Today: With the July Fourth holiday making this a short week on Wall Street, bankers completed a host of acquisitions in the tech sector Monday. Also: Technology stocks perform well as Apple (AAPL) rides iPad trademark settlement to highest price in months, but manufacturing numbers keep other stocks from rising.
Dell, Sony, Micron and Beats make big buys in tech sector
With a midweek holiday creating a very short trading week -- Tuesday's trading closes at 10 a.m. Pacific time, and markets are closed Wednesday for the Fourth of July -- bankers seemed eager to complete long-rumored acquisition deals Monday. Four major tech mergers were announced, three of them involving California companies.
The largest initial price in Monday's deals was Dell's agreement to acquire Quest software for $2.36 billion after a protracted process that had the No. 2 U.S. personal-computer maker bidding against an investment firm that also wanted to own the Aliso Viejo company.
"Quest Software plays in Dell's sweet spot," Mizuho Securities analyst Abhey Lamba wrote in a research report Monday. "The combination could help Dell jump start its software business."
Dell will pay $28 a share for the company, a 44 percent premium to the price at which Quest was trading when bidding originally began at $23 a share in early March. Texas-based Dell saw its shares slip 1 percent in Monday trading, closing at $12.39.
Micron will end up paying more for its Monday acquisition than Dell, despite an initial outlay of $750 million. The Idaho memory company, the last U.S. maker of dynamic random-access memory chips, bought a bankrupt Japanese DRAM company called Elpida. Micron had been pushing more into the flash-memory market, which is more popular in today's popular mobile devices, but Elpida makes mobile DRAM devices for companies such as Apple, giving the company inroads into the mobile market while focusing on technology with which it is familiar.
"This is a big step in providing some stability to our industry," Micron President Mark Adams told Reuters on Monday.
While Micron will pay $750 million for the company, it also agreed to pay off about $1.75 billion in Elpida debt in installments, making the total deal worth about $2.5 billion. The manufacturing capacity offered by Elpida is worth much more than that, Micron said, and Stifel analyst Kevin Cassidy agreed.
"We estimate this manufacturing capability would cost roughly $6 billion to $8 billion if built new," Cassidy said.
"The purchase of Elpida represents a huge boost for Micron's status in the DRAM industry," IHS analyst Mike Howard concurred in an email Monday. "Micron will see its market share and DRAM manufacturing base nearly double as a result. Furthermore, Micron is gaining access to some excellent mobile DRAM technology, which should greatly improve its product portfolio."
Micron shares, which have been struggling this year as the company refocused, increased 3.8 percent Monday to close at $6.55.
Aliso Viejo was the most popular destination for companies looking to buy Monday, as the Orange County city also saw local streaming video-game company Gaikai agree to be purchased Monday by Japanese electronics giant Sony. The maker of PlayStations will pay roughly $380 million for the company, which was founded in 2008 and focuses on delivering console-quality video games to Web-connected devices.
The purchase moves Sony into the cloud-based gaming business, with Andrew House, president of Sony Computer Entertainment, saying in the news release that the move will allow Sony to "deliver a world-class cloud-streaming service that allows users to instantly enjoy a broad array of content ranging from immersive core games with rich graphics to casual content anytime, anywhere on a variety of Internet-connected devices."
The acquisition could be yet another signal that the way consumer purchase video games will change from buying discs in stores and going home and feeding them into a PlayStation, Xbox or Nintendo Wii to ordering games through a "smart television."
Jesse Divnich, game analyst for Electronic Entertainment Design and Research, told MSNBC that the change to a completely cloud-based model for console gaming is not immediate, but called Sony's move "a genius decision to 'future-proof' their company."
"It does tend to take a while for consumers to transition technologies," he said. "But 10 years from now, the idea of having a set top box to play games -- that is probably going to go away and all of that is probably going to be handled through the television."
Sony stock fell 0.3 percent Monday to close at $14.20.
While SoCal was a hot market for acquisitions Monday, Silicon Valley was not left out completely, though Monday's Bay Area acquisition targeted the East Bay. Berkeley-based streaming-music service MOG was officially acquired by Beats Electronics, the music hardware maker founded by N.W.A. and Death Row rapper/producer Dr. Dre and music-industry heavyweight Jimmy Iovine.
Beats is known for headphones, bot also offers speakers and other hardware peripherals. With the purchase of MOG, the Santa Monica company creates "the first truly end-to-end music experience," president and COO Luke Wood said in the news release.
MOG will remain an independent company run by its founder and CEO, David Hyman, and subscribers will not immediately see any changes to the service, the companies announced. The two companies are privately held and did not announce an acquisition price.
Apple roars back toward $600 a share in dull Wall Street day
The heavy activity in mergers and acquisitions didn't spark investors to a big day, as stocks struggled to find and sustain gains in Monday's session. Technology was a favorite however, as the tech-heavy Nasdaq gained 0.6 percent while the Standard & Poor's 500 rose 0.3 percent and the blue-chip Dow Jones index declined 0.1 percent.
Apple was a favorite target for buyers after it finally settled a lawsuit from China-based Proview that claimed the smaller company still had the Chinese trademark to the iPad name. After the Cupertino tech giant agreed to pay $60 million to end the legal battle, concerns about access to the Chinese market lifted, and Apple stock increased 1.5 percent to close at $592.52. That is Apple's highest closing price since it fell below $600 in late April.
Facebook's most recent struggles on Wall Street continued Monday, as shares fell 1 percent to close at $30.77. The Menlo Park company continues to consider changes investors should like -- rumors Monday included a "Want" button for advertisers and possible acquisitions of companies creating content for the social network's platform -- but many would rather wait for the company's impending earnings report before pushing the stock higher. Other social networks headed the other way, however, as Yelp gained 4.4 percent, Zynga rose 2.3 percent and LinkedIn moved up 1.3 percent.
Outside of Silicon Valley, Microsoft fell in after-hours trading following its announcement of a massive $6.2 billion charge related to Microsoft's ailing advertising business. The Washington tech titan's advertising platform has suffered in competition with Google (GOOG), forcing the company to admit that its $6.3 billion purchase of advertising company aQuantive in 2007 was a failure.
Manufacturing falls, creating more economic concerns
Wall Street's positive momentum took a hit Monday from an economic report that showed manufacturing activity shrinking for the first time in nearly three years, yet another sign that the U.S. economy is facing larger struggles.
The Institute for Supply Management said its index of manufacturing activity declined to 49.7, which indicates contraction. Just as alarming, the report's gauge of new orders, which is used to measure future activity, nose-dived from 60.1 to 47.8.
"Clearly this is the biggest sign yet that the U.S. is catching the slowdown that is well under way in Europe and China," Paul Dales, senior U.S. economist at Capital Economics, told Reuters.
The Bizarro U.S. economy continued, as the formerly struggling housing industry showed signs of improving while the larger economy stopped recovering from the Great Recession: Construction spending increased in May by the most in five months.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 16.18, or 0.55 percent, to 2,951.23
The blue chip Dow Jones industrial average: Down 8.70, or 0.07 percent, to 12,871.39
And the widely watched Standard & Poor's 500 index: Up 3.35, or 0.25 percent, to 1,365.51
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.