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This Week in Tech: Microsoft, Apple, LinkedIn, and More

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A lot has happened in the technology sector in the third week of June, including mergers, negative regulations, and asset sales. In this article, we go over the most meaningful catalysts in the sector, including an analysis of events involving five big tech stocks.

The companies in question are Microsoft Corporation (NASDAQ:MSFT), LinkedIn Corp (NYSE:LNKD), salesforce.com, inc. (NYSE:CRM), Apple Inc. (NASDAQ:AAPL), and Yahoo! Inc. (NASDAQ:YHOO). Aside from taking a look at the latest developments surrounding these companies, we will also take a look at the hedge fund sentiment towards them, based on the data from the last round of 13F filings.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Microsoft Corporation (NASDAQ:MSFT), Microsoft corporate offices, people, sign, building, logo

Northfoto / Shutterstock.com

Big M&A deal

Microsoft Corporation (NASDAQ:MSFT) made a bold move this week by buying LinkedIn Corp (NYSE:LNKD) for $26.2 billion in cash. Microsoft’s bid was evidently generous enough to beat out any potential salesforce.com, inc. (NYSE:CRM) offer, even though a salesforce.com/LinkedIn combination likely would have had more synergies than Microsoft will realize from buying the professional networking site. On the surface, it doesn’t seem that Microsoft and LinkedIn have much overlap that could yield any meaningful cost-cutting opportunities.

Digging deeper, the acquisition will allow Microsoft to further strengthen itself in the lucrative corporate productivity market and provide it with a valuable tool to increase growth in its cloud services. LinkedIn will be part of Microsoft’s Productivity and Business Processes division, and LinkedIn’s treasure trove of data over its hundreds of millions of corporate and professional users will help Microsoft improve the utility of its software. The more utility Microsoft’s programs deliver, the more lock-in the company has with its users, who increasingly have more cloud productivity options from salesforce.com and other companies.

The deal is the largest acquisition that Microsoft has made under CEO Satya Nadella’s tenure, and although Microsoft has had a spotty history with acquisitions, including buying Nokia’s phone division and aQuantive, the latest deal could pay off given LinkedIn’s strong network effects and future growth potential. Microsoft may have to sacrifice its AAA credit rating, however, to finance the deal, as the company still intends to complete its previously announced billion-dollar buyback program by the end of the year.

Among the 766 funds tracked by Insider Monkey, Microsoft Corporation (NASDAQ:MSFT) was the most popular with 144 funds holding shares at the end of March. Salesforce.com, inc. (NYSE:CRM) was next with 63 investors having reported stakes and LinkedIn Corp (NYSE:LNKD) was third with 41 funds long the stock as of the end of the first quarter.

Follow Microsoft Corp (NASDAQ:MSFT)
Trade (NASDAQ:MSFT) Now!

Follow Linkedin Corp (NYSE:LNKD)
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Follow Salesforce Com Inc (NYSE:CRM)
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On the next page, we are going to take a look at Apple and Yahoo!.

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