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There have been a number of noteworthy developments in the technology space recently. They will likely have a material impact on the companies in the sector and the markets they serve.

Electronic Arts To Acquire PopCap Games

Electronic Arts (ERTS) has agreed to acquire PopCap Games for about $650 million in cash and $100 million in common stock. PopCap is a major provider of games for mobile phones, tablets, personal computers, and social networking Web sites. Electronic Arts’ global studio and publishing network will help PopCap expand its market footprint, and this addition will accelerate EA’s momentum towards a $1 billion digital business. This follows the company’s earlier acquisition of Chillingo, also an independent games publisher. These moves allow EA to diversify its revenue stream and expand its presence across a wider array of platforms. Moreover, they reflect an important trend in the video game industry, as publishers have been purchasing developers of mobile and social games, since those markets are expanding with the popularity of Facebook and smartphones.

A New Pricing Plan For Netflix

Netflix (NFLX) has separated its streaming and DVD-by-mail offerings into two distinct pricing plans. The new pricing offers unlimited DVD by mail for $7.99 per month or unlimited streaming for $7.99 per month. Customers who want both would have to pay $15.98 per month. This will not affect streaming only subscribers, and will be a 20% savings for customers who want the DVD-only plan. However, it will result in a 60% price increase for DVD-subscribers who also use streaming. This should upset some customers and hurt domestic subscriber additions in the third quarter. However, the company believes it will have a net-positive effect on revenue from the fourth quarter onward. It appears to be part of a strategy to emphasize the company’s streaming service. Indeed, Netflix is directing savings generated from lower DVD demand toward increasing streaming content and marketing.

Nintendo Slashes Prices for the 3DS

Nintendo has announced that it is cutting the price of its handheld 3DS game console by 32% in the face of disappointing demand. This occurs only four months after the release of the 3DS. The console has had a rough ride. Indeed, following its launch, Nintendo warned customers that 3-D viewing may be detrimental to the eyesight of young children. Moreover, the environment for high-end, hand-held games remains unfavorable. The new console appears to be having difficulty competing against Apple’s (AAPL) iPad and iPod touch. These handheld devices also offer games, many that are free or downloadable for just 99 cents. Nintendo’s stock was down more than 10% after the company announced it was cutting its fiscal-year earnings forecast by around 80%.

EBay’s Online Payments Unit Targeting Offline Payments

Ebay’s (EBAY) online payments business PayPal is looking to help retailers expand their business offline. PayPal will be testing “point-of-sale” innovation with a large domestic retailer by yearend. Next year PayPal will introduce in-store payment services with as many as 20 national retailers. This move follows encouragement by merchants and investors who want to see the company aggressively pursue the offline opportunity. Though online payments have traditionally been PayPal’s bread and butter, the surging popularity of smartphone usage has blurred the distinction between online and offline payments. Emerging mobile payment standards should allow consumers to make purchases with their mobile phones in the coming years.

Cisco, Research In Motion to Cut Workforce

Cisco Systems (CSCO - Free Cisco Stock Report) has announced plans to reduce its workforce by 15%, which will lower its headcount by roughly 11,500 staff. In addition, the company will sell its set-top box factory to Taiwan’s Hon Hai Precision Industry. The move will result in pretax restructuring charges of up to $1.3 billion in the coming quarters, but should result in a reduction of annual expenses by $1 billion. The changes were prompted by weakness in the global economy and the company losing market share in the network equipment business. Elsewhere, Research In Motion (RIMM) will slash 2,000 jobs (11% of its workforce). Efforts to improve productivity should, indeed, benefit profit margins, though it remains to be seen if the company can improve its competitive position. RIMM has lost ground in recent years to Apple’s iPhone and devices using Google’s (GOOG) Android software. Investors appear skeptical as to whether the company can regain market share, and the stock currently trades at a price-to-earnings multiple well below its historical average.

 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.