This earnings season has seen equal excitement in terms of acquisitions as well. Last week, earnings reports were accompanied by new that the Japanese firm Softbank was acquiring British chip designing powerhouse ARM Holdings.

This week saw another big announcement in Analog Devices (ADI Quick QuoteADI - Free Report) picking up Linear Technology , Yahoo finally accepting Verizon’s offer and some speculation of a hostile takeover of Micron. And of course there were the hottest tech earnings from Apple (AAPL Quick QuoteAAPL - Free Report) , Alphabet (GOOGL Quick QuoteGOOGL - Free Report) , Amazon (AMZN Quick QuoteAMZN - Free Report) , Facebook , Twitter, Groupon (GRPN Quick QuoteGRPN - Free Report) and so on.

Here are the top stories-

Earnings Highlights

Apple: Apple saw unit declines across all major product lines from iPhones to iPads and Macs although iPad revenues grew possibly because people are upgrading to newer models. It’s also likely that people are reluctant to buy new iPhones with the next model just around the corner.

At any rate, the iPhone numbers were better than expected, which sent the shares up. Services Apple Music, the App Store, iTunes and iCloud) were a bright spot and now generate more revenue than both iPads and Macs.   For more details read: Apple Shares Up on Q3 Earnings & Revenue Beat

Alphabet: Alphabet’s revenue and earnings topped estimates. The FX impact on revenue was negative on a year on year basis. The Google segment constituted substantially all of the business with Mobile and YouTube remaining strong drivers.

Google continues to sacrifice prices for volume, which helped it grow the advertising business.  Nest, Fiber and Verily contributed to Other Bets revenue. For more details read: Alphabet Earnings And Revenues Beat On Solid Execution

Amazon: The company blew past the Zacks Consensus Estimates for revenue and earnings with the FX impact coming in positive across all segments. The North America and AWS segments were strong contributors to profits while investments in international continued. Operating efficiencies continued in the last quarter and the tax rate also continued to decline.

The company promised heavy investments to build out 18 fulfillment centers in the current quarter that will help it cope with the fourth-quarter surge in demand. It continues to take the Prime advantage to new markets. For more details read: Amazon Beats 2Q Earnings Estimates Courtesy AWS

Facebook: Almost like clockwork, Facebook comfortably beat the Zacks Consensus Estimate on both top and bottom lines. This time, results were driven by very strong growth in mobile and continued growth in its huge user base.

But Facebook isn’t satisfied with being the place where practically everyone on the planet socializes on. It has big ambitions to deliver other experiences (and build the social media one as well). After all, there’s a limit to the real estate that you can plant ads on and this could curb its future growth. So the company has laid out future growth plans and intends to step up investments in emerging areas like AR/VR,  Messenger, WhatsApp  and so forth. For more details read: Facebook Q2 Earnings Top Estimates Driven by Mobile Ads

Texas Instruments: The company reported another very strong quarter with margins continuing to expand significantly from the year-ago quarter. TI as it is better known, has moved away from the fast-growing (or in other words erratic) consumer electronics market for deep focus on automotive, industrial and communications markets.

Current R&D efforts are focused on very long-term analog and embedded processing solutions for these markets that will help the company to continue filling up its advanced, cost-efficient fabs thereby driving up its margins. For more details read: Texas Instruments Beats Zacks Consensus, Margin Expansion Story Continues

 Twitter: Twitter shares plunged 11% following disappointing second quarter results and third-quarter guidance. It appears that all the efforts of current management to bring back users haven’t yet yielded the desired results because user growth was again sluggish. For more details read: Twitter Q2 Loss Narrower, Revenues Lag on Ad Woes

Analog Devices to Buy Linear Technology

Since the boards of both companies have signed the deal and turned it over for regulatory approval, Linear Technology may soon become part of Analog Devices. For Linear, the offer of a 24% premium (or $14.8 billion), which will be paid in 58 million new shares and cash (through $7.3 million in fresh debt and Analog’s balance sheet cash), was too good to pass up.

For Analog Devices, it is an acquisition of products (there is minimal product overlap and some possibility of cross selling), technology (Linear’s power conversion products can complement Analog’s data conversion capabilities targeting wireless, automotive and industrial customers) and an extremely strong engineering team that it has said it will focus on retaining. Moreover, annual synergies after 18 months are expected to be $150 million.

Unrelated to the acquisition, Analog Devices raised its fiscal third-quarter guidance: revenue up from $800 million-$840 million to $865 million and adjusted EPS of $0.77-$0.78, up from prior guidance of $0.66-$0.74.

Verizon Confirms Yahoo Buy

Verizon is buying Yahoo for $4.83 billion en route to transforming itself into an Internet company. In 2014, it acquired another ailing Internet giant AOL for $4.4 billion and Yahoo’s core assets will be folded into this AOL business. Mayer will continue at Yahoo through the process but it’s likely that Tim Armstrong, who heads AOL will take over the combination once the acquisition is complete.

Verizon has been buying online properties and will continue doing so to reach more users. With Yahoo, it will reach a billion users and the goal is to double this number by 2020. Advertising and video are two of its focus areas that are expected to help it diversify away from the highly-regulated, low-growth carrier business.

The deal will draw the attention of regulators as Verizon’s history with law enforcement hasn’t been spectacular to date. The company was earlier charged with planting super cookies to track users and passing on their details to advertisers without their consent. But Verizon is determined to collect more data and that’s the reason for these acquisitions. It’s highly doubtful that it will become the next Google or Facebook, but even capturing a few points of market share will make this a good deal for Verizon.

For Yahoo, this is the end of the road for one of the web’s pioneers. Hopefully the brand stays, and also some of its popular services.       

Is Micron a Takeover Target?

There was renewed speculation about a possible takeover after the board of directors of the company approved a plan to issue one right share for every common share held in the event any individual or group assumed greater than a 5% stake in the company. The rights issue would prevent a hostile takeover of the company, prevent the transfer of control to another party and also enable Micron to continue to use its prior losses to reduce its tax bills.  

Two names are at the forefront in this respect: the first is China’s Tsinghua Unigroup, which earlier offered $23 billion for the company and then backed out when it was thought that the Committee on Foreign Investment in the United States (CIFUS) could oppose it on security concerns.

The second possibility is Intel Corp because the chipmaker has already partnered with it to develop its 3D XPoint architecture and other technologies. In the event of an acquisition, Intel would get Micron’s other memory technology as well, but would also be saddled with its losses.

What could happen instead is that both Intel and the Chinese company (or any one of them) could increase investment in the company to gain access to some memory technology to further their own growth goals.

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Sector Price Index

Other stories you might have missed-

Corporate

Google Announces New Executive: Google’s new HR head Eileen Naughton, previously VP of sales and operations for Google in the UK and Ireland, will report directly to CFO Ruth Porat. She joined Google in 2005 after a stint as President of Time Magazine. She will be in charge of recruiting, benefits and diversity globally for Google’s 64K employees but not for Alphabet’s other endeavors.

Amazon Woos Startups: Amazon’s Launchpad store is making room for a little addition. It’s a kickstarter store with a difference: the companies that have raised funds through Kickstarter and created successful products will now get to customers through two-day Prime shipping. Startups generally have plenty of problems to deal with from manufacture to sales to after-market service and

Amazon is now saying that reaching customers is not going to be one of them. Some of the things currently on offer are Pebble smartwatches, Oculus Rifts, Petcube dog cameras, Zackee's turning signal LED gloves for cyclists and Olloclip's detachable iPhone lenses.

Pandora Strategic Alternatives: Under pressure from activist investor Corvex Management LP (with 9.9% stake in the company), Pandora has hired Centerview Partners LLC to advise it on a possible sale. While talks are reportedly in initial stages, Liberty Media has made an informal offer to buy Pandora for $15 a share. The board would like $20. Morgan Stanley is already an advisor since February, so this is the second advisor.

Legal/Regulatory

Facebook Tax Bill:  In the next chapter of the transfer of its global operations to Ireland, the IRS has served a notice of deficiency for $3 billion to $5 billion, plus interest and penalties. The problem seems to be that Facebook’s tax adviser Ernst & Young LLP undervalued the company’s property in its transfer to Facebook Ireland Holdings Ltd. by evaluating pieces of the online platform separately. Facebook will likely have to cough up some cash (if not the amount the IRS is claiming) in case it’s found guilty.  

Brazil Authority’s Problem with Facebook:Brazil continues to penalize Facebook for not providing data on people charged with crimes. The platform being questioned is WhatsApp, where Facebook has enabled end-to-end encryption. Last week, the authorities froze 38 million reais ($11.7 million) held in a Brazilian Facebook account for non-compliance with a court order asking for the information.

New Technology/Products

Facebook Publicity About Camera: In one of its biggest pushes to boost demand for the Occulus Rift, Facebook released on GitHub the blueprints to build the Surround 360 degree Camera as well as the software required to stitch the video together for the 360 degree immersive experience. Off-the-shelf parts will add up to $30K, compared to $15K for the GoPro Odyssey or $60K for the Nokia Ozo. Facebook is betting that if more professional videographers start shooting in VR, demand for VR content will rise and what could be better for its $599 Rift, which started selling in March this year?

Yahoo’s Tumblr Starts Advertising on Blogs: Soon after the announced sale of the business to Verizon, Tumblr has announced that it will be serving ads on nearly all blogs. While the blog owner can opt out of it, this may not happen since it is a way for the bloggers to make some more money (and Yahoo/Verizon too of course). The Tumblr community has resisted ads since Yahoo bought it, but alternative methods of monetization haven’t materialized with the company finally writing down its billion dollar valuation by $230 million. So ads it is. 

Microsoft App to Get You Clicking: Microsoft’s Pix app for the iPhone uses artificial intelligence to identify the best settings for exposure, focus and time (down to the exact second) to take a photo. Another interesting feature is, it automatically takes pictures in burst mode, i.e. in a series and uses facial recognition technology to choose the best one. So don’t worry if your eyes close at just the wrong moment!

Google Maps Makeover: Google has made some cosmetic changes to its popular Maps app to make it easier on the eyes. It has removed road lines and started using color code to mark areas of high activity (points of interest), where bars, restaurants and shops are more easily available. Google uses an algorithmic process to find such regions and marks them a pale orange. There’s also a color code to mark regions with schools and hospitals. Typography for street names, points of interest, etc now appears larger. The changes are already available on iOS and Android.

A Google-backed Chinese Smartwatch: Former Googlers in China formed a company called Mobvoi that Google invested in the last round of funding in October. That company is now getting ready to launch a $200 smartwatch called Ticwatch to take on Apple’s Watch in China. The CEO of the startup expects to sell 50K devices within a year of its U.S. debut and reach total revenue of $100 million in 2017.

World’s First 64 Layer 3D NAND Technology: Western Digital has announced its next generation 3D NAND technology called BiCS3, claiming 64 layers of vertical storage capability. The company has started pilot production at its Yokkaichi, Japan JV facilities with the first lot of devices expected later this year. Western Digital expects to ship meaningful commercial volumes of BiCS3 in the first half of calendar 2017.

M&A and Collaborations

Apple Has Deal with Parkopedia: Apple’s agreement with the parking services company will integrate the service directly into Apple maps so users can look for parking garages and lots along with details about the payment type, number of spaces, etc. They can also click on the link to book a spot rightaway (the payment is currently being completed on the Parkopedia website and not Apple Maps). Parkopedia covers 40 million parking spots in 75 countries across North America, Europe, Asia and Latin America, so this is a nice enhancement to the Apple service.

Some Numbers

Apple iPhone Milestone: At an employee meeting last week, Tim Cook said “iPhone has become one of the most important, world-changing and successful products in history…It’s become more than a constant companion. iPhone is truly an essential part of our daily life and enables much of what we do throughout the day. Last week we passed another major milestone when we sold the billionth iPhone. We never set out to make the most, but we’ve always set out to make the best products that make a difference. Thank you to everyone at Apple for helping change the world every day.”

Some Other Companies That Reported Last Week: Expedia, Lam Research, Garmin, Corning, CA Inc, Xilinx, Groupon, Marvell Technology, Western Digital, NXP International, Nielsen, Verisign, Automated Data Processing, Equifax

Companies to Report This Week: Priceline, Dun & Bradstreet, Insperity, Fiserv, Teradata, Electronic Arts, Take Two Interactive, ActiVision, Iron Mountain, Harman, Zynga, Scientific Games, Cognizant Seagate, Paycom Software, Equinix, Symantec, LinkedIn, FireEye, NVDIA.

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