Today: Apple (AAPL) buys a Mountain View startup that could boost Apple TV, and shares reach their highest level since January a day after Carl Icahn announced investment. Also: Cisco (CSCO) announces 4,000 layoffs, stock plummets.
The Lead: Apple tops $500 after acquisition aimed at Apple TV, Icahn's investment
Apple stock continued to build Wednesday, after Tuesday's news of an investment from Carl Icahn was followed by confirmation of an acquisition meant to boost its Apple TV offering, pushing shares higher than $500 for the first time since January.
Apple shares topped $500 for the first time in seven months, moving as high as $504.25 before falling back to end the day's trading session with a 1.8 percent advance at $498.50. Apple stock has now gained 10.2 percent in the month of August after advancing 14 percent in July
Wednesday's move came after the Cupertino tech giant confirmed late Tuesday afternoon that it had acquired Mountain View startup Matcha.tv, which offered a service that would guide users to video content across several different services, such as cable and different streaming options such as Netflix (NFLX)
(FILES)The Apple logo is seen in this September 11, 2012 file photo at the Yerba Buena Center for Arts in San Francisco. KIMIHIRO HOSHINO/AFP/Getty Images (KIMIHIRO HOSHINO)
and Hulu. VentureBeat, which originally broke the story Tuesday, reported that a source quoted an acquisition price of $1 million to $1.5 million, though the actual amount could be higher.
Apple confirmed the move with a typical, generic statement and did not comment further. However, the technology seems like a perfect fit for Apple TV, the company's set-top dongle that lets users stream video content to their television sets. Amid rumors about Apple developing an all-in-one TV set, Apple seems to have fallen behind in the race for users' living rooms, with Roku more popular according to a recent survey and Google (GOOG) getting a boost from the debut of its Chromecast device, which costs less and performs similar functions.
Despite the move, attention was still squarely on Icahn, who tweeted Tuesday that he had amassed a sizable investment in Apple and been able to speak with CEO Tim Cook about Icahn's desire for a more robust stock-repurchase program from Apple, which committed $60 billion to buying back shares earlier this year.
Analysts disagreed on whether Icahn would be able to successfully push Apple to buy back more shares: UBS analyst Steven Milunovich deemed it "unlikely" after the company already went into debt to finance a $100 billion overall plan to return cash to shareholders, but Barclay's analyst Ben Reitzes noted that Apple could easily add another $15 billion or so to its buyback program thanks to its large free cash flow, which he predicted would add $1.10 to the company's earnings per share in the 2015 fiscal year.
Bloomberg News reported that Icahn had snatched up about $1 billion in Apple stock, while the Wall Street Journal reported a purchase of about $1.5 billion, but that would not even place Icahn in the top 50 largest shareholders in Apple, according to FactSet. Analysts still expect the investor's outsize influence will allow him to agitate more than some larger stakeholders, however.
"Very rarely is Icahn's first request his final request," Moor Insights and Strategy analyst Patrick Moorhead told the Los Angeles Times. "I expect Apple to balk initially and then Icahn to go into action until he gets what he thinks he deserves. This will get uglier before it gets resolved."
SV150 market report: Cisco, NetApp and Agilent release earnings after down day for Wall Street
Apple pushed Silicon Valley stocks to a small gain on the day, even as the larger Wall Street indexes fell, but most of the action took place after Wednesday's regular session, when three of the region's 15 largest tech companies released quarterly earnings.
Cisco Systems announced it would lay off 5 percent of its workforce during its earnings conference call Wednesday afternoon, and its stock took a big hit. The San Jose networking giant reported earnings of 42 cents a share on record quarterly revenues of $12.4 billion, representing strong year-over-year growth: Profits gained 18 percent and sales were up 6 percent. Analysts had expected slightly stronger profits, however, with a Thomson Reuters survey showing an average forecast of 44 cents a share, and Cisco announced in its earnings call that it would lay off 4,000 people beginning in 2014. Cisco stock plummeted in late trading to less than $24 after it ended the regular session with a 0.2 percent gain at $26.37.
Sunnyvale storage company NetApp followed a similar path to Cisco, posting year-over-year gains but falling in late trading. NetApp reported profits of 23 cents a share on revenues of $1.51 billion, but the company's stock fell more than 4 percent in late trading after closing Wednesday's session with a 0.1 percent gain to $42.33. Santa Clara biotech equipment giant Agilent went the other way from its Silicon Valley neighbors, posting a year-over-year dip in profits and revenues to earnings of 49 cents a share on sales of $1.65 billion, but the company's stock rose more than 3 percent in after-hours action after dropping 0.9 percent to $46.51 in regular trading.
In Wednesday's regular session, San Francisco social-gaming pioneer Zynga gained 2.1 percent to $2.97 after CEO Don Mattrick began remaking the executive suite, losing three executives including the newly crowned chief operating officer and Zynga's chief technology officer, who was close with former CEO and co-founder Mark Pincus. San Jose networking company Brocade gained 15.8 percent to $7.99 a share after a strong earnings report released Tuesday afternoon, San Mateo's WageWorks gained 12.2 percent to $45.46 after pricing a new public offering of stock at $40.45, and Nvidia gained 4.2 percent to $15.03.
Elon Musk's Silicon Valley ventures had a rough day Wednesday on Wall Street: Tesla Motors (TSLA) dropped 4.2 percent to $139.36 as it announced a new Supercharger location at its Fremont manufacturing facility, and SolarCity declined 4.7 percent to $36.14. Google declined 1.3 percent to $869.81 as its Street View project met unexpected resistance in Thailand, and Facebook dropped 1 percent to $36.64 as hedge-fund filings showed mixed reviews of the stock.
Up: Nvidia, Advanced Micro Devices, Zynga, Apple, Netflix, Oracle (ORCL), Electronic Arts
Down: SolarCity, Tesla, LinkedIn, SunPower (SPWRA), Pandora, Google, Gilead, Facebook, Yahoo (YHOO), Yelp, Salesforce, Symantec, Adobe
The SV150 index of Silicon Valley's largest tech companies: Up 1.71, or 0.13 percent, to 1,321.07
The tech-heavy Nasdaq composite index: Down 15.17, or 0.41 percent, to 3,669.27
The blue chip Dow Jones industrial average: Down 113.35, or 0.73 percent, to 15,337.66
And the widely watched Standard & Poor's 500 index: Down 8.77, or 0.52 percent, to 1,685.39
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.