The tech market slid today, with the Nasdaq seeing a ho-hum decline of 0.31%. However, quite a bit of the big news came after the bell. Let's take a lap around the biggest news in the technology world.
Tech storyline No. 1: RIM hits a new low
After the bell, Research In Motion
Of course, RIM didn't need to give guidance to illustrate that point. At a time when smartphone sales are still booming across the world, RIM is seeing its sales decline and its market share erode. With RIM hinting that it's exploring "opportunities and partnerships," the drumbeat for an acquisition will only get louder in the coming months. The greatest asset remaining for the company is still its valuable network-operations center services and other messaging services. RIM is able to collect about $5 each month per user thanks to its Services division, which charges fees to wireless carriers.
The problem is that with RIM's hardware sales falling, that services revenue will eventually dry up. Right now, RIM's still seeing revenue from all the handsets it sold while hardware sales were ramping up across 2010, but its weak results will mean that as those customers churn out to other smartphones when their contracts expire, RIM's services revenue will begin falling as well. Thus, the window for striking a deal could be closing fairly quickly. While it's fashionable to bash RIM, its problems are even more deeply rooted than many investors realize.
Tech storyline No. 2: Try harder, Google
In the immortal words of W.C. Fields: "If at first you don't succeed, try, try again. Then quit. There's no point in being a damn fool about it."
This is advice Google
Readers might be quick to note that this isn't Google's first attempt setting up a store to drive Android sales. The company had initially tried selling its Nexus One phone through its own site as well. It's unclear what final form Google's newest store will take, such as whether the site will predominately highlight co-branded tablets with Google or will serve as a "showroom" for Android tablets in general.
Still, the point remains that Android tablets have problems much greater than needing a central site from Google to highlight their features. With the iPad attracting consumer attention on the high end and Amazon.com's
Tech storyline No. 3: The king of open source
Finally, in the winner's column today we have Red Hat
Wrong. The company spread its swings and soared 19.5% today! I think Red Hat's a fine company and is executing well, but I have to admit I was left scratching my head at the reaction to Red Hat's earnings. While the company seems ideally positioned for many IT trends across the next decade, its P/E of about 84 gives me extreme pause. Sure, its continued growth and accounting for sales mean that cash flow far outstrips earnings, but this is still an extremely richly priced stock. Even after its own recent run-up, I'd be more inclined to look at VMware as a high-growth alternative in the space.
Another idea for the road
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Eric Bleeker owns shares of no company listed above. The Motley Fool owns shares of Google, Apple, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, and Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.