Benner on Tech: Tech Stocks Get Hammered
People are Talking About ...
The markets have been unkind to tech companies. Investors used earnings season, along with the slew of disappointing results from the likes of LinkedIn, Yelp and, of course, Twitter, to derisk, creating a wave of selling and downward stock moves that begat more selling. Robert Pavlik, the chief investment strategist at Boston Private Wealth, told Bloomberg: “The weakness is building on itself, and it’s being led by sectors like biotech, which are bleeding over into the broader market.”
The tech sell-off erased a lot of the gains that the S&P 500 and the Nasdaq had racked up this month. And that might be a good thing.
One reason the markets have been so hard on high-flying social media stocks is because there are worries those companies have gotten overvalued. This could end up being a little bit of volatility created as companies reset Wall Street expectations. That’s probably the most optimistic read. We saw something similar happen last spring when cloud stocks, biotechs and social media companies sold off and eventually got cheap enough to lure investors back in.
If things don’t rebound, I wonder what becomes of highly-valued private companies like Dropbox, Pinterest and Snapchat. They might be perfectly fine companies, but they could have a hard time raising private capital at (yet another) high valuation if the public markets are lowering the market caps of their comps.
Speaking of Stocks ...
Tomasz Tunguz, a venture capitalist at Redpoint Ventures, wrote about how a Salesforce acquisition could impact startups. If Salesforce is bought, an active acquirer of private companies is knocked out of the market. Last year I wrote about how startups have been waiting for big enterprise companies to ramp up the acquisition machine. The last thing you want to see is an active buyer leave the market.
No Surprises Here
When anonymous message app Secret shut down was anyone surprised? Secret and similar apps like Whisper and Yik Yak are well-documented places where people can be awful because there's no accountability for their actions. I wonder what the conversations between investors in other anonymous social networks and entrepreneurs were like after the news hit. Dave Vronay, who started a whistleblower platform Heard, weighed in that anonymity simply for the sake of hiding one's identity isn’t compelling longterm.
"The reputation of a speaker really matters for the audience for all but the most trivial of musings," Vronay said in a statement. "Removing reputation from a system just results in a descent into bullying, trolling and, in general, the lowest forms of human interaction.”
Another Anticlimactic Thing
Elon Musk announced the thing we’ve known for weeks that he’d announced: Batteries for home and business, product lines that should make Tesla less dependent on electric cars. (Bloomberg)
** Augmented reality. Better mobile devices. The New York Times talks to CEO Satya Nadella about Microsoft's attempts to turn innovation into revenue.
** Twitter needs a new CEO, argues Ben Thompson in the longest, most detailed piece I've read on why the company needs a management shakeup. (I also think that the company should find a way to be acquired.)
** How a hardware disaster led ESPN to become a mobile giant. (Vice)
** The startup that almost died. How the super-hyped Quirky lost $120 million and is now in desperate need of a turnaround. (Business Insider)
LinkedIn missed quarterly revenue estimates and issued a sales forecast that disappointed Wall Street. The shares sank as much as 27 percent in after-hours trading. (Bloomberg)
FireEye beat Wall Street's first-quarter earnings and revenue estimates. (TheStreet)
Time Warner Cable's first-quarter profit missed analysts’ estimates. (Bloomberg)
Bitcoin just got the Goldman Sachs imprimatur. The bank led a $50 million financing round in Circle Internet Financial. (Bloomberg)
Circa, the mobile news app, is looking for a buyer. (Fortune)
Flywheel is letting riders pay through the mobile app even if they hail the cab on the street. (BuzzFeed)
Warby Parker raised $100 million in a round that values the company at $1.2 billion. (Wall Street Journal)
Uber made an SOS button for app users in India that sends a live GPS update to local police, along with driver information. (the Verge)
Lyft has been spending furiously to catch up to its main rival Uber. (Good luck. Uber has raised more money than all other car hailing apps combined.) The company spends a combined $530 on marketing to each driver and 22 passengers in San Francisco, expenditures that take nine months to recoup. The company expects to spend 60.5 percent of its revenue on marketing at the end of this year. (Bloomberg)
Apple is working with IBM to develop iPad software for Japan Post's national Post Office Watch, a service post office employees use to check in on elderly people and offer them services. (Wall Street Journal) A research firm says that the Apple Watch has the lowest hardware cost-to-retail price ratio of any Apple product. That suggests big potential profit margins for the device. (MacRumors)
Microsoft is waging a battle with temp workers, including 38 bug testers who work full time in Microsoft's offices and voted to create a union. (Bloomberg)
Twitter's ads have yet to show results for brands. (Wall Street Journal)
Yahoo is working hard to keep its acqui-hired entrepreneurs, dubbed Foundrs, happy. This includes hosting semi-regular dinners for the more than 50 young stars that have joined the company to bond and vent frustrations to CEO Marissa Mayer. (Wall Street Journal)
Microsoft is trying to filter out ads that trick users into downloading malware or other harmful applications with a SmartScreen Filter feature that starts next month. (PC World)
The cable industry, long wary of Hulu and Netflix, faces a more immediate threat from Verizon, whose slimmed-down Custom TV bundle competes with the traditional cable bundle. (Bloomberg)
Hulu has nearly 9 million paid subscribers, and membership is up 50 percent. (Cnet)
News and Notes
Blue Origin, Jeff Bezos's private space company, completed its first test flight of an unmanned spaceship. (New York Times)
A surge in patent litigation has made patent law a bipartisan issue in Washington. (New York Times)
Drone vandalism is here. (Wired)
Sheryl Sandberg got an Apple Watch. (Bloomberg)
There's a project to bring 200 small- to mid-sized Japanese businesses to California so they can learn the Silicon Valley ethos of entrepreneurship and risk taking. (Wall Street Journal)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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