Today: While everyone kept their eye on the markets to see if the Dow Jones would hit a record high Thursday, the real action occurred after the markets closed, when Facebook announced the purchase of a failed Microsoft acquisition, Groupon fired CEO and founder Andrew Mason, and a raft of Silicon Valley companies announced earnings.
Facebook buys ad technology, Groupon fires its CEO, founder
Fireworks erupted in the social-networking sphere Thursday afternoon, when Facebook announced that it was purchasing advertising technology from Microsoft meant to help the social network challenge Google (GOOG), and Groupon booted its founder from the CEO seat.
Facebook's acquisition of the Atlas Advertiser Suite from Microsoft has long been rumored, but the companies made it official Thursday. Microsoft bought Atlas as part of its $6.3 billion purchase of aQuantive, a digital advertising agency. The purchase did not work for Microsoft -- it wrote down $6.2 billion from the acquisition last year -- but it receives an unspecified portion of that cash back in Thursday's deal.
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From Facebook's side, the deal gives it another tool to battle Google in the lucrative market for Internet advertising; Google and Facebook are the top two in that field, according to eMarketer, with Google in front.
Atlas measures the effectiveness of advertising, a sore point for Facebook after General Motors publicly ended its ad deal with the company in the run-up to the Menlo Park company's record-breaking initial public offering last year. Facebook has focused intently on building up its advertising offering, launching Facebook Exchange late last year, which targets users based on other websites they visit, and plans to expand that offering.
"They are chasing a new pool of money," Pivotal Research Group analyst Brian Wieser told Bloomberg News recently. "The exchange is going very well, and could contribute meaningfully to ongoing revenue acceleration."
By combining Atlas with its ad exchange offering, Facebook can offer advertisers targeted ads and follow-up information on how
Groupon Chief Executive Andrew Mason (L) prepares for the opening bell ceremony celebrating his company's IPO at the Nasdaq Market in New York in this November 4, 2011, file photo. Groupon Inc replaced CEO Andrew Mason at the helm on February 28, 2013, a day after posting a dismal set of quarterly results, and appointed co-founder Eric Lefkofsky and board member Ted Leonsis as interim chief executives. REUTERS/Brendan McDermid/Files (BRENDAN MCDERMID)
effective the ad was, a full-service offering that will give it a strong case when challenging Google.
While Facebook has recovered from a post-IPO plunge in its stock price, daily deals originator Groupon has not been able to turn around its trajectory, and that cost founder Andrew Mason his role as CEO on Thursday. One day after the company announced its second consecutive disappointing quarterly earnings report -- which led to a gigantic drop in its stock price Thursday -- the board asked Mason to leave the company he created.
Mason seemed to understand and support the decision, publicly releasing a humble and hilarious goodbye memo.
"After four and a half intense and wonderful years as CEO of Groupon, I've decided that I'd like to spend more time with my family. Just kidding -- I was fired today. If you're wondering why ... you haven't been paying attention," Mason began, later adding, "The events of the last year and a half speak for themselves. As CEO, I am accountable."
While Mason's ousting may satisfy some large investors who have been calling for a more seasoned executive to run Groupon, the struggling company is likely to be tough to revive, experts said.
"The next person who comes in will have tough road ahead. The new CEO will have to be somebody with a strong stomach," Dan Niles, chief investment officer at AlphaOne Capital, told Reuters, later adding, "Changing the CEO is not going to change the fundamental tough aspects of the business."
Reality set in during after-hours trading, where shares spiked as much as 13 percent before settling down to an increase of about 4 percent. In regular trading, Groupon shares decreased 24.3 percent to close at $4.53.
Facebook shares gained 1.4 percent to $27.25 in regular trading, and the price was steady in after-hours trading following the announcement of the Atlas deal.
Salesforce, Palo Alto Networks and The Gap exceed expectations
With all the excitement of the Groupon and Facebook announcements, a trio of Silicon Valley earnings reports nearly escaped attention, but the performance of a software stalwart and upstart security firm are likely to be on investors' minds in Friday trading.
San Francisco cloud-software pioneer Salesforce announced that yearly revenues increased 35 percent in 2012. While the company did lose money in the final quarter of the year, it exceeded projections for revenue as it continued to add cloud subscribers. The company's forecast for 2013 meshed with analysts' expectations, and investors pushed the company's stock up more than 5 percent in after-hours trading.
Palo Alto Networks, a cloud-based security software company, announced its second quarterly earnings report since its successful 2012 IPO, and beat analysts' expectations for the second consecutive quarter. With hacking attacks on government and corporate interests receiving heavy publicity, the company increased its revenue 70 percent and boasted of profits of 5 cents a share, a strong showing for a young company as both numbers beat forecasts. Still, shares dipped after-hours, as "some investors may have hoped for more," FBR Capital Markets analyst Daniel Ives said. After gaining 5.5 percent to $61.13 in the regular session, shares decreased by more than 4 percent in late action.
Outside of the tech realm, San Francisco retailer Gap continued to come back from the doldrums, announcing that sales continued to climb in the holiday quarter. The company reported profits of 73 cents a share, a big jump from 44 cents a share in the 2011 holiday season, and celebrated by announcing a 20 percent dividend increase. After gaining 1.3 percent to $32.92 in regular trading, shares rose another 2.5 percent in late trading.
Apple falls as Dow fails to hit record, but Yahoo hits 52-week high
The financial world's attention was diverted for most of the day by the chances that the Dow Jones industrial average could close at an all-time high, but stocks ended up dipping slightly on the day after the rally that produced big gains on Wednesday finally faded.
In Silicon Valley, stocks had a rougher day, with the SV150 declining 0.4 percent, a steeper fall than the three main U.S. indexes. Apple (AAPL) was a part of the fall, declining 0.7 percent despite announcing that iTunes U had produced its 1 billionth download. Redwood City neighbors Electronic Arts (ERTS) and Oracle (ORCL) also had a rough day, dropping 3.3 percent and 1.3 percent respectively.
There were still success stories, however: Yahoo (YHOO) hit a new 52-week high of $21.57 in intraday trading before closing with a gain of 0.7 percent at $21.31, despite focus still being on its work-from-home ban, which produced a humorous billboard on Highway 101. Hewlett-Packard (HPQ) rose 1.8 percent to $20.14 as the Palo Alto tech giant became the first entity to obtain 1 million followers on LinkedIn, which fell slightly from the record high established Wednesday.
Silicon Valley tech stocks
Up: Palo Alto Networks, SolarCity, Ruckus, Netflix (NFLX), HP, Yelp, Facebook, Intuit (INTU), eBay (EBAY), Symantec, Yahoo, SunPower (SPWRA), Nvidia, Google
Down: Zynga, EA, NetApp, Advanced Micro Devices, VMware, Oracle, Workday, Tesla, Adobe (ADBE), Apple, Splunk, Jive, Gilead
The tech-heavy Nasdaq composite index: Down 2.07, or 0.07 percent, to 3,160.19
The blue chip Dow Jones industrial average: Down 20.88, or 0.15 percent, to 14,054.49
And the widely watched Standard & Poor's 500 index: Down 1.31, or 0.09 percent, to 1,514.68
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.