Seeking Alpha
What is your profession? ×
Long/short equity, special situations, momentum, growth
Profile| Send Message|
( followers)

The tech world is constantly changing, with creative destruction being the best phrase to describe what happens every day in the industry. We have seen many titans in the industry fall over the years but lately there has been some really high profile names which have fallen and others which are seeing their core businesses come under attack by the new kids on the block. Google (NASDAQ:GOOG) has been one of the companies which has used its dominance in one sector to venture into other areas and take on multiple names at the same time. They are weaving a web of web based applications, services and software to build an ecosystem to take on both Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) as it has already taken the ad platform from Yahoo (NASDAQ:YHOO). It seems to U.S. that Google has done quite well thus far, being part of the reason Blackberry (NASDAQ:BBRY) is where it is today, and the results from last night back that up.

Chart of the Day:

With its big stars starting to report stellar results once again and the cash rich names looking to increase buybacks it seems to U.S. that the Nasdaq has further to run. The biotechs remain a strong sector, the small community banks are getting healthier and technology continues to power forward...this all points to the need to be bullish here.

(Click to enlarge)

Source: Yahoo Finance

We have no economic news today.

Asian markets finished mixed today:

  • All Ordinaries -- up 0.74%
  • Shanghai Composite -- up 0.24%
  • Nikkei 225 -- down 0.17%
  • NZSE 50 -- down 0.36%
  • Seoul Composite -- up 0.58%

In Europe, markets are trading higher this morning:

  • CAC 40 -- up 0.67%
  • DAX -- up 0.26%
  • FTSE 100 -- up 0.45%
  • OSE -- up 0.95%

The Tech Wars Continue, With Winners Beginning to Emerge...

Whereas one of our biggest winners for readers this year in the tech space has realized most of its gains via excitement over its holdings in other companies, Google is the complete opposite. The pending Alibaba IPO has lit a fire under Yahoo shares, which have more than doubled since we began our bullish stance on the shares but we have been irked a little bit by the lack of execution and measurable progress in the core business. We still have faith that Mrs. Mayer will figure it out, but the fact that Google has stopped the bleeding in their paid clicks business indicates to U.S. that Yahoo needs to step on the gas a bit more to hasten the turnaround they need in display ads on their content network.

The quarterly report from Google last night was quite impressive as paid clicks rose 26% year-over-year and 8% growth from last quarter (the conference call transcript is located here). This coupled with YouTube seeing a shift in usage from PC to mobile is why the stock jumped about 9% in after hours trading. The CPC is declining on PC ads, but with the mobile platform seeing more demand and the company having launched a multiscreen ad platform for advertisers to buy across PC and mobile we suspect that the CPC for mobile (where the growth is mind you) will begin increasing steadily in the coming quarters. Also playing to Google's advantage is their foresight to have developed the Android OS which now has a captured audience for them around the world and with dominate market share in many of the world's largest advertising markets. This is the quarter that many have been waiting for.

The after hours and pre-market trading indicate that the stock is going to break out of the recent sideways movement. After the recent quarter it seems that shares have the wind at their backs now.

(Click to enlarge)

Source: Yahoo Finance

We should make it clear that all of this is good for Google, but not bad for Apple. For some reason the market likes to draw that conclusion and punish whichever company does not have the best news. The two are competitors to be sure, but their dominate market positions are in areas where they do not compete together. Generally every attempt by one of these companies to venture into the realm of the other has ended in failure, as is evidenced by Apple's venture into Maps and Google's venture into handsets (not the Android OS, but the Motorola acquisition). If Apple ends up getting some downgrades from Wall Street, or investors sell the shares in reaction to Google's good news we would be buyers.

And Of Course Some Losers...

With the proliferation of tablets and smartphones, Microsoft is seeing a fragmenting of their monopoly on the operating system. Their entry into the tablet space featured an interesting approach to the user experience which fit nicely with their Windows Mobile experience. However, as is typically the case with Microsoft when they try to change the way business is done, the company had a huge misstep with the new Windows 8. We were recently replacing the laptops in our offices and were extremely turned off by the Windows 8 operating system that wants the user to touch the screen and use the device as a tablet when a mouse is already present. As far as upgrades go, it was too much too soon and we actually paid more to get the exact same laptops with Windows 7 OS as opposed to trying to force the totally foreign Windows 8 OS upon the workforce. We discussed this with some of our clients as well as family and friends who also have to make decisions such as these for their businesses and it was unanimous in that everyone was sticking with later OS versions until Windows 8 is more user friendly. Trying to be too much like Apple and Google is really hurting Microsoft do what it is good at, and if they lose their foothold with corporate clients it could spell serious trouble down the road.

The past few years have been rough sledding for Blackberry shareholders, and the next few months appear set to be choppy as well. The company is scrambling to get a deal done, and any way possible it seems.

(Click to enlarge)

Source: Yahoo Finance

Which would lead to a situation like the one Blackberry finds itself in. Buyers are hard to come by and those who have emerged are hardly slam dunks to get a deal done. The latest news is that Lenovo is looking at Blackberry and is taking a serious look at its business and books as it mulls whether to make a deal or not. Whereas the current Canadian suitors face issues with financing, the Chinese will undoubtedly face issues pertaining to security of users' information and data. Blackberry has already suffered a mass exodus of corporate clients as they moved to other devices like the iPhone and Galaxy, but government agencies are still a large category they dominate due to their security infrastructure. Watch for the possibility of a joint bid between the Canadian finance guys and Lenovo where the security portion of the business remained Canadian and cut off from control of the Chinese. That might be enough to get a deal done, but it sure seems like too little too late.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.