech stocks got off to a fairly positive start in the new season as several major deals and the mobile phone market came under especially intense scrutiny.

Major exchanges and market indexes were mixed Friday in the wake of a tepid government jobs report. The Dow Jones Industrial Average closed at 14,922.50, down by 14.98 points, while the Standard and Poor’s 500 index and the tech-heavy Nasdaq both closed up slightly higher for the day.

The Dow, the S&P and the Nasdaq were all in positive territory for the week, however. The Nasdaq Computer Index of more than 100 tech-related stocks closed Friday at 1755.4, up by 3.82 for the day and also in positive territory for the week.

Tech stocks were among the most heavily traded shares Friday, with Microsoft and Nokia in the top five volume leaders of the day. This is not surprising, given the announcement Tuesday that Microsoft will buy the Finnish company’s mobile phone business. Microsoft will pay €3.79 billion (US$5 billion) for Nokia’s Devices & Services business and €1.65 billion to license Nokia’s patents.

Some analysts said that the deal is a necessary risk for Microsoft, which counts Nokia as its only major ally in the mobile OS battle against Google’s Android and Apple iOS. Microsoft’s mobile OS market share number is foundering in the single digits, and it may need the acquisition to assure that a major manufacturer will continue to produce Windows-based phones.

But the market appears to be sour on the deal, which pairs two tech giants that are so far on the losing side in the mobile market. Nokia shares, which at first jumped on the news, closed Friday at $5.37, down by $0.12. Microsoft shares dropped $1.55 on the news Tuesday, closing at $31.20, and drifted down during the week to end up at $31.15.

Many parts of Microsoft’s broad product portfolio are doing well, but it’s not a stretch to say that future success rests in large part on how well it does in the mobile market. “Never have as many mobile phones been sold worldwide as in the first half of 2013,” according to a report from market research firm GfK this week.

“In the period January to June 2013, global demand for smartphones rose by 66 percent compared with the same period in the previous year,” the report said. “Of all mobile end devices sold, 59 percent are smartphones.”

Meanwhile, erstwhile smartphone leader BlackBerry wants to proceed as quickly as possible with a plan to sell the company in an auction process that could end by November, according to a story in The Wall Street Journal that cited sources close to the company. The company announced in August that it had formed a committee to explore “strategic alternatives.”

BlackBerry has failed to meet the challenge posed by Android devices and the iPhone, and recent analyst reports indicate that the handset maker’s 2013 products are not gaining much traction.

“Our global surveys indicate very weak Z10, Q10, and Q5 sales along with sharply declining legacy BB7 sales,” said Canaccord Genuity analyst Michael Walkley in a research note this week.

“We believe the special committee formed by BlackBerry’s board to explore strategic alternatives such as joint ventures, strategic partnerships, or a sale of BlackBerry is consistent with our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability,” Walkley noted.

In another major deal this week, Verizon Communications said it reached an agreement to acquire for $130 billion Vodafone Group’s 45 percent stake in its Verizon Wireless subsidiary. The deal calls for Verizon to take 100 percent ownership of the wireless unit, the largest mobile operator in the U.S. The company said the deal will allow it to offer “seamless and integrated services.”

“Verizon will now fully control what we feel is one of the best wireless assets in the world,” said Canaccord Genuity analyst Greg Miller. Nevertheless, perhaps concerned about the dilutive effect of the giant acquisition on Verizon’s financials, investors dumped shares. Verizon shares closed Tuesday, the day after the deal was announced, at $46.01, down by $1.37, and ended the week at $46.34, regaining only some of the value it lost.

The market’s mixed close at the end of the week may have been due more to geopolitical and macroeconomic issues than any particular deal announced during the week. Though stocks recovered somewhat during the day, a weak opening to trading was ascribed to fears about the Syrian conflict, and how involved the U.S. may get. The so-so jobs report was a mixed blessing.

Total nonfarm payroll employment increased by 169,000 in August, but the unemployment rate was little changed at 7.3 percent, the U.S. Bureau of Labor Statistics reported Friday.

“Bottom line: The momentum in the labor market is uneven at best,” wrote Sterne Agee chief economist Lindsey Piegza in a research note Friday. “While headline job creation remains positive it is a far cry from robust, sustainable levels of growth suggesting a near-term draw down of available labor. “

Some market watchers see this as a positive thing, because uneven growth may induce the U.S. Federal Reserve to continue its policy of propping up the stock market by buying bonds. “From the Fed’s standpoint, tapering plans were predicated on the economy, specifically the labor market, showing confirmed improvement. This morning’s employment report gave no such confirmation,” noted Piegza.

Tech vendors will not start reporting quarterly earnings for a while, so IT-related stocks may be at the mercy of such macro trends for the near term.

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Hands-on: Ricoh's Theta, a personal 'Street View' camera

BERLIN—Imagine being able to take all-round pictures like those seen in Google’s Street View from a small camera you can carry around in your pocket. That’s the promise of Ricoh’s Theta, a sleek panoramic camera launched at this week’s IFA electronics show here.

The camera is intended for both consumer and professional users alike, and I tried it out at the show.

Photo: Martyn WilliamsRicoh’s Theta panoramic camera

Theta is long and thin and doesn’t look much like any other camera. It’s about as long as a smartphone but isn’t as wide and is quite a bit thicker. It’s most striking feature is a fisheye lens toward the top of the device. It’s matched by one on the rear and its through these that the camera can take pictures that extend almost 360 degrees in any direction.

There are only three buttons on its body: about halfway up its body is one for the shutter and on the side are buttons to switch on and off the power and Wi-Fi connection.

Using it is easy. Because it takes an all-around picture, you don’t need to worry which way it is facing. You just have to consider what’s around it.

There are two ways of taking pictures. The shutter button on the camera body will snap an image and store it in the Theta’s microSD card, but you’ll have more fun using a dedicated app on your cellphone.

When the shutter button on the app is pressed, the camera takes a picture and then transfers it to the phone over a Wi-Fi Direct connection. The software acts as an image viewer and lets you explore the picture you just took and share it online with services like Facebook, Twitter and Tumblr.

Taking pictures with the Theta requires a bit of a change in the way you visualize your intended image. Instead of what’s in front of the camera, you need to consider what’s all around it so, for example, a picture of a group of friends works best if they are sitting around the camera rather than all lined up on one side.

It’s certainly a fun twist on the conventional pictures we all take on vacation, at parties and perhaps for work.

I had a chance to speak to the Theta’s designer, Hidenao Ubukata, general manager of Ricoh’s visual revolution unit, and he explained how it works.

Martyn Williams360-degree action!

Behind each lens is a 2-megapixel image sensor and they both snap a picture at the same time. The two images are stitched together in the device to make an equirectangular JPEG image with 2,000 pixel by 1,000 pixel resolution. Equi-rectangular projection is best known as the projection method used to show the Earth’s sphere on 2D maps.

That image is then transferred to the phone, where it is mapped onto a sphere to re-create the all-around image. The image capturing process takes about three seconds and then it takes another five seconds or so to send the image to the phone.

Ubukata said he anticipates the Theta’s first users will be digital creatives, and they are the people who will probably hit upon new uses for this style of photography, which isn’t new but has never been so easy.

The camera will be available in October and will cost $399. The software is compatible with iOS and an Android version will be released before the end of the year.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service.
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Google Street View Trekker photographs British canals

Google's Street View backpack has ascended Dubai's record-breaking Burj Khalifa skyscraper, hiked Arizona's Grand Canyon, and climbed Mount Everest. Now it's coming to map the U.K.'s canal network.

The U.K.'s Canal and River Trust revealed last week that the Trekker—as Google has dubbed it—will start to capture the U.K.'s 200 year-old canals and waterways.

The 4-foot, 39-pound backpack uses 15 lenses angled in different directions to take photos every two and a half seconds that can be stitched together to create 360-degree panoramic views and help map remote parts of the world.

Volunteers from the Canal and River Trust will carry the backpack over 100 miles a month to map canals and rivers in England and Wales.

The Street View Trekker photographed the Grand Canyon.

"We are thrilled to be collaborating with the Canal & River Trust on such a fun project, and we hope to help boost the discovery of and make these historical canals accessible to more people in the U.K. and across the world through Street View technology," said Google program manager Pascale Milite.

Starting on Regent's Canal in North London, the Trekker will take in some of the U.K.'s Seven Wonders of the Waterways over the next month, including the longest and deepest canal in the country—the Standedge Tunnel on the Huddersfield Narrow Canal.

Other canals on the network that will be photographed include Bingley Five Rise (a steep "staircase" set of locks and another Wonder of the Waterways) and the blacksmith's workshop on the Grand Union Canal at Stoke Bruerne, described as "one of the most picturesque canal villages" by the Canal & River Trust.

"We're delighted to be the first people in the U.K. to get the Trekker on our backs—it's fantastic that our 200-year old network is being given a different lease of life thanks to cutting edge, 21st-century technology," said Wendy Hawk, partnerships manager of the Canal & River Trust. "The footage we get will allow millions of people from all over the world to see our canals, rivers and towpaths, and will hopefully encourage some people to make a trip to see them."

Google loans The Trekker to trusts and charities, which believe that their locations deserve to appear on Street View. Google also has a fleet of cars and tricycles that are used to map other parts of the world.

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Free Game Friday: Take on Wall Street

You see the news tickers everyday. They count up and down, green and red, good and bad—but chances are you're never really sure what they mean.

Well, it's time to get educated and have some fun while doing it. Get involved in some of these free fantasy stock trading games that offer to teach you some critical financial stuff along the way.

Wall Street Survivor is more than just a game to these guys. They are determined to teach you a thing or two about actual investing and have a financially secure future.

Get educated in the market to become financially secure—or play it fast and reckless!

Before you get down to slinging stocks, Wall Street Survivor offers a whole course list on investing and personal finance that range from just starting out to advanced knowledge. They come complete with achievements to unlock and goals to meet—sort of like Code Academy for the aspiring programmer.

It requires you to sign up with either your email or Facebook account in order to track your progress. You can start your course portfolio, which focuses on everything you learn throughout the education process, or start your own practice portfolio to just try your smarts out on your own. Both have their own leagues and leader boards to contend on to keep you coming back every day.

So far I've made a total of 82 cents but that's nothing compared to the education that's sure to follow. By the end of the week my new-found knowledge may be worth a pack of gum!

Straight from The Wall Street Journal's MarketWatch, get ready to go big or go broke with the Virtual Stock Exchange.

Nobody does a virtual Stock Market like the Wall Street Journal.

Sign up and join a public game or create a private one to compete against friends. The listings show a plethora of information on the stock as well as which companies are in the news today. Stocks are easy to find and buy in bulk so you may find that you blew through your $20,000 starting budget (on beginner) in no time.

Games have a set day limit, usually somewhere over 100 days, and whoever makes the most at the end ranks top among all. It's literally the fantasy sports of stocks—bragging rights included.

If you're tired of buying and selling aimlessly, you're already on the most comprehensive financial site around!

Ugh, the real thing is too much. You don't need more stress in your life, even if it's all fake. How about a nice arcade-style trading simulator with Stock Market Trader?

Test your reaction skills more than your financial wit.

There's only one (imaginary) stock that you're constantly watching rise and fall in real time. You have $2000 to invest, so buy low and sell high. Little sliders allow you to adjust just how much of your money you're willing to spend or how much of the stock you're willing to sell.

It's more of a quick-reaction game that teaches you some very basic fundamentals of the market. The ticker moves fast and it's completely unpredictable. If it starts to take a nosedive you have to decide when to buy it on the spot. If it starts to climb slowly do you sell safely or wait for it to hit the high mark and sell it all?

Good luck!

Alex covers desktops, everything from fancy to practical. He's also an avid (addicted) gamer and loves following the industry.
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Wall Street Beat: Tech shares up as Internet stocks rise

Tech stocks had an upbeat week as industry watchers appear to be looking at the positive side of earnings from Internet, consumer electronics and networking companies.

IT industry bellwethers have reported mixed results for the quarter ending in June. This week, earnings season continued with reports from LinkedIn, Yelp and Sony, among other companies.

Tech shares led markets to close up Friday, even though several indexes were down earlier in the day after a tepid report on the U.S. jobs market. The Labor Department said that although the unemployment rate fell last month to 7.4 percent, its lowest since 2008, the country added just 162,000 jobs in July, below the average monthly 202,000 this year.

The tech-heavy Nasdaq gained 0.36 percent to close up by 3.34 points at 15,658.36. The Nasdaq Computer Index rose 0.56 percent to 1735.89.

This week, professional social network LinkedIn was the tech star, announcing second quarter revenue of US$363.7 million, an increase of 59 percent year over year, while net income rose from $2.8 million to $3.7 million. LinkedIn membership grew to 238 million, rising 37 percent year-over-year.

LinkedIn shares spiked Friday afternoon by $22.58 to close at $235.58.

"Decisions made two years ago to re-write LinkedIn's code base have enabled rapid product innovation, which is driving much higher member engagement, creating a foundation that helped fuel tremendous self-service ad sales," said Canaccord Genuity analyst Michael Graham in a research note.

Online user business reviews site Yelp also came out with strong results, reporting that net revenue jumped 69 percent year over year to $55 million. The company's loss shrank to $878,000 from $2 million. The average number of unique visitors per month rose 38 percent year over year to approximately 108 million, while active local business accounts increased 62 percent year over year to approximately 51,400.

Yelp shares jumped Friday by $5.52 to close at $57.02.

Though LinkedIn and Yelp revenues are minuscule compared to Facebook's, their rising user statistics appeared to fuel the general good feeling toward Internet stocks. Last week, Facebook said mobile ad sales stoked revenue, which jumped 53 percent year over year to $1.81 billion, while profit totaled $333 million compared to a net loss a year earlier.

Facebook this week finally succeeded in clawing its way back to its May 2012 initial public offering price of $38, on Friday closing at $38.05.

Consumer electronics giant Sony, meanwhile, reported a profit, pushing forward with a turnaround that was sparked previously by a sale of assets including its U.S. headquarters and a Tokyo office complex. This quarter, improved results came from a combination of solid smartphone sales and a favorable foreign exchange rate.

The company reported that net profit was ¥3.5 billion (US$35 million) in the quarter, compared to losses of ¥24.6 billion in the same quarter last year, while revenue increased 13 percent to ¥1.7 trillion.

Sony's mobile products and communications business reported revenue of ¥389 billion, a 36 percent increase year over year, underscoring the importance of mobile communications to the future of just about any company in the consumer electronics business.

"Semiconductors for smartphones will see healthy revenue growth as demand for increased speeds and additional features continue to drive high-end smartphone demand in developed countries and low-cost smartphones in developing countries," said Nina Turner, research manager for semiconductors at IDC in a report this week. PC chip sales will remain weak, but as smartphone sales surge, semiconductor revenue worldwide will increase this year by 6.9 percent, reaching $320 billion, IDC said in the report.

Meanwhile, the wireless infrastructure segment of Alcatel-Lucent's business remained stable in the second quarter as the company continues efforts to focus on IP networking and ultra-broadband equipment. Revenue rose 1.9 percent to €3.61 million, driven by strong growth in sales of IP networking equipment, the company said. However, the company reported a net loss of €885 million (US$1.15 billion) for the quarter, weighed down by a charge of €552 million following a re-evaluation of assets, and restructuring charges of €194 million.

A strong week for tech stocks bodes well for confidence in the tech sector, as investors seem to be accentuating the positive aspects of what has been by most accounts a mixed quarter. But potential pitfalls remain.

Continued global macroeconomic uncertainty from a slowdown in China, the eurozone debt crisis and recession, Japan recession and the U.S. government spending cutbacks as a result of political compromise could all be factors weighing down IT, particularly spending that affects sales of components, IDC said in its report.

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