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Wall Street Beat: Takeover battles, Apple spark trading
By Marc Ferranti
News about Apple Computer Inc.'s iPod line, the continuing U.S. telecommunications sector merger saga, and a budding takeover battle in the Chinese online arena grabbed the attention of investors this week.
On Wednesday, Apple updated the iPod family with, among other devices, a new 30G-byte model of its mini digital photo music player, which sells for US$349, or $150 less than the previous 40G-byte version. The company also dropped the price of the 60G-byte version by about $150, to $449.
Apple (ticker symbol: AAPL) shares Wednesday spiked by $2.94, to close at $88.23. Company observers say that Apple is making a healthy profit on iPod devices. For example, a recent analysis from IDC reported that Apple makes 35 percent to 40 percent margin on each iPod Shuffle player sold. An expected drop in flash memory prices will further fuel profits, IDC said.
In the telecom arena, Qwest Communications International Inc. Thursday made a new bid for MCI Inc. in an effort to snatch it away from Verizon Communications Inc. The new offer counters the deal, announced Feb. 14, for Verizon to buy MCI for US$6.7 billion.
MCI (MCIP) shares have ridden the turbulence in the sector to a new 52-week high, closing Thursday at $23.21, up 24.4 percent for the month.
The new Qwest offer is for the same amount that it had tendered earlier, about $8 billion, but this time the company is saying that it will guarantee the price. The acquisition mechanism announced by Qwest would allow for a faster payout to MCI shareholders than the Verizon deal.
MCI had rejected Qwest's earlier offer, after which Qwest publicized the fact that its bid was higher than Verizon's. MCI officials then had to explain publicly that Verizon is larger and more profitable than Verizon and thus a better fit. MCI said it would study the new Qwest offer.
The jockeying for position in the telecom world follows SBC Communications Inc.'s January announcement that it will acquire AT&T Corp. The deal paved the way for further industry consolidation as carriers scramble to fight the new telecom giant.
After the SBC announcement, the value of Qwest shares neared its 52-week high of $5.00, then plunged below $4.00 after the Verizon-MCI deal was announced. But since announcing that it intended to rebid, Qwest (Q) shares have moved back to the $4.00 range. Verizon (V) shares have inched down, closing Thursday at $35.50, 1.71 percent lower than its closing price one week earlier, when Qwest announced its intention to rebid.
Investor interest has also been piqued by a corporate takeover tussle in China. The efforts of Shanda Interactive Entertainment Ltd., China's biggest online-game company, to acquire Internet media company Sina Corp. has boosted the value of Sina on the Nasdaq exchange.
On Feb 18, Shanda announced that, together with related companies, it had paid $230 million for a 19.5 percent stake in Sina. Sina (SINA) shares jumped by $2.82, to $28.42, on the news. Though Sina Tuesday announced a shareholder rights plan, otherwise known as a 'poison pill,' to ward off a takeover, the move did not dim Sina's star significantly, as shares in the company continued to trade in the $27 range. Continued interest in the company is likely due to the fact that a merged Sina and Shanda would be the largest company in the competitive Chinese Internet market.
Telecom manufacturers, meanwhile, see continued price pressure. Ciena Corp. shares lost $0.35 Wednesday, sliding to $2.40, after the company said it does not expect its second fiscal quarter to be better than its first. Part of the problem, the company said, is that although its optical transport business has made some gains, margins on the equipment are low. It forecasts a second quarter loss of $0.05 to $0.07.
Posted February 25, 2005 05:22 PM |
