Please ensure Javascript is enabled for purposes of website accessibility

The 3 Biggest Surprises in Tech This Week

By Anders Bylund - Apr 21, 2013 at 6:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you get bored in Silicon Valley, you might want to check your vital signs.

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.

Image credit: _Nezemnaya_ via Flickr

Hurry up and wait for a better network
It's no secret that Google (GOOGL -3.93%) wants to expand its Google Fiber high-speed networking service. The company has focused on the twin Kansas Cities for three years but stretched down to Austin, Texas, earlier this month.

But nobody expected the third territory to show up just one week later. This week, Big G added Provo, Utah, to its Fiber to-do list.

This one's unique, because Google isn't building a citywide fiber network from scratch. Instead, the company will take over an existing 10-year-old network run by the city. The aging infrastructure will be upgraded to gigabit speeds, and low-cost but high-bandwidth services will roll out across the city.

And it's not all about ultra-fast speeds, either. Thanks to the pre-existing cable runs, Google offers a 5-megabit connection at no monthly cost, with a low $30 activation fee. Local cable provider Comcast offers a similar 6-megabit service for $50 a month. This Comcast plan needs to get drastically cheaper in Provo, if Comcast wants to access the low-end market here.

Danger, Will Robinson!
Alarms blared and Apple (AAPL -5.64%) shares fell 9.1% this week, as an important component supplier delivered weak results.

Audio-chip maker Cirrus Logic (CRUS -1.75%) plunged 17% on Wednesday on a disappointing preliminary fourth-quarter report. Sales jumped 87% year over year but still fell short of analyst targets, and the company is backing out $20.7 million of high-volume products into an inventory reserve. The reason is "a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components," which sounds a lot like Apple's having trouble moving one of its current flagship products.

I'm thinking that the culprit is the iPhone 5, given the way Verizon (VZ -0.10%) sold 2 million iPhone 5 units but also just as many previous-generation iPhone 4 and 4S handsets. It's been that way ever since the iPhone 5 was unveiled, but that imbalance could be forgiven in earlier quarters as Apple struggled to meet high demand with adequate supply. That excuse is off the table now, and consumers still like older and less profitable versions.

That's why Cirrus' report reinforced the conclusions you might draw from Verizon's and paints a bad picture for iPhone 5 sales when Apple reports earnings on Tuesday.

Destroy, build, destroy
This last one is a head-scratcher for me. IBM (IBM -3.92%) reported weak first-quarter sales this week, hampered by the sequester and government upheaval in China. OK, these things happen -- not very often, but that's life.

The shocking part of IBM's story this week is what the company is doing to get through these headwinds. Big Blue is reportedly trying to sell its server division to Chinese systems builder Lenovo.

Now, IBM and Lenovo have a well-documented history since IBM sold its consumer-grade systems division to the same company eight years ago. But that transaction was part of a very successful and sensible focus on the enterprise computing space. IBM has become the envy of that industry with an unmatched portfolio of complete solutions from hardware to software to support services -- and now Big Blue wants to dismantle that legendary business model?

I don't get it. At all. Neither did many investors, and IBM shares fell 10% this week on the one-two punch of this crazy idea and the soft earnings report.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$140.82 (-5.64%) $-8.42
International Business Machines Corporation Stock Quote
International Business Machines Corporation
IBM
$132.94 (-3.92%) $-5.43
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,237.99 (-3.93%) $-91.47
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$48.89 (-0.10%) $0.05
Cirrus Logic, Inc. Stock Quote
Cirrus Logic, Inc.
CRUS
$79.86 (-1.75%) $-1.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.