Mergers and acquisitions and several strong financial reports excited IT investors this week, even as concerns about the U.S. economy continue to roil the stock market.
The U.S. Federal Reserve Board decision Tuesday to cut interest rates gave a temporary boost to stock exchanges and benefitted bellwether IT companies such as Google Inc., Research in Motion Ltd. and Dell Inc., which all posted share gains after the Fed’s move.
Since mid-quarter, investors have dumped shares, including those of IT vendors, as concerns about the faltering U.S. housing sector, mortgage payment failures, and related worries about the credit market have grown.The Fed’s move was meant to allay worries about a potential tightening of credit, which is often expected to dampen business and consumer spending.
But economic concerns have not appeared to slow the pace of M&A among IT vendors themselves. For example, to expand its foothold in the U.S., T-Mobile USA Inc. announced Monday that it will buy SunCom Wireless Holdings Inc. for US$2.4 billion. SunCom Wireless jumped $3.65 to close at $25.65 after the announcement.
Yahoo Inc. also helped the week start off with a bang, announcing a $350 million acquisition in the hot software-as-a-service market. Yahoo is buying Zimbra Inc., which offers a hosted collaboration and messaging software suite. Yahoo shares closed Monday at $24.95, up by $0.22.
There were a host of other M&A news, including Monday’s announcement by InfoSpace Inc., that it would sell its Switchboard.com online directory business for $225 million to Idearc Inc., a print and online directory publisher. InfoSpace shares soared $4.13 to close at $17.38 on the news.
Meanwhile Leap Wireless International Inc. rejected an unsolicited buyout offer from cell phone rival MetroPCS Communications Inc., saying the $4.7 billion bid underestimates Leap’s growth potential.
Generally, M&A news boosts investor confidence, because it is taken as a sign that the vendors themselves are certain enough about new technology to bet big on it.
Other good news this week came from software bellwether Oracle Corp., which Thursday announced that strong database, middleware and services revenue helped bring net income for its first fiscal quarter to $840 million, a 25 percent jump from the year-earlier period.
In the hardware arena, Best Buy Co. Inc. Tuesday reported that due in part to strong sales of computers, net income rose to $250 million, for the quarter ended Sept. 1, compared with $230 million a year earlier.
Gartner Inc. offered more good news for hardware, predicting in a report Thursday that lower prices and the improved performance of laptops will fuel continued growth in PC sales. Worldwide PC shipments will grow 12.3 percent this year, Gartner said.
