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

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.

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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.

On the next page, we are going to take a look at Apple and Yahoo!.
Apple Experiences Patent Troubles in China 

Apple Inc. (NASDAQ:AAPL)’s shares have retreated to close at $95.33 a piece this week. Patent troubles in the world’s largest smartphone market could have something to do with the stock’s weakness. Shares of Apple sold off on Friday after news broke that Beijing officials ordered a halt of sales of the iPhone 6 and iPhone 6 Plus in the city. The officials ordered a halt because a court ruled that the two phone’s designs infringe on a patent held by a Chinese company. Apple has appealed and, according to reports, all Apple products are still for sale across the country. China is a key market for Apple and the company needs to have good relations with the government. In the most preferable scenario, Apple may need to do some more investments, similar to the one in Didi Chuxing, to patch up its relationship with the government and business can continue as usual. A total of 152 funds from our database had a long position in Apple Inc. (NASDAQ:AAPL) at the end of March, up by 19 funds from the previous quarter.

Yahoo! Sells Some Real Estate

According to the Silicon Valley Business Journal, Yahoo! Inc. (NASDAQ:YHOO) has divested some real estate assets to a Chinese company. Yahoo has apparently sold a 48.6 acre site in Silicon Valley to LeEco for $250 million, which gave the company a $144 million pre-tax profit. The real estate sale’s effect on the sale of Yahoo’s core properties is uncertain. One bidder, Verizon Communications Inc. (NYSE:VZ), is only interested in the core internet businesses, while others are interested in the core internet business, patents, and assets. The bidders might take the sale into account when offering their final bidding prices. At the end of March, 97 funds from our database owned shares of Yahoo! Inc. (NASDAQ:YHOO).

Disclosure: none