Various tech stocks have been making acquisitions (or trying to make acquisitions) recently, with mixed results. If we take a closer look at these acquisitions, we can see that they can have a significant impact on future outlook and should be strong considerations for investors. Micron Technology (MU), for example, has taken a huge leap and risk, which I believe will reward it in the long run. Microsoft (MSFT) and Oracle (ORCL), have made moves to secure their place in the changing tech market - a wise next step for both tech giants. It should help both secure steady revenue even with dynamic changes in touch screen and storage technologies. Meanwhile, AT&T (T) is currently involved in three new deals to acquire more spectrum.
First I will look at Micron Technologies. This company is in the process of acquiring Elpida Memory and its debt for about $2.5 billion, but this acquisition is going far from smoothly. Bond holders in the smaller and bankrupt Japanese company are preparing to fight the acquisition on the basis that the amount offered undervalues the company. As a result, Micron stock has declined by as much as 7% recently, and I think that there is a potential that it could decline by as much as 10% to 12% before this is all over. But, once the acquisition goes through, we should see a healthy increase in the future. At the moment, Micron is trading around $6 per share. Micron will look to get back to the $9 level of last year, though the $2.5 billion price tag represents more than its announced 1Q revenue of $2.2 billion. Micron's revenue had been steadily increasing, which is a positive sign, but it will need to bring to bring revenue numbers up to cover Elpida's debt. The paying off of which could hold Micron back for a few quarters, though it's a solid strategy for the long term.
Next, Microsoft recently announced plans to acquire Perceptive Pixel. This could be a very good move for the company, especially in the tablet arena, as Perceptive Pixel is able to produce larger and more technologically advanced touch screens for Microsoft's tablet offerings. It must be noted, however, that although this will be a technological step forward, the tablets will not be popular unless Microsoft can bring the price down in some way. Microsoft's stock has experienced a decline of 2%, partially due to investors questioning the profitability of the acquisition. This decline in stock will continue unless Microsoft can make this acquisition work in its favor. Microsoft is trading at around $30 per share, which is not bad in comparison with its 52-week range. Certainly, Microsoft is on the rise and is a far shot from the dying prognosis some analysts gave it years ago. Moreover, the tablet market is only going to continue to grow, and Microsoft is properly looking for any way to earn a large portion of the projected 119 million tablet sales next year.
Oracle is on something of an acquisition spree having recently added social-media software company Involver to its list. This is company number three in as many months that Oracle has acquired. The acquisition is supposedly aimed at "beefing up the social aspects of its cloud-based enterprise software offering." Over the last three months while Oracle was making these acquisitions its stock price went up by more than 3%, indicating that its strategy may be working form a broad perspective. But since the acquisition of Involver recently its stock has declined by a little over 2%, indicating investor concern over the latest purchase. The company is currently trading at around $32 per share and has a dividend and yield of about $0.24 (0.80%). Oracle should be on the path to success, though it's numbers are still down - I expect some growth here.
AT&T is in the process of acquiring spectrum from three companies, NextWave Wireless, Comcast (CMCSA), and Horizon Wi-Com. The move was prompted by AT&T's skyrocketing data requirements. AT&T has introduced more than 24 deals over the past several months. According to UBS AG analyst John Hodulik, "AT&T's plans would boost its most important spectrum holdings by 62% in the biggest 100 U.S. markets." The company's stock is up by around 2.5% in the last month. If you look at the company's share price, which is $36.75 at the time of writing, it is doing quite well. AT&T is a stock to watch, though it might be too expensive at this point, nearing an overvalued position.
Acquisitions can make or break a company, especially with the large price tags that tech firms dish out to buy competitors or start-ups. Companies like AT&T are showing that acquisitions can help secure stable and healthy growth. Micron may also be worth watching if it can finalize its deal. It's making a big, big move, and we will have to see if it pays off.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.