Say what you want about the tech sector, but it's never boring. Any given week will keep tech investors flooded with product announcements, earnings surprises, and crazy strategy shifts that absolutely nobody saw coming.
These are three of the most shocking pieces of tech news this week:
1. Rise of the smart watch
Smartphones were the new hotness for a couple of years, and then tablets joined the party. Apple (NASDAQ:AAPL) sparked both revolutions with the iPhone and iPad, respectively.
This week, we got a glimpse of the next next big thing. Say hello to the smart watch. Rumor-mongers and leak wranglers just started talking up wrist-bound mobile computing gadgets from both Apple and Samsung.
Apple absolutely needs to come up with something new if it wants to keep the growth fires burning in Cupertino. A high-end TV set was presented as a likely option, but now we're supposed to think about more agile iPhone replacements instead.
Color me surprised. I'm all for innovation and progress, but do we really have the technology yet to make a watch-sized gadget that really works? If nothing else, these things might need a quantum leap in battery technology before becoming viable consumer products.
2. Sensible action on patent trolls
Even Washington makes sense once in a blue moon.
In an online question-and-answer event this week, President Obama called for "smarter patent laws." Specifically, he saw a problem with so-called patent trolls wielding patent claims as bludgeons in a crusade to squeeze money from companies that actually make something useful. Protecting intellectual property is important, Obama said, but "we've got to balance that with making sure that [patents aren't] so long that innovation is reduced."
Perhaps our president had his arm twisted by large technology companies this time. Google (NASDAQ:GOOGL) is a noted friend of the White House, and also a frequent target of trollish lawsuits. You could say the same about Apple, though Cupertino dishes out nonsensical lawsuits as often as it receives subpoenas. And that's just the tip of the iceberg. Name a large technology company, and changes are good that it's the target of several patent troll attacks -- and that it contributes heavily to election campaigns.
Serious reform in this area could turn the economics of patent litigation upside down. Make nuisance lawsuits subject to large fees and serious sanctions when they're struck down, and I think you'll see a whole lot less of these innovation-killing shenanigans. Entire companies would go out of business overnight. I'm looking at you, Vringo (NASDAQ:VRNG) and VirnetX (NYSEMKT:VHC).
It's about time that Washington starts to take this problem seriously. Buying someone else's inventions only to be used as extortion bludgeons shouldn't be a viable business model.
3. Level 3 hit the skids
This earnings season is winding down with a modicum of unexpected results. But a handful of tech stocks still managed to surprise investors in a big way.
I'm thinking of global networking provider Level 3 Communications (NYSE:LVLT), which reported sales in line with Street targets but missed earnings expectations by 44%. The stock plunged 15% the next day.
Level 3 has been dead money for years. A buyout binge left the company buried under a mountain of debt and redundant operations. Management's main task is to reduce bloat and pay down debt, and it'll be difficult to call the buyouts a good deal until they get it done.
So I'm not particularly shocked to see Level 3 struggling. It's the magnitude of this quarter's miss that landed it a spot on this week's list.
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