Technology Stock Roundup: Intel/TI/Micron Crash, GTAT Goes Bankrupt

Chip stocks like Intel (INTC), Texas Instruments (TXN) and Micron (MU) took a tumble last week as Microchip (MCHP) warned of an inventory correction in the industry; GT Advanced Technology (GTAT) filed for bankruptcy.

Inventory Concerns Send Semi Stocks Crashing

Microchip Technology led semiconductor stocks down as its CEO warned investors of an inventory correction. Semiconductor companies and investors in these companies have been very much on edge about a fallback in demand.

After the last downturn, companies have been very conservative about building inventory and placing orders, and channel inventories have been lean for the most part. A few companies had just started talking about some channel filling this year, but it may be too soon if Microchip CEO Steve Sanghi is to be believed.

The warning shouldn’t have had such a broad impact, but many semiconductor bellwethers had swooning share prices following the CEO comments. Some of the worst affected were Microchip itself, Intel, Texas Instruments, STMicroelectronics, Micron, Analog Devices and Freescale.

This could be because of Microchip’s broad exposure to different markets using semiconductors. Moreover, the weakness was attributed particularly to China and a lot of these companies have been pinning their hopes on growth in the region. Sanghi also said that companies reporting on a sell-in basis may not feel the effect immediately.

Apple “Surprised” at GTAT Bankruptcy

GT Advanced Technologies is paying the price for placing all its eggs in one basket. But the company probably can’t be blamed because of the funding required to develop sapphire technology. Apple (AAPL) agreed to pay $578 million for the purpose last year, of which $439 million was paid as a first installment. The remaining $139 million was to be paid only if GTAT met certain criteria, which aren’t public.

GTAT says the terms of the agreement were “burdensome and oppressive.” First, it filed for Chapter 11 protection, then it requested the court permission to wind down the sapphire crystal operations in Arizona and keep the terms of its agreement with Apple undisclosed because it could be required to pay $50 million in damages per disclosure. After that, it filed another document asking the court to end its agreement with Apple because it was an unnecessary drain on its resources.

Apple did two things that could have put the final nail in GTAT’s coffin. First, it rescinded the contract without paying the $139 million. Second, it didn’t use what GTAT was making in its devices, since the contract didn’t impose any obligations on it to buy although GTAT was obligated to produce and meet its quality and volume requirements.

The nature of Apple devices necessitates huge volumes, and Apple wouldn’t be able to use the material if volume targets weren’t reached. Apple said that it was focused on preserving jobs in Arizona and would continue to work with state and local officials as it considered its next steps.

Symantec Decides To Split

GOOG = Class C shares (new, non-voting)

GOOGL = Class A shares (old, 1 vote per share)

Other stories you may have missed-

Corporate

Facebook’s Zuckerberg Goes to India: Zuckerberg’s mission to “spread knowledge and improve lives” took him to India last week. The Facebook (FB) CEO was also supposed to meet the new government to discuss the issue of limited connectivity and invest a million dollars for innovative ideas to connect women, students, farmers and migrant workers. India has roughly 1.2 billion people, of which 108 million have Facebook accounts. While that’s up from just 8 million back in 2010, the scope for growth appears considerable.

Yahoo Does An India Job Cut

Microsoft CEO’s Faux Pas: Microsoft CEO Satya Nadella must have made a few enemies with his comments about women’s pay. When asked about his advice to women that were not comfortable asking for a raise or promotion, he said that they should wait for the system to take its own course and trust that their karma would deliver the goods. But he must have missed the report from the American Association of University Women that found women received 78% of what was paid to equally qualified males. At any rate, he apologized.

Twitter Replaces Head of News: Adam Sharp is replacing Vivian Schiller as head of news and government partnerships. Sharp’s role appears broader than Schiller’s who was in charge of partnerships with news and journalism organizations. Schiller came from NBC News.

Oracle Hires Snapchat Exec: Oracle has announced that it has employed former Snapchat and Google engineer Peter Magnusson to work on its Oracle Cloud Platform as its SVP of cloud development. Oracle’s efforts are intended to help big companies modernize their technology enabling more tasks in the cloud. He will report to Thomas Kurian, its head of product development.

Regulatory

EU to Take Amazon to Task: The European Commission will start a formal probe into allegations that Amazon has used its Luxemberg unit to illegally minimize the taxes it pays in Europe. Amazon leases its technology licenses to a tax-exempt partnership in Luxemberg, which then operates in Europe on its behalf. Amazon received a favorable tax ruling in 2003, which limited its total tax to less than 1% of its European income. If it is found that Amazon gained competitive advantage as a result of this mechanism, it may be required to pay off the resultant gains over the past 10 years.

Cisco Could Be Resorting to Stealth Disclosure: Investment research firm Probes Reporter has issued a report pointing to inadequate disclosure in Cisco’s filings about SEC enforcement activities. The report says that Cisco made choices regarding timing, venue and language that appear designed to mislead investors and/or keep material information from them regarding SEC exposures.

New Technology/Products

Microsoft Dynamics CRM is Enhanced: The new sales productivity solution combines Dynamics CRM Online Professional with Office 365 and Power BI facilitating seamless operation between different productivity tools to make them more effective. The promo price is $65 a user but existing Office 365 users can upgrade for $45. The pricing is competitive.

Facebook Anonymous App Could Be a Salve: Rumor has it that Facebook is developing an app that will allow users to connect and share views anonymously. Facebook needs true identities of users for proper customer profiling and ad serving, so it has spent some time defending its ID requirements. But recently, the company made peace with drag queens and trans-gender folks because it didn’t want to alienate users.

Its intention to get into healthcare may also have influenced this move since some people may be reluctant to share such sensitive information publicly. The app could solve these problems, but how or if at all it allows integration with the main network could have an effect on its uptake.

Google Wants to Help You Pay Your Bills: Privacy advocates may well sit up and take notice. Google Now is now able to scan your email for the bills you need to pay during the week and tell you the amounts and dates. Google on its part has only made the feature available to those turning on Google Now and giving Google express permission to access information from their Gmail accounts. It also displays the words “only you can see these results” when pulling up the bills.

Google Could Announce New Tab This Week: Its now being rumored that Google will launch its Nexus 9 on Oct 15, just a day ahead of Apple’s new iPad announcement. The device will be manufactured by HTC (allowing Google to continue expanding its partner base) and it now appears that it will sell for $399.

Amazon Takes Holiday Deals Abroad, Invests in First Brick & Mortar Store

M&A

Microsoft To Acquire Israeli Startup Equivio

Activist Investor Asks EMC to Split: In its first public letter to the company, activist investor Eliott Management Corp asked EMC to spin off its VMware unit or pursue other M&A options. EMC said that its leadership had already had several discussions with Eliott reps and they were looking forward to open dialogue with shareholders to determine the best course of action for the company. EMC has seen weakening demand for its higher-priced older generation products sue to the availability of cheaper alternatives, modular structures and combining flash memory.

Compuware Spins Off Covisint: Application performance management company Compuware has announced the spin-off of its single-point BTB cloud platform Covisint to help it better focus on its growth opportunities. All shares that Compuware holds in Covosint will be distributed as a pro rata dividend on Compuware shares and will be taxable in the U.S.

Collaborations

Pandora/Ford Partnership: Pandora has gone a step forward in its international expansion with the announcement of a partnership with Ford Australia. Pandora has around 2 million listeners in the country and estimates that 60% of Australians listen to radio in their cars each week, with 35% of all music-listening happens inside cars. Other automakers it has partnered with in Australia include Holden and Mazda.

Twitter Ties with French Bank: Groupe BPCE, the French bank with the second largest number of customers, has tied with Twitter to enable its customers in France to make simple person-to-person money transfers through tweets. The service, which doesn’t require the sharing of bank details is called S-Money.

Some Numbers

iOS Uptake Appears Slower than Usual: Mixpanel estimates that iOS 8 uptake is a good bit slower than its predecessor iOS 7, which was already in 70% of Apple devices in the first 2.5 weeks. This could be because of the bugs in the system at the time of launch. But iOS 8.1 is not that far off, and upgrades could pick up at that time. A sluggish uptake also slows down the app development process since developers have fewer devices to address, which makes it less lucrative for them.

Cisco Ceding Share to Huawei: Market research firm IDC sees limited growth in the market for video conferencing and telepresence equipment through 2018 due to the presence of a growing number of cheaper alternatives. The firm estimates that market leader Cisco was the worst-hit in the second quarter of 2014, followed by the number two player Polycom. Both these companies appear to be losing out to the leading Chinese vendor Huawei, which saw a jump in its market share based on strength in emerging markets.

Social Media Marketer HubSpot Jumps on IPO: HubSpot, a company offering cloud-based sales and marketing tools for businesses using social media networks like Facebook, LinkedIn, Google and Twitter raised $125 million at its initial public offering. The company issued 5 million shares at $25 each, higher than the expected $22-24.

Major Companies Reporting This Week: Intel, Google, eBay, AMD and Netflix are among the top guns expected to report this week.

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