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Technology Round Up - January 5, 2012
There have been many noteworthy developments in the technology space recently. Some of these will likely have a material impact on the companies in the sector and the markets they serve.
Holiday Cheer for Amazon.com
Amazon.com (AMZN) reports that its Kindle family of products sold very well this past holiday season. Indeed, over a million Kindles were sold each week in December. The Kindle Fire tablet claimed the top spot, followed by the Kindle Touch. Sales of the Kindle have been strong internationally, particularly in Europe. Efforts to offer the Kindle products at relatively low prices appear to have paid off in recent months. Furthermore, high Kindle sales also increase e-book sales for Amazon.
A New Offering From Netflix
Netflix (NFLX) will be launching its first original, exclusive series in early February, which will be available on its streaming service in the United States, Canada, and Latin America. “Lilyhammer” stars Steven Van Zandt (from the E Street Band and “The Sopranos”) as a New York mobster in a small town in Norway. Other Netflix content slated for release includes “House of Cards” and a new season of “Arrested Development”.
Netflix has experienced its share of troubles since last July, and its stock price has fallen dramatically since then. The company has lost customers since it decided to split its streaming and DVD-by-mail offerings into two separate plans, increasing the price significantly for customers who use both services. This move has upset customers and investors. In addition to the customer exodus, the company’s industry continues to draw competitors.
It remains to be seen whether the introduction of its own content can help Netflix turn the corner. One of the most important issues for the company is to increase the amount of content available for streaming. This could very well be an important step in the right direction, provided the programs are well received by customers and critics.
Apple TV Speculation Mounts
Speculation continues to mount about Apple’s (AAPL) foray into Internet television. It is rumored that Apple plans to launch the TV sets in the second or third quarter of 2012. The initial sets will reportedly be 32-inches and 37-inches, though larger sizes would likely not be too far off. The devices are expected to incorporate streaming and downloading services.
Such an offering would presumably be far more ambitious than the company’s previous foray into Internet television. The original Apple TV is a set-top box. This network appliance is designed to play digital content from a variety of sources, including iTunes, Netflix, and YouTube. The second generation of this device (released in September of 2010) met with modest success, selling over 2 million by the end of the second quarter of 2011. Should Apple introduce television sets, we would expect these offerings to aim for much greater sales.
It remains to be seen whether such an endeavor (provided Apple undertakes it) would meet with success, and if so, what effect this would have on television producers and cable providers. Much remains unclear at this juncture, though interested investors, consumers, and technophiles alike are advised to keep a close eye on this issue.
Research In Motion’s Troubles Continue
Research In Motion (RIMM) continues to lose ground to Apple and smartphones running on Google’s (GOOG) Android platform. Indeed, the company’s share of the smartphone market declined from 19.7% to 16.6% during the three months ended November 30, 2011, according to comScore. In addition, the company offered considerable discounts on its PlayBook tablet in India in the last few days of 2011 in a bid to boost poor sales of the product there. India is an important market for the company. Its BlackBerry has proven popular in emerging markets in recent times, offsetting weakening demand elsewhere. The discounts follow recent prices cuts in North American markets. Sales of the PlayBook have paled in comparison to sales of Apple’s iPad. Research In Motion has announced that it was taking a $360 million aftertax charge in relation to the writedown of its PlayBook inventory.
In addition, the company now plans to delay the launch of smartphones based on its QNX operating system until late in 2012. These devices had previously been expected to be released in the first quarter.
A New CEO For Yahoo!
Yahoo! (YHOO) has a new chief executive. Scott Thompson will take the helm. Mr. Thompson had previously been head of PayPal since early 2008. Yahoo! is undergoing a strategic review, and taking stock of its options in the current environment. The company has struggled to remain competitive in recent years, and has been eclipsed by newer rivals. Yahoo’s next move could be to cut its stakes in China’s Alibaba Group and its Japanese affiliate, raising roughly $17 billion.
Shares of Yahoo! have been lifted by buyout speculation in recent months. Potential suitors have included Alibaba and several private equity firms. The addition of a new chief executive appears to make this possibility less likely. Even so, Alibaba may still make a bid, should efforts by Yahoo! to cut its Asian holdings break down. Alibaba has recently retained a Washington lobbying firm, a move which has been interpreted by investors as signaling the company was still interested in a deal.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.