Tech stocks continued their all-star year yesterday (Thursday) with a Cisco Systems Inc. (Nasdaq: CSCO) deal, a new intraday high for Apple Inc. (Nasdaq: AAPL), and an explosive first-day performance for Demandware Inc. (NYSE: DWRE) moving markets.
The tech-heavy Nasdaq closed up 0.51% to 3,056.37.
Here's why these are the tech stocks to watch today (Friday):
NDS's software is used by cable-television and satellite companies to encrypt signals to deliver TV programming and other video though various devices. The security software prevents people who have not paid for television services from hacking into channels. NDS's security software is in 28% of the worlds' TV set-top boxes, as well as 40% of all digital video recorders, according to independent market research quoted by the company.
The acquisition supports Cisco's recent strategy change where it focuses growth on a few core areas, including video, instead of a broad range of services. Cisco hopes the move will allow it to quickly develop its Videoscape entertainment platform.
The deal also lets Cisco tap into its enormous cash pile of more than $46 billion, which is mostly held overseas.
Analysts said the deal was pricey for Cisco, but a good move since the company has the cash.
"NDS has some core technology that will allow Cisco to allow service providers to differentiate in the way content is delivered," IDC analyst Crawford Del Prete wrote in an email to MarketWatch. "It's an aggressive move that is not cheap, but to address this segment in a big way you need scale. This will give Cisco scale."
Cisco shares fell Thursday 1.41% to close at $19.91.
The historic move came just about a month after Apple hit $500.
Apple shares have more than doubled in the last 18 months and are up 45% YTD. But the stock's meteoric rise to more than $550 a share has given some investors pause. Many believe the stock has come too far too fast to dive in now.
"There are a lot of investors who would love to benefit from Apple's growth, as well as from its "Midas touch' with products," investment expert Martin Hutchinson said in a recent interview with Private Briefing. "But Apple's shares have climbed a very long way and appear pricey."
Apple's new iPad will be available in stores today. Analyst estimates for 2012 iPad sales range from 55 million to 60 million. Apple has sold 55 million iPads since the product's debut in April 2010, winning over not just consumers but multiple markets.
[Click here for a report on how to profit from the Apple's new iPad – without buying its pricey stock.]
Demandware Inc. (DWRE) soars in trading: On its first trading day, Demandware Inc. (NYSE: DWRE) soared more than 47% to $23.59 after pricing its IPO Wednesday at $16 a share.
The cloud-based software company sold 5.5 million shares and was expected to price between $12.50 and $14.50.
Demandware is the fifth cloud-related company to go public in the last few months. Tech investors have gobbled up shares of cloud-computing stocks as the sector is poised to grow in 2012.
"It seems that any company that has the words 'on demand', 'SaaS' or 'cloud' in their prospectus is going to do well in this market," Morningstar analyst James Krapfel told Reuters.
The global cloud-computing market is expected to reach $148.8 billion by 2014, according to tech research firm Gartner Inc.
Demandware has a solid client base that's pushed it ahead of cloud competitors. Its 10-largest customers account for 40% of revenue.
But some analysts are concerned about Demandware's long-term growth. Industry leaders like Hewlett Packard and IBM want to expand into the cloud space and have more money and resources to quickly grow into the sector. They're likely to go on the hunt for smaller tech players that can expand the bigwigs' cloud offerings.
Tech stocks have posted a whopping 16% return in 2012, the top performing sector in the Standard & Poor's 500 index.
News and Related Story Links:
- Money Morning:
How Apple Inc. (Nasdaq: AAPL) Became the Vampire Squid of Tech
- Money Morning:
Tech Stocks to Watch: Pandora Media (NYSE: P), Apple (Nasdaq: AAPL), Yahoo (Nasdaq: YHOO)
- Money Morning:
Tech Sector: Cisco Systems Inc. (Nasdaq: CSCO) Earnings Show It’s Gearing Up for a Rebound
Cisco buying NDS for $5 billion in big video move
Demandware debut shines on cloud appeal
- The Financial Times:
Cisco back on deal trail with $5bn NDS move