5 Companies That Had A Rough Week2:55 PM EST Fri. Sep. 06, 2013
This week's roundup of those that had a rough week include Microsoft for its expensive acquisition of Nokia assets, Facebook for yet another privacy controversy, several companies for stirring up skepticism about the first wave of "smartwatches" to hit the market, and a DRAM manufacturer whose facilities caught fire, which could disrupt chip supplies.
Also, be sure to check out our roundup of 5 Companies That Came To Win This Week.
Microsoft this week said it's acquiring Nokia's devices and services business for $7.1 billion. Microsoft execs touted the acquisition as a critical step in the company's efforts to transform itself into a services and devices company. And, Microsoft CEO Steve Ballmer proclaimed the move "a bold step into the future" that will provide "significant long-term revenue and profit opportunities" for Microsoft and its shareholders.
But, Wall Street panned the deal. The day it was announced Microsoft's stock dropped nearly 5 percent, cutting $18.2 billion from the company's market capitalization.
Industry analysts also were skeptical, saying they weren't convinced it would help Microsoft catch up with smartphone makers like Apple and Samsung. One analyst even said it was akin to Hewlett-Packard's $1.2 billion acquisition of Palm in 2010, which ultimately proved a bust.
With pressure building to repeal the controversial software services tax, Massachusetts Governor Deval Patrick responded this week by holding a closed-door meeting with state legislators and business owners to discuss the issue. But, the meeting's guest list raised questions about just how much the governor is really hearing about the burden the tax, implemented in July, places on the state's IT solution and service providers. Many of the attendees were supporters of the governor: Five of the seven business leaders are involved as leaders of Patrick's various state initiatives in technology, healthcare, education and business development; four have donated to Patrick's election campaigns. Andy Singleton, president of software vendor Assembla, was the only invited executive involved in a company that faces direct implications of the tax. "They need to invite someone who is actually doing the work, not some corporate worker or lawyer," said Carl Rubin, operations manager at software consulting firm Monument Data Solutions, Needham, Mass. "The only way you can understand this is if you talk to the people who do the work."
Facebook has found itself embroiled in yet another controversy over privacy.
This week six privacy groups, including the Electronic Privacy Information Center and the Center for Digital Democracy, asked the Federal Trade Commission to block the proposed changes to Facebook's Data Use Policy and Statement of Rights and Responsibilities.
Trying to beat Apple to the punch, Samsung, Sony and Qualcomm all unveiled their entrants in the nascent "smartwatch" market this week. And, the applause was less than deafening.
Samsung's debut of its Galaxy Gear watch on Wednesday was the most visible launch, followed by Sony's SmartWatch 2 and Qualcomm's Toq. But, reviewers criticized the new devices, noting that they must be connected via Bluetooth to a smartphone. They also lack Wi-Fi capability and offer poor battery life. One analyst called Samsung's device "a blocky health tracker with a camera."
All this leaves the door wide open for Apple whenever it's ready to debut its much-anticipated iWatch.
As if PC makers weren't already having a difficult year, a fire at a manufacturing plant in China that accounts for 10 percent of the world's DRAM wafer production could make life even more difficult.
The plant, owned by SK Hynix of South Korea, was hit by a fire late Wednesday, and it's unclear how long production will be disrupted. But, spot market prices for DRAM chips immediately jumped 20 percent after news of the fire got out. And, several memory chip suppliers put shipments on hold until the extent of the fire is better known.
Global supplies of DRAM chips are already constricted, and the fire could make it even harder for manufacturers of PCs, tablet computers and smartphones to get the components they need. Higher prices for the chips could force the manufacturers to hike their own prices.