A posed picture shows a Motorola Droid phone displaying the Google search page in New York August 15, 2011.

Credit: Reuters/Brendan McDermid

SAN FRANCISCO (Reuters) - Recommendations to unload Google Inc stock are extremely rare on Wall Street. But the latest "sell" rating for the Internet company was so fleeting it existed for just three trading days.

Standard & Poor's upgraded Google's stock on Monday, giving it a "hold" rating, reversing its much-debated downgrade the prior week.

S&P had slapped Google with a Sell rating -- the only such bearish call on the Internet giant's stock among almost 40 analysts tracked by Thomson Reuters I/B/E/S -- after a surprise August 15 announcement that it will buy Motorola Mobility Holdings Inc for $12.5 billion.

As with other investors and industry commentators, S&P voiced concern about Google's plans to enter the smartphone manufacturing business, which could weigh on its financials and create conflicts with the other handset vendors who also license Google's Android software.

Shares of Google have fallen more than 10 percent from their closing price before the deal was announced, trading just a whisker below $500 in the afternoon, compared to the Dow Jones Industrial Average's roughly 3 percent drop during the period.

But while several analysts adjusted targets on Google's stock price following news of the deal, no other firm appears to have downgraded Google's stock, according to Thomson Reuters data.

Scott Kessler, the head of technology sector equity research at S&P, said the sell-off in Google's stock following the Motorola news had brought its share price down to the $500 target that he set for Google when he downgraded the stock.

"It's very hard for us to say sell this stock when it's trading below its target price," Kessler told Reuters in an interview on Monday.

The fact that the back-to-back Google downgrade and upgrade came from S&P Equity, whose parent's unprecedented downgrade of United States sovereign debt this month roiled global markets and prompted discussion, made the move all the more striking.

Kessler acknowledged it was unusual to see a stock's recommendation change so quickly. But he said the move was consistent with S&P's approach to equity research.

"If we made a change to our fundamental commentary or the target price, that would understandably be a little curious," he said.

Google, the world's No.1 Web search engine, has 14 "strong buy" ratings, 20 "buy" ratings and 5 "hold" ratings, according to Thomson Reuters data. Google has no other "underperform" or "sell" ratings according to Thomson One (S&P's research is not included in Thomson One).

Although S&P raised its recommendation on Google's stock a notch, Kessler said the firm's views of Google have not changed much.

"We still have a lot of questions and concerns about this proposed acquisition and the impact it's going to have," he said.

(Reporting by Alexei Oreskovic; Editing by Phil Berlowitz)

original content on reuters

HP CEO Leo Apotheker speaks to the press after delivering the keynote address at the HP Summit in San Francisco, California March 14, 2011.

Credit: Reuters/Stephen Lam

SAN FRANCISCO (Reuters) - Leo Apotheker's credibility as a CEO is falling along with Hewlett-Packard's stock price.

Apotheker, who gained a reputation for sharp business acumen when he headed up SAP, thoroughly flummoxed HP shareholders last week with what some analysts have called a "value destroying" $11.7 billion deal to buy British software maker Autonomy and for sticking a for-sale sign on HP's PC division -- thus scaring off clients for the year or so it will take to decide on the division's future.

In a resounding rejection of Apotheker's grand vision, shareholders sent HP shares down almost 20 percent on Friday, wiping out $16 billion of value in the worst single-day fall since the Black Monday stock market crash of October 1987.

Since Apotheker joined HP early last November, the company has lost almost 44 percent of its value, and he has lost a significant amount of investor support.

"We wonder whether activist investors will -- and should -- begin to exert pressure on the board," said Toni Sacconaghi, an analyst with Sanford Bernstein. "If HP's results don't improve, the company will ultimately restructure its portfolio and/or replace its leadership."

Pat Becker Jr., fund manager at Portland, Oregon-based Becker Capital Management Inc, which owns HP shares, noted that Apotheker has continually failed to instill confidence in his conference calls with investors.

"Every time he has gotten on the call, the stock has gone down substantially," Becker said.

On a conference call last Thursday following the announcements on Autonomy and the PC division, Apotheker failed to fully address key questions from analysts, including why HP was paying a large premium for Autonomy. When asked about the vision for HP's PC unit, he said the decision could range from an outright sale to a spinoff to a "potential "nontransaction."

"That call -- was that an 'A' performance by a CEO on that acquisition?" asked Becker, whose firm holds HP shares.

An HP spokeswoman said the "strategic transformation" is intended to position the company for a new future and drive long-term shareholder value.

While investors applaud Apotheker's long-term plan to get out of HP's commoditized PC business, and the Palm WebOS tablet and smartphone business -- considered a capital sinkhole -- that goes with it, the $11.7 billion bill for Autonomy and haphazard articulation of the spin-off strategy left many shaking their heads.

HP's purchase price is a stunningly rich 10 times sales of Autonomy, a cloud search specialist whose revenues are equal to only about 1 percent of HP's.

HP's Personal Systems Group, which includes the PC business and the now-defunct TouchPad tablet -- faces an uncertain future, which may undermine the business and benefit Dell, whose shares ended up nearly 2 percent on Friday in a broadly weak market.

Even more worrying, HP's new strategic road map marked an about-face on several crucial fronts, signaling a lack of direction. Executives as recently as May had touted how WebOS would be on every HP product from printers to PCs. In March, they had played up the advantages of serving both consumers and enterprise.

In addition, Apotheker has been forced to slash HP's sales estimates three times since he took over last November.

IN BIG BLUE'S FOOTSTEPS

It is not the first time HP seems behind the curve. it agreed to buy Compaq in 2001 in what turned out to be a rocky merger. IBM, on the other hand, transformed itself by selling its PC arm to China's Lenovo in late 2004 and establishing its dominance in enterprise IT. HP appears to be trying to replicate Big Blue's success.

Some analysts and fund managers hold out hope that the company is at least now on the right track and can still catch up by making smart acquisitions.

"Just because they didn't make the move earlier doesn't mean they still can't skate to the where the puck is going," said Tony Ursillo, an analyst with Loomis Sayles Value Fund.

But he added, "HP has overpaid for every acquisition it has made" in the past year.

One thing that could take the sting out of the steep price tag for Autonomy is the sale of HP's PC division, which industry experts estimate could fetch as much as $10 billion.

And Apotheker did make at least one correct decision by retiring the TouchPad. Sacconaghi estimates the business lost about $250 million last quarter, or 9 cents a share.

INTERNAL DISARRAY

But the events of last Thursday have done little to build confidence in Apotheker. The afternoon of high drama kicked off with a series of rapid-fire announcements: disclosure of acquisition talks with Autonomy; confirmation a deal had been done; announcement that HP was killing its TouchPad and other WebOS devices.

HP also disclosed its results an hour earlier than scheduled, marking the second straight quarter that the company had to release earnings ahead of schedule. And in another small sign of disarray, TouchPad ads featuring "Glee" star Lea Michele continued to run on CNBC on Friday.

While HP's dire competitive position was in the making well before Apotheker's arrival, shareholders do not view the CEO's track record as impressive.

"I was skeptical coming in about whether he had the right background for the job," Ursillo said. "So far the results are not encouraging."

(Reporting by Poornima Gupta; Editing by Peter Lauria, Edwin Chan and Leslie Adler)

original content on reuters

Related Video

HP makes dramatic choices

Thu, Aug 18 2011

• Breakingviews: HP strategy points to uncertain future

A HP Invent logo is pictured in front of Hewlett-Packard international offices in Meyrin near Geneva in this August 4, 2009 file photograph.

Credit: Reuters/Denis Balibouse/Files

NEW YORK/BANGALORE (Reuters) - Shares of Hewlett-Packard slumped by more than 20 percent to a six-year low on Friday as investors wiped about $16 billion off the market value of the world's biggest PC maker in a resounding rejection of its plan for a major shake-up.

Investors also appeared to lose confidence in Chief Executive Leo Apotheker after a flurry of HP announcements on Thursday including an $11.7 billion acquisition offer, a shuttering of its mobile efforts and the potential spin-off its PC business.

This was on top of disappointing financial guidance for the third quarter in a row. HP may also be risking future PC sales as its customers could flee to rivals like Dell Inc in the uncertainty, one analyst said.

"They're doing too many things at the same time," said Sterne Agee analyst Shaw Wu.

Even if it makes sense in the long term, HP should not have told the world it was thinking of getting rid of its PC business, which brings in 16 percent of its profits, Wu said.

"Why would anybody want to do business with them if it's up for sale," he said. "To have this in limbo for 12 months is going to be pretty material."

On top of this, investors worried that HP's offer of nearly $12 billion for British software company Autonomy Corp was too high and questioned why it was giving up so soon on the mobile business it bought for $1.2 billion from Palm Inc, Wu said.

HP shares fell as low as $22.76 on Friday making it the biggest loser on the New York Stock Exchange. Before the announcements its shares had closed at $31.39 on Wednesday. Investors fled to rivals like Dell, pushing its shares up nearly 3 percent, as it is expected to profit from HP's chaos.

"There's not a lot of confidence in (Apotheker's) management," said Wu, noting that he had to lower guidance every quarter since he joined HP. "This is just further proof,"

At least two brokerages downgraded Palo Alto, California-based HP, and five cut their price targets, mainly citing uncertainty and expenses related to the restructuring.

"Last night HP may have eroded what remained of Wall Street's confidence in the company and its strategy," Needham & Co said in a research note.

Gleacher & Co analyst Brian Marshall cut his price target for the stock to $39 from $50 saying he "materially underestimated the magnitude and timing of this metamorphosis."

He said however that HP "is undergoing a sound strategy transformation by focusing on high-growth, high-margin opportunities in the enterprise/commercial markets."

With a forward 12-month price-to-earnings ratio of 5.6, the company is trailing its peers, including Dell, Apple and IBM according to Starmine SmartEstimate.

Before Thursday's news HP's stock had already lost nearly a fifth of its value since it reported quarterly results in May.

HP said it has already stopped production of its WebOS-based devices like its TouchPad tablet, which failed to attract buyers.

Cypress Semiconductor Corp -- the main supplier of touch controllers for TouchPad -- will also hurt if the company pulls the plug on the product, brokerage Collins Stewart said.

Cypress' shares fell 1 percent to $16.93 on Friday.

HP has been struggling with its once hugely popular PC business, as niftier gadgets like Apple's iPad have eaten into its business.

Thursday's weak forecast follows smaller rival Dell's lowered revenue outlook earlier this week that dragged down both stocks.

Both companies have been venturing out of traditional comfort zones and into enterprise solutions and services, but continuing soft sales have been a constant source of trouble.

Brokerage Robert W. Baird said HP is no longer a "safe haven" stock and expects it to lose market share.

HP's decision to spin off the PC business reflects commoditization, as consumers change the use of computers, and this may hurt Intel, the world's largest supplier of PC chips, brokerage Nomura said in a note.

"A reversal in average selling prices would remove a key revenue driver over the last six quarters (for Intel)."

(Additional reporting by Rachel Chitra in Bangalore; Editing

by Don Sebastian, Joyjeet Das, Dave Zimmerman)

original content on reuters

An Apple store employee gives a class on how to use the new iPad 2 during the China launch at an Apple Store in central Beijing May 6, 2011.

Credit: Reuters/David Gray

SAN FRANCISCO (Reuters) - Apple Inc's increasingly effective patent war against rivals like Samsung Electronics may mask its real target: arch-foe Google Inc.

The maker of the iPad and iPhone has sued three of the largest manufacturers of Google's Android-based devices -- Samsung, Motorola and HTC -- for multiple patent infringements across multiple countries, pointing out "slavish copying" of design and "look and feel."

And the courts are beginning to listen: recent success in blocking sales of Samsung's latest Galaxy tablet in most of Europe and Apple's challenges to the Korean giant in Australia reflect an aggressive effort to defend its top position in the red-hot mobile market from the runaway success of Android.

While the lawsuits don't take direct aim at the operating software -- yet -- many of the features under contention are connected to and enhanced by it. Apple CEO Steve Jobs once referred to the software as being the soul of any device when he introduced the company's iOS 5 system in June.

Brian Marshall, an analyst with Gleacher & Co, said Apple is starting to flex its patent muscle with some early success but its real battle is with the Android software. "Apple doesn't really care too much about the actual OEMs."

Apple's lead is now under siege in smartphones from Google's free Android software, already the world's most-used mobile system with 550,000 devices activated every day.

Its momentum could be hampered by successful patent infringement lawsuits against adopters like Samsung.

"The way Google gets sucked into it is through the marketplace," Ron Laurie, managing director and patent consultant at Inflexion Point Strategy, said.

Any injunction won by Apple, if enforced, could mean that Android may be forced to take out the offending feature from its software design. "That would make it less attractive and people would go elsewhere," Laurie said.

Google Chairman Eric Schmidt has said rivals are responding to Android's success with lawsuits "as they cannot respond through innovations."

HIGH STAKES

At stake is a booming one-year-old market that analysts are already predicting will eclipse the decades-old PC market in a matter of years, a market that Apple fears Google's software could eventually dominate the way it now leads the smartphone arena.

The tablet market is expected to grow from under 20 million tablets last year to over 230 million in 2015.

While Apple is still the leader by far in the tablet market, research firm Informa expects tablets running Android to catch up with Apple's iPad and surpass it in 2016.

Samsung, experts say, has the best chance of attacking the iPad's commanding hold on the market. Apple's 75 percent share is expected to fall to 39 percent in 2015, when Android's will grow to 38 percent, according to Informa.

A less visible benefit of Apple waging and winning patent battles against the likes of Samsung, HTC and Motorola would be that Android may effectively no longer be free because of potential licensing costs that need to be paid to Apple.

Android's major vulnerability lies in the patent arena. Being a fairly new entrant in this market, Google hasn't built up enough intellectual property in the way Apple or Microsoft has.

"All this will end up making Android less 'free', Jean-Louis Gassee, venture capitalist and a former Apple executive, said. "But by how much? Five dollars a handset, no problem. Fifteen dollars -- then it is trouble."

Apple knows the power of licensing -- from the losing side as well. It recently forged a cross-licensing patent deal with Nokia, agreeing to make a one-time payment in hundreds of millions of dollars and pay continuing royalties.

But it is Google that had been caught off guard in the patent battle, being historically and philosophically opposed to gathering them as a defensive or offensive move. But that is changing with Google now in the hunt for key patents.

This has sparked an expensive arms race between technology giants as they try to outbid each other to stockpile on valuable patent portfolios up for grabs.

In the high-profile tussle for 6,000 wireless patents from bankrupt Nortel Networks, Google kicked off the tug-of-war with a stalking horse bid of $900 million -- far greater than anyone expected. But Apple -- allying with Microsoft, Sony and others -- swooped in to snap them up eventually for $4.5 billion, a price tag that sent shockwaves through the industry.

Google's chief lawyer, David Drummond, last week lashed out against Apple and others, accusing them of "a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents."

In the wake of the injunction against the Galaxy in Europe, Apple is seeking a similar ruling against Motorola's Xoom in German court. It won a preliminary ruling last month from a U.S. trade panel that HTC infringed two of Apple's patents.

But Apple is not the only one enforcing patent rights on Android mobile devices. Microsoft recently settled a suit with HTC over the Taiwanese company's Android devices. Oracle is seeking billions of dollars from Google for infringing on Java patents through its Android system.

Analysts expect Apple to continue to be the aggressor.

"It's clear that the tablet wars are going to be fought on many, many fronts," Michael Gartenberg, technology analyst with Gartner. "Clearly lots of companies are seeing opportunities here who don't plan on ceding the market to Apple, and Apple is using everything in its arsenal to defend itself."

(Reporting by Poornima Gupta; Editing by Edwin Chan, Gary Hill)

original content on reuters

TAIPEI/BANGALORE (Reuters) - Top chipmaker Intel Corp said computer makers Lenovo, Asustek and Acer will launch its new category of notebook computer in the third to fourth quarter, and expects to see their prices below $999 in the fourth quarter.

Intel Capital, Intel's global investment arm, will create a $300 million fund to invest in companies building hardware and software technologies for the new category of PCs known as Ultrabook.

"We are working very hard to bring the Ultrabook into the main stream...the prices will come down over time," Erik Reid, Intel's PC Client Group General Manager of Mobile Platforms Division, told a press conference in Taipei on Thursday.

Ultrabooks, launched by Intel in late May, will be lightweight but still pack high-performance processors. Intel sees them accounting for 40 percent of laptop sales to consumers by the end of next year.

Reid said Ultrabooks will also focus on the enterprise market and Intel is working with partners such as Dell and HP to launch the notebooks. However, the transition usually first happens in the consumer market, Reid said.

Santa Clara, California-based Intel is eager to make laptops more attractive to consumers who are increasingly captivated by Apple's iPad and other mobile gadgets.

Speaking on the new PE fund, Intel Capital Managing Director David Flanagan told reporters that the investment will be made over the next 3-4 years in companies that help deliver slim components and platform technologies, longer battery life and new user experience.

He did not specify how much the fund plans to invest in Asia, but said Asia has a big potential for investment, given the large number of manufacturers in the region.

Besides the latest Ultrabook fund, Intel Capital has a number of dedicated funds in specific technology areas. Past technology-specific funds have included the Intel Digital Home Fund and Intel Communications Fund.

Last month, Intel Corp, which dominates the PC microchip industry but is struggling in a fast-expanding mobile market, warned that PC sales will not be as strong as it had expected this year and it expected PC unit growth at around 8 to 10 percent this year.

(Reporting by Clare Jim in TAIPEI and Sakthi Prasad in BANGALORE; Editing by Ken Wills and Vinu Pilakkott)

original content on reuters