Technology Stocks
A few months ago, I mentioned how I believe Facebook’s valuation of $65 billion was unjustifiable. But the valuation continues to grow. According to recent estimates, the company is now valued at close to $100 billion. Given that Facebook’s revenue model remains largely unchanged, my lack of resonance with such high valuations persists. Many ask at Silicon Valley parties these days: Is there a bubble? Well, yes, there is. That doesn’t change the fact that Facebook is an excellent company. It is, however, overvalued.
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Declining PC sales have pulled down the quarterly forecasts of all major PC manufacturers, and Dell was no exception. In the recent quarter, Dell’s market share slipped from 23.6% last year to 22.6% this year. The market conditions have recently led to the announcement of HP’s plans to spin off its PC segment, although that decision also comes from HP’s new CEO Leo Apothekar’s DNA mis-match with hardware businesses. The news seemed to bolster the rather depressed Dell stock. Analysts believe that Dell will be able to gain market share by attracting customers from HP. The market had shown a similar trend when Dell had gained IBM’s and Compaq’s customers when IBM sold their PC business to Lenovo and when Compaq was acquired by HP.
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According to recent IDC and Gartner reports, global personal computer shipments in the second quarter increased less than the percentage anticipated because of sluggish economies and a shift toward smartphones and the iPad media tablet. Worldwide PC shipments increased 2.6% compared with 2.9% projected earlier by IDC. While HP remained the market leader in PC sales, PC shipments fell 0.6% over the year in the second quarter and Dell saw a bigger decline with number of units sold declining 10.2% over the year. Apple, however, continued to gain market presence, with annual shipments increasing 15% over the year driven by iPad sales. Meanwhile, declining PC sales led HP to consider spinning off their PC segment, a move I thought had made sense years ago when IBM spun its off and sold it to Lenovo.
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Some analysts believe that growth in the $76 billion Indian outsourcing industry has begun to slow because of Standard & Poor’s downgrade of the U.S. credit rating and the troubled economies in Europe. But this may not be the case. Ignoring the market conditions, the bigger players in the market are all gearing to expand their near-shore presence, a trend that they have realized cannot be ignored.
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According to market estimates,China’s internet population reached 477 million users in March of this year, far ahead of the 239.2 million internet users recorded in the U.S. at the end of 2010. Despite the increased numbers, Internet penetration in the country is at just 40%. In comparison, 78% of the U.S. population has at least one home-based email account. But growing Internet use has translated into an increased number of websites registered, to 3.82 million at present from 3.3 million in February in China.
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According to travel research firm PhoCusWright Inc., the global travel market is expected to grow from $888 billion last year to $939 billion this year. By region, the U.S. market will grow from $255 billion last year to $271 billion in 2011. Another report by the researcher projects that the online leisure-travel market in the U.S. will grow from $97 billion last year to $113 billion this year, translating to 16% growth over the year. The European travel market is projected to grow from $319 billion to $331 billion, while APAC markets are projected to grow from $256 billion to $274 billion and Latin American markets from $58 billion to $63 billion for the year. Online travel markets are all set to address increased travel spending in these regions.
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Near-shoring for offshore services is a trend that can no longer be ignored. My recent interview with Neeraj Gupta, CEO of Systems In Motion, a near-shore outsourcing focused organization, showed how smaller companies are stepping up efforts to get in on this trend. In the recent quarters, bigger players have also strengthened their focus on expanding in these regions.
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ADP’s (NASDAQ:ADP) recent employment report brought some good news to a gloomy market as the company reported growth in private payrolls in July by 114,000 jobs, ahead of the 100,000 projected earlier. This was the 18th consecutive month of growth in jobs in the country. Growth has been seen across all business sizes with small businesses reporting an increase of 58,000 jobs last month, medium-sized businesses reporting a gain of 47,000 jobs, and large firms adding 9,000 jobs overall. Payroll processing firm ADP’s quarterly results were also equally cheerful. Read the full article »
