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:
The fact that Dell Inc. (NASDAQ:DELL) let its founder and CEO take the company private this week wasn’t much of a surprise. The move has been telegraphed for weeks and widely reported as fact long before it happened.
But here’s what did surprise me when Dell announced the agreement. Some of the company’s rivals treated the deal as a chance to steal customers, while others simply shrugged and called it water under the bridge.
Hewlett-Packard Company (NYSE:HPQ) took the low road. Dell’s “extended period of uncertainty and transition” surely must be bad for its customers, HP said. Our offices in Santa Clara stand ready to accept any Dell refugees, starting right now!
On the high road, you’ll find Chinese system builder Lenovo. “We remain as always confident in our strategy,” the company said. “We believe that the financial actions of some of our traditional competitors will not substantially change our outlook.”
You might expect HP to hold off on throwing rocks at Dell, because the company has built a glass house around itself.
1). HP warns that the Dell deal will lead to customer-facing uncertainty, but what do you call HP’s lack of strategy in the post-Hurd era?
2). Dell takes on a heavy debt load in this deal, but it started from a much lighter loan ledger than HP’s own.
3). And if leveraged buyouts are tantamount to killing the deal target, why does HP have no less than four well-known buyout architects on its own board of directors?
But HP did attack Dell on all of these flimsy grounds, while Lenovo made itself look classy and focused on the bigger picture.
2. Gaming giants hobble next-generation consoles
Here’s a weird one. The market for traditional gaming consoles has never looked weaker, as even Nintendo (OTCBB:NTDOY)‘s brand-new Wii U unit failed to burn up the sales charts. Gamers everywhere seem more interested in casual gaming via smartphones, tablets, and websites than the old model of hooking specialized hardware up to big-screen TV sets.
So how do Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) plan to turn the beat around with their next console releases? Why, by making their products less attractive to real gamers, of course.
According to reports surfacing this week, both the PlayStation 4 and Xbox 720 will feature new measures to reduce piracy and — here’s the show-stopper — remove the ability to play games bought second-hand. Microsoft will do this by tying every game to a unique code that must be checked against an online database every time you want to play. Wrong console, no play. Sony’s PlayStation will achieve a similar effect by including RFID identification chips in every retail game.
Either way, gamers lose the option to trade in old games for cash or to buy pre-owned titles at a discount. These measures may run afoul of the so-called First Sale Doctrine, which gives consumers ownership rights of the media they buy. Video-game retailer GameStop Corp. (NYSE:GME) hates the very idea, because the company makes a mint on buying and selling used console games. And GameStop spokesman Matt Hodges explains my next point better than I ever could:
“We know the desire to purchase a next-generation console would be significantly diminished if new consoles were to prohibit playing pre-owned games, limit portability, or not play new physical games,” he told Bloomberg.
The best way to combat shrinking sales is most definitely not to make your product less user-friendly with a higher total cost of ownership. Can somebody make sure Sony and Microsoft get that memo?
3. Apple Inc. (NASDAQ:AAPL) investors fight for bigger dividend checks
Apple Inc. (NASDAQ:AAPL) owns a $135 billion cash pile and keeps adding more to it with every passing quarter. That’s great for Cupertino’s financial security, but large Apple investors have started to question if it wasn’t time to really share the wealth already.
Yes, the company pays a dividend as of 2012 and also started a modest share-buyback program at the same time. But allocating $45 billion to these programs over a three-year period doesn’t distribute any of the existing oversupply of cash, given that the company pulled in $21 billion of free cash in the last quarter alone.
Nice problem to have, but Greenlight Capital manager David Einhorn thinks the company could do more. On Thursday, he filed a lawsuit against Apple Inc. (NASDAQ:AAPL) to make it reconsider its capital allocation strategy.
The lawsuit is the big surprise here. The Fool has called Apple’s dividend policy “stingy” since the beginning, and I agree that the company should embrace its newfound status as a value and income stock with both hands. It’s just a little jarring to see legal action to push the envelope.
The article 3 of the Biggest Surprises This Week originally appeared on Fool.com and is written by Anders Bylund.
Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders’ bio and holdings or follow him on Twitter and Google+. The Motley Fool recommends Apple and Nintendo and owns shares of Apple, GameStop, and Microsoft.
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