How the Market Works in the Real World

Economics for Investors

Subscribe to Economics for Investors: eMailAlertsEmail Alerts newslettersWeekly Newsletters
Get Economics for Investors: homepageHomepage mobileMobile rssRSS facebookFacebook twitterTwitter linkedinLinkedIn

Top Stories

The great mid-May Facebook IPO has reportedly been delayed maybe until mid-June waiting on Mark Zuckerberg to wrap up whatever else is distracting him right now besides his billion-dollar Instagram acquisition or the $550 million patent deal with Microsoft, which also mean the company needs to make more financial disclosures. According to CNBC the pre-IPO roadshow may have slipped from May 7 to May 14 or even the end of May when the Memorial weekend then becomes a problem. ... (more)

Facebook Ups Its IPO Price

You knew this was gonna happen, right? Facebook has repriced its IPO upwards from $28-$35 a share to $34-$38 a share giving it a valuation of $92 billion-$104 billion, a neighborhood more to its liking than the original $77 billion-$96 billion. The actual price won't be set until Thursday night. Bloomberg claimed the company's IPO roadshow was producing less institutional demand for the stock than expected because of less-than-rosy revenue forecasts last week - though the increase in the price would seem to belie that statement - and the AP and CNBC did a survey that found half the people polled thought the original asking price was too high - more among active investors. Forty percent of active investors think Facebook wouldn't be a good investment; reactions depend on how old you are; 17% had doubts about Facebook's future as a public company; 14% - even active ... (more)

HP to Buy Back Stock

HP's stock took a nasty turn for the worse when the board ran CEO Mark Hurd off the place - and lost more ground during the seemingly irrational 3PAR chase - so the board threw shareholders a bone the other day and authorized the company to buy back an additional $10 billion worth of stock. It said it was to manage the dilution created by shares issued under employee stock plans. It was already operating under an $8 billion plan of which $4.9 billion remained. CFO and interim CEO Cathie Lesjak said the company planned to buy back $3 billion worth before Halloween. HP's got $15 billion in the kitty. ... (more)

Oracle Sales Surge 47%

Oracle's fiscal Q2 revenues were up 47% to $8.6 billion, ahead of expectations of $8.3 billion. Its performance was nothing like poor Cisco, suggesting that maybe the portents aren't as bad as the doom merchants say. The all-important new software license revenues were up 21% to $2 billion. Oracle co-president Safra Catz, who predicted only 6%-16% growth last quarter, credited "company-specific momentum" for the 21% uptick in new licenses. Software license updates and product support revenues were up 12% to $3.6 billion. Sun hardware and support revenues were worth $1.75 billion, roughly 20% of Oracle's total, with a gross margin on hardware of 53%. Oracle co-president Mark Hurd said the pre-packaged hardware/software Exadata appliance pipeline is now worth nearly $2 billion. He claimed the number "is a good leading indicator that customers are planning to increase... (more)

Netflix Shocker: Confidence Crisis

Boomberg's Cliff Edwards reported the facts well: Netflix Inc. (NFLX) dropped the most in seven years after the video-rental service said it lost 800,000 U.S. subscribers in the third quarter, more than expected, and predicted more cancellations over a price increase. Netflix plunged 37 percent to $75.28 at 9:39 a.m. New York time, for the biggest intraday decline since October 2004. The stock closed at an all-time high of $298.73 on July 13, according to Bloomberg data. The outlook suggests Netflix has been unable to contain a subscriber revolt over a price increase and aborted plan to force subscribers into separate streaming and DVD services. The company now forecasts losses in 2012 because of costs to offer content in the U.K. and Ireland, and will delay further expansion until profitability is restored. Sound Strategy It's clear that Netflix understands what's g... (more)

Oracle Bounces Back from Q2 ‘Aberration’

Oracle, which suffered a dodgy Q2, called that rare earnings miss and soft software showing an "aberration" when it reported its Q3 numbers Tuesday. The company came in with stronger-than-expected income, up 18% to $2.5 billion, or 49 cents a share - 62 cents in Wall Street's language - against a tough compare, because good old fashioned software license sales neutralized weak hardware sales from its $7.4 billion acquisition of Sun Microsystems. Lately Oracle has preferred cloud buys like RightNow and Taleo. Oracle's revenues were up 3.1% to $9 billion, again ahead of expectations. Its operating margin widened from 34.1% to 36.7%. New license revenue, the great growth indicator, was up 7.2% to $2.4 billion, the high end of its guidance. Total software sales were up 7.9% although it's between cycles and moving customers to its new Fusion software and the newfangled mul... (more)

Google’s Stock to Split 2 for 1

Rather than pay a cash dividend, which is culturally repugnant to so-called growth stocks, Google said late Thursday, after posting better-than-expected results, that it would repay its stockholders, who must be dizzy from all its up and down movement, by giving them more non-voting stock, effectively a two-for-one tax-free stock split. It will create a “new class C stock” that trades under a different ticker symbol. In a letter on the Google web site Google founders Larry Page and Sergey Brin restated their control over the massive company because they, along with chairman Eric Schmidt, own the only real voting stock, which won’t be part of the split. They also hold a lot of the non-voting Class A stock and even as Class B holders will get the new class C stock. Page said in passing that Google isn’t planning any big acquisition soon. Google has its eye on Apple’... (more)

Workday Reportedly Hires Bankers for IPO

Workday, the SaaS house co-founded by PeopleSoft veterans David Duffield and Aneel Bhusri, has reportedly hired Goldman Sachs and Morgan Stanley to lead its anticipated IPO according to Reuters and heard from "several sources familiar with the situation." It's supposed to be one of tech's biggest IPOs this year although everything will look small after the Facebook extravaganza. Workday sells HR and financial management software to business and has raised $250 million from its VCs, including Amazon CEO Jeff Bezos' investment arm. ... (more)

Violin Reportedly Files to IPO

Violin Memory, the high-speed flash memory array maker, quietly filed its papers with the SEC last month to go public according to Bloomberg, which was quoting "two people familiar with the matter." It puts Violin's possible valuation at near $2 billion. At least that's what Violin's apparently negotiating for. It's all kinda hush-hush because Violin, like Workday, which IPO'd brilliantly last week, is making use of the recently enacted Jumpstart Our Business Startups (JOBS) Act that lets wannabe public companies keep their plans and financials secret until three weeks before their roadshow - hence no prospectus. To qualify under the JOBS Act companies have to have annual revenues of less than a billion dollars. Violin is understood to have sales of about $100 million. Violin has raised at least $172 million in venture backing and when it took in a massive $80 mi... (more)

Google Joins the Tech Wreck

After Intel and IBM came up short this week, Google's Q3 numbers were released early Thursday utterly surprising a market high on its business, an enthusiasm that had driven its stock to all-time highs. It missed big on both the top and bottom line, instantly creating a big sell-off of its high-flown stock, losing $19 billion in market cap, before it was halted at the company's request at $687.30, down roughly 70 bucks or 9%. It was not clear what was going on and whether the company actually intended an early release since it's unusual for a company like Google to post its numbers during the trading day. The release also looks like a draft with a placeholder for a quote from Larry Page. A half and hour or so after the crisis broke Google came out and blamed RR Donnelly, its filing agent, for sending its 8K to the SEC without authorization. Such an event is practica... (more)

Apple Guidance Stinks

Apple's record earnings came in a bit short of expectations Thursday, a situation the smart money attributed to its failure to make enough phones although it still sold an amazing 26.9 million of the things, up 58% year-over-year and good for $17.13 billion, into the expected launch of the new iPhone 5, which only came out at the very end of the third quarter. Apple admits to a lot of backlog and says it has no idea when supply and demand will even out. It earned $8.67 a share on revenues of $35.97 billion. It was expected to realize $8.75 a share on $35.86 billion. Apple sold 14 million iPads during the quarter, up 26% year-over-year, to $7.51 billion, less than the 17.5 million Wall Street originally anticipated and than rejigged to 15 million after Apple said Tuesday it sold 100 iPads since the beginning. Still Apple claims almost all of the Fortune 500 are test... (more)