Wall Street Beat: Tech IPOs, M&A continues to heat up

September 27, 2013 07:39 PM ETIDG News Service - Several recent IPOs and eBay's $800 million cash offer for payments startup BrainTree this week highlight what looks like a burgeoning market for tech initial public offerings and mergers and acquisitions.

On Friday, for example, Violin Memory, a flash storage maker, and RingCentral, a provider of cloud-business communications products, both went public. Last week, Benefitfocus, a provider of cloud-based benefits software solutions, and FireEye, which offers a virtual machine-based security platform, went public.

Meanwhile, Twitter announced that it plans to go public, and Chinese e-commerce giant Alibaba Group will also pursue an IPO in the U.S.

On the M&A front, following Microsoft's $7.2 billion offer for Nokia earlier this month, eBay announced it would pay $800 billion for BrainTree to enhance parent company PayPal's mobile capabilities.

Underlying both IPO and M&A activity is a strong stock market and a tech sector that has been getting stronger. Though Friday was a down day for markets as the political battle over funding heath care reform comes to a boil in Washington, D.C., overall it has been a strong year for the stock market.

The Dow Jones Industrial Average is up about 17 percent for the year, the Standard and Poor's 500 index is up about 19 percent for the year, and the Nasdaq stock market is up about 25 percent for the year.

The market for tech stocks in particular has been gaining steam, catching up to other sectors. At the end of the first quarter, the Nasdaq Computer Index was up about 6 percent for the year. Now, it's up about 16 percent for the year, and the Nasdaq Telecommunications Index is up about 21 percent for the year.

Industry insiders expect the tech IPO market to stay strong. A recent poll by KPMG found that of those tech-sector venture capitalists surveyed, more than half expected more tech IPO activity in the rest of the year. Twenty-two percent of those expected tech IPO activity to increase more than 10 percent.

"I think it's due to the market having done really well in the last four months," said Mihir Jobalia, global head of tech for KPMG Corporate Finance.

In the first eight months of the year the median return on tech IPOs was 26 percent, based on share price increases from IPO prices, Jobalia noted.

Tech companies these days are better prepared to go public than in the dot-com boom era of the late 90s, Jobalia said.

"There is a higher bar for companies to go public," Jobalia said. "The higher quality comes from having a more robust business model, better margins, and strong management teams focusing on financial management."

Reprinted with permission from IDG.net. Story copyright 2012 International Data Group. All rights reserved.

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Wall Street Beat: Tech starts off season on mildly upbeat note

IDG News Service - With the U.S. Labor Day holiday marking the unofficial end of summer on the markets, tech stocks got off to a fairly positive start in the new season as several major deals and the mobile phone market came under especially intense scrutiny.

Major exchanges and market indexes were mixed Friday in the wake of a tepid government jobs report. The Dow Jones Industrial Average closed at 14,922.50, down by 14.98 points, while the Standard and Poor's 500 index and the tech-heavy Nasdaq both closed up slightly higher for the day.

The Dow, the S&P and the Nasdaq were all in positive territory for the week, however. The Nasdaq Computer Index of more than 100 tech-related stocks closed Friday at 1755.4, up by 3.82 for the day and also in positive territory for the week.

Tech stocks were among the most heavily traded shares Friday, with Microsoft and Nokia in the top five volume leaders of the day. This is not surprising, given the announcement Tuesday that Microsoft will buy the Finnish company's mobile phone business. Microsoft will pay $5 billion for Nokia's Devices & Services business and about $2 billion to license Nokia's patents.

Some analysts said that the deal is a necessary risk for Microsoft, which counts Nokia as its only major ally in the mobile OS battle against Google's Android and Apple iOS. Microsoft's mobile OS market share number is foundering in the single digits, and it may need the acquisition to assure that a major manufacturer will continue to produce Windows-based phones.

But the market appears to be sour on the deal, which pairs two tech giants that are so far on the losing side in the mobile market. Nokia shares, which at first jumped on the news, closed Friday at $5.37, down by $0.12. Microsoft shares dropped $1.55 on the news Tuesday, closing at $31.20, and drifted down during the week to end up at $31.15.

Many parts of Microsoft's broad product portfolio are doing well, but it's not a stretch to say that future success rests in large part on how well it does in the mobile market. "Never have as many mobile phones been sold worldwide as in the first half of 2013," according to a report from market research firm GfK this week.

"In the period January to June 2013, global demand for smartphones rose by 66% compared with the same period in the previous year," the report said. "Of all mobile end devices sold, 59% are smartphones."

Meanwhile, erstwhile smartphone leader BlackBerry wants to proceed as quickly as possible with a plan to sell the company in an auction process that could end by November, according to a story in The Wall Street Journal that cited sources close to the company. The company announced in August that it had formed a committee to explore "strategic alternatives."

Reprinted with permission from IDG.net. Story copyright 2012 International Data Group. All rights reserved.

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