Top Tech News: Buyouts, Bum Guidance, and a Bummer for BlackBerry's Maker
Sep 16th 2011 12:45PM
Updated Sep 22nd 2011 12:42PM
Buyouts, bum guidance, and a broadening decline for a one-time tech titan made up the top tech news this week. Here's a closer look at two stocks that soared and two that soured.
1. The logic of Broadcom's (BRCM) big buy
In any given week, buyouts are bound to be behind the biggest moves, and this week is no exception. Shares of NetLogic Microsystems (NETL) zoomed more than 50% when chip maker Broadcom announced a $3.7 billion bid for the company.
Wall Street and retail investors appear to be mostly bullish on the deal: They've bid up Broadcom's stock by about 7%, or about two points more than the overall market.
There's logic to the buy. Broadcom, a generalist supplier of chips for electronic devices, is buying NetLogic's expertise in creating semiconductors for wireless and networking devices just as the world is adopting a wide array of smart mobile devices such as the iPhone.
Those last words -- "the iPhone" -- may be why lawyers are circling. Shortly after the deal was announced, a number of firms announced (ahem) "investigations" into whether NetLogic brokered a good enough deal for shareholders. Don't expect these fishing expeditions to yield much.
2. Fundtech (FNDT) bumps stock offer, bags cash instead
Sometimes, one buyout offer isn't enough. Just ask Fundtech, whose technology helps broker digital banking transactions. Private equity firm GTCR offered $23.33 a share in cash this week, which the board found more attractive than a June all-stock bid made by software supplier S1. Investors bid up the stock more than 40% on the news.
It appears that GTCR's arrival will end the drama. The Associated Press reports that S1, which is facing an undisclosed takeover bid of its own from a competitor, has accepted an $11.9 million termination payment rather than increasing its offer.
3. A not-so-Perfect World (PWRD)
The market, like life, is filled with irony. Today's proof: Perfect World, a Chinese gaming company that can't seem to find the perfect recipe for growth. Management this week lowered third-quarter revenue guidance to $109.8 million, down from an earlier forecast of $118.3 million. Shares of Perfect World sunk more than 18% after the announcement.
The good news? Perfect World is still growing -- more than 11% on the top line, even with the downward revision. Analysts, meanwhile, believe earnings will rise more than 30% to $3.14 a share in the current year.
The danger? Perfect World has an imperfect history when it comes to producing profits. Per-share earnings surged 77% in 2009 only to fall 18% last year. Trusting Wall Street here might be like asking a jewel thief to manage a Tiffany's. Losses are just too likely.
4. No brakes for Research In Motion (RIMM)
Finally, there's Research In Motion, whose shares have been mixed more than a fruit cocktail over the past year. They're down 20% more late this afternoon after the company reported another awful quarter.
Wait, it gets worse: Despite much hyperbole about the launch of the new BlackBerry 7 handset from co-CEOs Jim Balsillie and Mike Lazaridis during last night's call with analysts, Research In Motion expects earnings per share of just $1.20 to $1.40 for the third quarter.
Forget for a moment that management hasn't proven trustworthy with its estimates. The $1.30 mid-point of its guidance is still $0.06 below what Wall Street was expecting, while the low-end comes startlingly short of analysts' $1.36-per-share target. The message? Like old men in a Bruce Springsteen ballad, Balsillie and Lazaridis may be left with nothing but to reminisce over Research In Motion's glory days gone by.
And that's the week in review. What tech stocks are you following right now? Please weigh in using the comments box below. You can also send Tim an email with your suggestions.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Fool.com writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. He holds no position in any company mentioned. The Motley Fool owns shares of Research In Motion.