Technology Stock Roundup: Amazon Buys Twitch, Cisco Grows Server Share

Zacks

Amazon’s (AMZN) Twitch acquisition and Cisco’s (CSCO) strong growth in servers helped share prices last week. 

Amazon Grabs Twitch

Amazon outbid Google to acquire gaming platform Twitch for $970 million in cash and roughly another $40 million in retention-related payouts. The company has been spending heavily on content and customer acquisition as technology has brought about a sea change in consumption habits and platforms. Therefore, just as the digital consumption patterns of books, video and music prompted it to invest in platforms, content and people to develop suitable technologies, so also is the case for gaming.

The Twitch acquisition has helped on both counts, as it brought on board 55 million monthly active users watching “billions of minutes of games.” Twitch users are usually avid gamers watching video clips of games for entertainment or to learn new techniques. Therefore the customer base is sticky and growing.

This provides Amazon space to serve related product ads that could get them to spend on Amazon. It could also be used to attract them to Prime memberships, which comes with its own share of benefits. Amazon has a game studio where it is trying to create original gaming content so Twitch could be just the place to market what it makes, among other things.

H-P Retains Top Server Vendor Position

Facebook Introduces Keyword Search

Facebook (FB) is testing a tool that could allow users to search all the unstructured content (comments, likes, pictures, video) intended for them by simply typing relevant keywords. The company has been indexing all the user-generated content, which is expected to make this possible.

The broader implication is of course the possibility that the company could get into the search market, but this seems like a distant possibility right now. Facebook’s search agreement with Microsoft’s (MSFT) Bing remains in place and the company’s graph search has met with lukewarm response. It also has privacy watchdogs nipping at its heels.

In contrast, Google (GOOGL) remains the unquestioned leader in the search market with the best results and speed. Moreover, it continues to innovate.

Company

Last Week

Last  6 Months

AAPL

+0.52%

+36.34%

FB

-0.52%

+9.29%

YHOO

+0.89%

-0.41%

GOOG

-2.07%

+2.35%

GOOGL

-1.91%

-4.29%

MSFT

+0.24%

+18.59%

INTC

-0.47%

+41.03%

CSCO

+1.03%

+14.63%

GOOG = Class C shares (new, non-voting)

GOOGL = Class A shares (old, 1 vote per share)

Other stories you may have missed-

Corporate

Insider Sales Hurt GrubHub (GRUB) Shares: GrubHub insiders, including the members of its board and management will be selling 8.78 million shares at a secondary offering. Another 1.25 million shares will be sold by the company itself, according to a filing. Insiders taking profit within the lock-in period could indicate over valuation particularly since the shares have had a great run in the last few months. As a result, the news sent the shares down more than 8%.    

Intel Wins Over Qualcomm (QCOM) Executive: Amir Faintuch, President of Qualcomm Atheros, overseeing its networking and connectivity businesses, will be joining Intel as SVP and co-general manager of its Platform Engineering Group. Intel (INTC) is not known for spiriting away its competitors’ talent, but the company is now making an all-out effort to grow its mobile business. Besides, the times are changing and tech companies have recently been taken to task for colluding to suppress wages across the industry. 

Regulatory

Jury Disallows Oracle’s (ORCL) $1.3 Billion Claim vs. SAP (SAP): A U.S. appeals court ruled that Oracle would have to accept $356.7 million in damages for copyright infringement or go for a retrial. The suit dates back to 2007 when Oracle sued SAP for a large number of unauthorized downloads of its support software. Oracle spokespeople did not shed any light on the company’s future course of action.

New Technology/Products

Intel Has 2 New Products For Foundry Customers

Microsoft Dongle in the Making: The FCC website describes a new product from Microsoft Mobile called HD-10 that comes with Wi-Fi, an HDMI connection and a USB port for power. It is expected to use Miracast technology (also used in Windows Phones) to stream audio and video content. This could be Microsoft’s answer to Google’s highly popular Chromecast, or even STBs like Roku and Apple TV. It could give Microsoft a stronger entry into the living room.

Google Productivity Suite Updated: As announced earlier in June, Google has updated Google Docs and Sheets and introduced Google Slides (similar to Microsoft PowerPoint) for Android and iOS. Google’s less sophisticated (and totally free) productivity suite can now edit Office files without converting them.

Android has taken over the consumer segment and is making inroads in enterprise. But this is Microsoft’s bread and butter, and the software giant is likely to put up a big fight. Microsoft’s Office 365 productivity suite remains the most popular so far and is a very important strategic tool for the company. Google’s refresh is intended to break into its walled garden.

Google Testing Package-Delivery Drones: Google says the outdoor testing of its package delivery drones in Australia was successful. However, the company expects to take several more years before such a vehicle becomes commercially available. In the meantime, it will join Amazon, Facebook, BP (BP), Walt Disney (DIS) and others to continue lobbying for regulatory approval. The Federal Aviation Administration (:FAA) has so far denied permission on safety and privacy considerations, but the growing number of high-profile lobbyists and positive opinion regarding the benefits of such services are likely to change its position.

Google Takes Local to the Desktop: Google will be displaying locally available goods to users when they switch to their desktops. This is expected to be a first step and other mobile products are also expected to migrate in a similar fashion. Google has a lower market share in mobile and is losing out every day to social media platforms, particularly Facebook. Since desktop ad prices are much higher than mobile, Google could make good some of its losses if it is able to transfer some ad dollars.              

Chromebooks Geared For the Enterprise: At the VMworld 2014 show held last week, VMware (VMW) announced a number of partnerships, one of which was a collaboration with NVIDIA (NVDA) and Google to virtualize graphics-intensive apps. Specifically, the next gen VMware Blast will combine with NVIDIA’s Grid virtual GPU technology to facilitate high-quality virtualization of Chromebooks and speed up the transition to cloud computing. 

Analyst Commentary

Cisco Should Be a Buy Despite Share Losses: A UBS analyst explained Cisco’s share losses in the networking equipment market, particularly in the 10-gig segment. The analyst said that although the latest numbers from research firm Dell ‘Oro indicated that Cisco was losing share to Arista and Juniper (JNPR) (both are more established in SDN), Cisco’s share loss was small and it remained the dominant player with a 63% share. Further, Cisco, along with a few others is driving the transition to higher speeds; and growth in these segments was faster and price erosion slower.

Alibaba Revenue Growth is Positive For Yahoo (YHOO): A Cantor Fitzgerald analyst reiterated his Buy rating on Yahoo shares after Alibaba reported better-than-expected revenue growth of 46% in its fiscal first quarter ending in June. This may be expected to support higher share prices when the company goes for its IPO later this quarter. This will be a positive for Yahoo, which is set to offload some of its 24% stake in the ecommerce company.

Some Numbers

Surface Tablets Get a Price Cut

VMware Slides After Analyst Day: VMware announced new cloud initiatives that are expected to help the company remain at the forefront of the virtualization trend, but management’s decision to discontinue its practice of providing long tern financial targets hurt share prices.

Higher Costs Offset Workday’s Solid Revenue Growth

Intel gets $2 Billion Tax Break: The State of Oregon has determined that since Intel is the largest private employer in the state with over 17,500 employees, it would continue to enjoy tax advantages based on its investments in the state. The decision is sanctioned by a 1993 law that was intended to attract high-tech manufacturers that typically see rapid depreciation in equipment. The deal gives Intel a property tax waiver on $100 billion spent on tools and equipment over a period of 30 years. Intel will also make certain other donations and payments.

Chinese Carriers Cut Subsidies: Soon after China Mobile (CHL) announced a $2 billion reduction in subsidies, other carriers have responded with further reductions totaling $1.9 billion. The announcement comes just ahead of new product launches, such as the iPhone from Apple and Note 4 from Samsung.

China is one of the fastest-growing markets and Apple’s premium brand has helped it deliver high growth rates. Samsung however has been hit at the low end of the market by a growing number of devices from local and other players. But carrier subsidies are essential for selling high-end devices, so both companies could be affected.

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