Today: Netflix (NFLX) stock soars after activist investor Carl Icahn buys a big stake in the Los Gatos company. Also: Facebook slides after lockup for rank-and-file expires, and Apple (AAPL) slips after executive shakeup as Wall Street has mixed day in first action since big storm.
Carl Icahn buys Netflix stock, shares zoom on acquisition anticipation
Netflix shares received a big boost Wednesday after the announcement of a major investment by Carl Icahn, which pushed acquisition rumors that started late last week to a fever pitch.
Icahn, the activist investor known for pushing major moves such as buyouts at companies in which he invests, bought slightly more than 5.4 million shares in Netflix, according to a Wednesday regulatory filing. The Los Gatos video-on-demand company's massive fall on Wall Street in the past 18 months led Icahn to decide "shares were undervalued due to the issuer's dominant market position and international growth prospects," according to the filing with the Securities and Exchange Commission.
The more interesting language in the filing for investors, however, was this: "The Reporting Persons believe Netflix may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the Internet, mobile, and traditional industry."
In other words, Icahn believes Netflix is ripe for a sale to a larger company, similar to last week's rumors that Microsoft may be considering buying the company, spurred by Netflix CEO Reed Hastings stepping down from the Microsoft board. While a report Monday morning threw water on that rumor, Icahn's substantial stake started tongues wagging about other possible takers for the company, which still has a market cap north of $4 billion.
Forbes writer Eric Savitz proposes that Microsoft could still take a long look at a possible acquisition, and also says that Google (GOOG) and Amazon could take a run at Netflix, while other suitors could certainly jump in. "What's not in dispute here is that Carl Icahn has put Netflix in play," Savitz wrote.
Icahn mentioned all of those companies as well as one more in speaking to Bloomberg Television about Netflix.
"I believe that there is going to be great consolidation between Netflix and, everybody's read about it, Amazon or Microsoft or Verizon or Google, there are so many possible combinations," Icahn said.
Icahn, a prominent voice in the investment community since a hostile takeover of TWA in 1985, is no stranger to the Bay Area when it comes to investing in companies and pushing for sales. He was one of the loudest Yahoo (YHOO) investors pushing for Microsoft's $33-a-share offer in 2008, prompting a proxy war after then-CEO Jerry Yang and the Yahoo board turned down the offer, a battle that ended with Icahn on the company's board for a little more than a year. Last year, he tried to buy Oakland-based Clorox or force it to find a different suitor, a battle that Clorox eventually won.
No matter where the marriage of Netflix and Icahn leads, it had an immediate effect on the company's stock price, as investors jumped to be on the same side as Icahn. Netflix shares jumped as high as $84.95 Wednesday after Icahn's stake became public, 22.1 percent higher than Friday's closing price; before closing at $79.24, a 13.9 percent bump.
Facebook falls after lockup expires (again) and Apple closes below $600
Facebook and Apple headed the opposite direction of Netflix on Wednesday, but not with as drastic a move. Facebook declined after rank-and-file workers were allowed to start selling their vested shares, while Apple closed lower than $600 for the first time since July in the first trading session since it dismissed the executive in charge of its software.
Facebook stock slid as much as 5.5 percent Wednesday as about 234 million new shares were able to hit the market, with shares in the Menlo Park social network closing at $21.11, a 3.8 percent slide. It was not as bad a day as the previous lockup expiration in August, when the stock fell 6.3 percent as large early investors gained access to their shares not offered in the company's record-breaking initial public offering.
"I don't really understand why Facebook (chose) to unlock virtually all of its compensation within the year of its IPO, but they did," Wedbush Securities analyst Michael Pachter told Reuters. "They made a mistake and set the company up for volatility."
Apple slid as much as 3 percent in the morning session on Wall Street after an executive shakeup that saw Steve Jobs protege Scott Forstall leave and other executives, such as design guru Jony Ive, take on greater responsibility. Analysts were not too concerned about the move, but investors still pushed the stock lower than $600 for the second consecutive session, after shares had been higher than that mark since July.
While Apple shares rebounded slightly to a loss of 1.3 percent, the stock still closed lower than $600 for the first time in three months, at $595.32.
Hewlett-Packard hits lowest price in a decade as tech stocks fall
The rest of Wall Street was mixed Wednesday in the first day back from a historic two-day closing for the New York Stock Exchange after Hurricane Sandy wreaked havoc on lower Manhattan, along with many other parts of the Northeast. Tech stocks were at the low end of Wednesday's barometer, as the tech-heavy Nasdaq dropped 0.4 percent and the SV150 index of Silicon valley's largest tech companies declined 0.7 percent while the blue-chip Dow Jones industrial average and broad-based Standard & Poor's 500 indexes stayed relatively flat.
Companies heavily invested in personal computers continued to take a beating by investors, as Hewlett-Packard (HPQ) fell to its lowest price in a decade at $13.80 before closing with a 1.7 percent loss at $13.85; and Santa Clara chipmaker Intel (INTC) declined 1,5 percent to $21.63. Microsoft, however, pushed to a 1.2 percent gain after its series of launches last week.
While Zynga followed Facebook down with a 3 percent loss, other social stocks managed gains, with Yelp increasing 4 percent and LinkedIn gaining 2.3 percent ahead of its earnings report, due after the bell Thursday. Freshly public companies had a tough day, with Workday declining 3 percent, Palo Alto Networks falling 2.3 percent, and Splunk descending 3.3 percent.
On the positive side, Google gained 0.8 percent as Gmail was crowned the world's most popular webmail service by ComScore, though the Mountain View search giant continues to face multiple problems in Europe. Yahoo gained 0.3 percent after inking a new deal for rights to some popular content, and Gilead moved 0.2 percent higher after seeing positive results from a study of its newest HIV/AIDS drug.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: 2,977.23, down 10.72, or 0.36 percent.
The blue chip Dow Jones industrial average: 13,096.46, down 10.75, or 0.08 percent.
And the widely watched Standard & Poor's 500 index: 1,412.16, up 0.22, or 0.02 percent.
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.