Stocks finished a week of nice gains with a mixed session on Friday. The Dow Jones Industrial Average (DJINDICES: ^DJI) closed at a record high, but the S&P 500 (SNPINDEX: ^GSPC) fell slightly.
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After the close of today's session, the largest index providers will be changing the way some companies are classified into sectors. The former telecommunications sector is being renamed "communications services" and will include some stocks formerly classified as information technology companies, including Facebook, Twitter, and Alphabet. Walt Disney, Netflix, Comcast, and some other companies will move to the new sector from their previous designation of consumer discretionary.
As for individual stocks, Medtronic (NYSE: MDT) announced plans to acquire Mazor Robotics (NASDAQ: MZOR), and Micron Technology (NASDAQ: MU) reported strong results.
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Medtronic snaps up Mazor Robotics
Medical device giant Medtronic is buying Israeli-based surgical robot company Mazor Robotics in $1.64 billion cash deal, sending shares of Mazor up 10.2% to $58.15 while shares of Medtronic rose 0.4%. Medtronic, which already owns 11.4% of Mazor, will buy the remaining outstanding shares for $58.50 per American depositary share. Net of Medtronic's existing position and cash acquired, the cost to Medtronic will be $1.34 billion. The boards of both companies have approved the deal.
Mazor makes robotic surgical systems for spine and brain surgery, and last year Medtronic acquired the worldwide distribution rights to its Mazor X Robotic Guidance System, leading to the installation of 80 systems since its launch.
Shipments of Mazor's systems are growing, but revenue in the last quarter declined due to lower selling prices. The company is also not yet consistently profitable, losing $5.1 million in the first six months of 2018. Medtronic says that the acquisition will be "modestly dilutive" to earnings in the current fiscal year, but will generate a double-digit return on invested capital by year four.
Mazor's $65 million in revenue last year pales in comparison to Medtronic's $30 billion in sales in its most recent fiscal year, but Medtronic sees the acquisition as an opportunity to add a key technology that could represent the future of spine surgery.
Micron beats estimates, but investors worry about the future
Chipmaker Micron Technology reported fiscal fourth-quarter results that beat expectations, but investor attention remains firmly focused on the future of memory demand and pricing, and ongoing concerns in those areas caused the stock to fall 2.9%. Revenue grew 37.5% to $8.44 billion, topping the analyst consensus of $8.25 billion. Non-GAAP earnings per share of $3.53 came in well above the expectations for $3.33.
Sales of DRAM chips, which are used in computers, servers, mobile devices, and graphics cards, rose 7% from last quarter and 47% year over year. Sales of NAND flash memory, used in storage applications such as solid-state disk drives, were up 15% sequentially and 21% from the year-ago period. Non-GAAP gross margin improved to 61.4%, compared with 60.9% in Q3 and 51.3% in Q4 last year.
Analysts on the conference call were concerned about comments that a CPU chip shortage affected demand for memory and that there was "some limited inventory adjustment underway at a few customers," unsure whether the issues may be harbingers of a longer-term slump in demand. Prices for DRAMs held steady, but the average selling price for NAND memory continued its rapid decline, dropping by a mid-teens percentage since last quarter.
Micron remains optimistic about long-term demand trends, but investors are cautious about the outlook for the industry in the next year.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jim Crumly owns shares of GOOG, FB, Micron Technology, NFLX, and DIS and has the following options: long January 2019 $50 calls on Micron Technology. The Motley Fool owns shares of and recommends GOOGL, GOOG, FB, NFLX, TWTR, and DIS. The Motley Fool owns shares of Medtronic. The Motley Fool recommends CMCSA and Mazor Robotics. The Motley Fool has a disclosure policy.