Technology Stock Roundup: GOOG Sells Motorola, MSFT CEO Search Narrows - Analyst Blog


Google Sells Motorola Mobility

Just the day before it reported fourth quarter numbers, Google ( GOOG ) announced its decision to sell Motorola to Lenovo for $2.91 billion. Google retained 15,000 of the 17,000 patents that it acquired from Motorola although it agreed to license some of them to Lenovo.

It was very important for Google to sell off this unit not just because it was making losses, but also because it was outside the area of its core competency. Moreover, Google could never go all-out with a hardware business and not alienate its hardware partners, which is a risk it can hardly afford to take.

Microsoft's Next CEO: Satya Nadella or Sundar Pichai?

Unidentified sources are saying that Indian-born Satya Nadella will likely succeed Ballmer as Microsoft's ( MSFT ) next CEO. It's also likely that founder Gates will make way for a successor to his position as Chairman of the Board.

This may look like an intention to radically change Microsoft's direction and operation. But like it or not, the direction was actually set last year with the announcement of Ballmer's "Devices and Services" strategy and the multi-billion-dollar acquisition of Nokia's loss-making handset business.

Granted, Nadella is a cloud-services man, so he is more focused on the services side of the business, but given his lack of experience at the top position of any company, it's very likely that he will not make radical changes on the devices side. And while he may be up for criticism, the best thing for Microsoft would probably be for him to do just that until he settles in.

After all, the devices side, while not making money, is of great strategic importance to Microsoft, and execution appears to be improving on that front. Things may get difficult, however, once activist investor ValueAct Holdings gets a seat on the Board.

It's also worth noting that several outsiders have refused the CEO position considering the many challenges. So Nadella definitely has his hands full.    

[Update: Latest media reports say that Sundar Pichai, SVP of Chrome and Apps at Google is now in the running and is the top external candidate.] 

Earnings Highlights: Here are some of the biggest movers

Facebook ( FB ) shares jumped 14.1% following the announcement of its fourth-quarter results. Very strong advertising revenue, particularly in the mobile business drove up shares.

Computing Sciences Corporation ( CSC ) shares were up 9.5% following its third-quarter results. Despite the disappointment on the top line that was severely impacted delayed spending and deferrals by the government, earnings came in much higher than expected due to excellent cost control. Considering lower cost structure and solid bookings, management was able to raise fiscal 2014 earnings guidance from 3.50-3.70 a share to $3.80-3.90 share

Google's earnings disappointed , but shares still appreciated 4.0%, as the euphoria of the Motorola sell-off spilled over. Google did see solid increase in paid clicks, but prices did not keep up.

The greatest disappointment was perhaps Amazon ( AMZN ), which lost 11% following its fourth-quarter results. Growth in the EGM business dropped off sharply in both North America and internationally. At the same time, Amazon's investments continued to increase, driving up costs. Guidance was soft. Increase in Prime fees was a positive.

Apple ( AAPL ) reported revenues that were more or less in line with our estimate and earnings that beat easily. Guidance looked conservative (as usual). But investors obviously wanted more because they sent the shares down 8.0%.

Yahoo's ( YHOO ) problems were similar to Google's, as pricing remained weak.  Management brushed it aside, saying that the decline on the Display side was on account of stream ads which had great long-term potential, while the decline on the Search side was essentially on account of a mix shift to mobile and emerging markets. Shares plunged 8.7% following the results .


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Other stories you may have missed -

Apple Targets BRIC Countries : Last week, Apple loosened up its sales policy in Russia, enabling MegaFon, the second-largest operator in the country to resume selling iPhones. The two signed a three-year agreement. This follows agreements in Brazil and India the week before and China Mobile before that. Apple is clearly increasing efforts in international markets.

Yahoo Makes a Couple More Acquisitions : Last week saw speculation about Yahoo's takeover of Tomfoolery and another startup called Incredible Labs. The latter's personal assistant Donna is similar to Google's Google Now.

Google Acquires DeepMind

Google-Samsung Sign 10-year Cross-licensing Agreement : The agreement covers a large number (though not all) current and future patents of the companies and is intended to minimize litigation for both. While it is in Google's interest to have viable competition to Samsung, this is the strongest competitor to Apple devices that do not use Android. Therefore, Google needs to look out for Samsung's interests too.

Stylish New Google Glass Gets Insurance Cover : Google announced four new frames (bold, curve, thin, split) and several colors that now enable 40 variations of Glass. Not just that, but Google tied with insurer VSP Vision Care (which covers 20% of Americans) to reimburse members for frames and prescription glasses for Google Glass devices. 

Android-Powered Gaming Device from Amazon : The $300-device is reportedly being designed for the living room with the ability to connect to a TV. Therefore, in addition to the 50,000-odd games from "Apps for Android," it will also be able to stream the thousands of videos that Amazon Prime members already have access to.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AAPL , AMZN , CSC , FB , GOOG

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