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As we all daydreamed about the holiday weekend, the technology industry knew it had to do something last week to get our attention. So it served up one piece of news after another, like hot dogs from a grill.
The week began with an onslaught of gadget hype: Microsoft (MSFT) talked about something called "Mango," a new version of its software for smartphones, expected this fall. It will have lots of ways to interact with Facebook, and other goodies, though whether you'll remember it or care at all once the days have melted into a stream of barbecues is a question.
Still, you've been warned.
The very same day, Barnes & Noble (BKS), which is currently the subject of a buyout offer by cable pioneer John Malone, introduced a new version of its e-book reader, the Nook. At $139, it's similar to Amazon.com's (AMZN) Kindle, only it lets you turn pages by tapping on the screen, like Apple's (AAPL) iPad. Perfect for the beach, I suppose, was the thinking.
By midweek, the stock market had taken firm command of the discussion, with Microsoft shares rising Wednesday evening after noted hedge-fund investor David Einhorn said he thinks the stock is a great buy.
He had one caveat, though: He suggested that the board dump Chief Executive Steve Ballmer. Ballmer is stuck in the past, failing to present investors with The Vision Thing.
Good luck. Given that Ballmer holds nearly 5% of the shares, and has had some say in who sits on his board, he appears firmly ensconced at Microsoft. Still, a hedge-fund manager can dream, can't he?
BY THURSDAY, THE GADGET MARKET, which abhors a vacuum, flocked to Google's (GOOG) announcement that it is going to make it possible for you to purchase things just by swiping your cellphone, without need for your actual wallet. That should boost demand of cellphones with leather trim, but the technology will take some time to roll out, so feel free to forget about that, too.
By week's end, equity analyst Peter Misek, of Jefferies & Co., was warning that Research in Motion (RIMM), the maker of the BlackBerry, might not introduce its latest round of spiffy new models until October of this year, rather than August, as originally speculated.
But by October, you may have actually returned from the hazy mindset of August, so perhaps it's all in RIM's best interest to hold off, if that is in fact what is happening.
Just what, then, is the technology investor to care about during these lazy days ahead?
Morgan Stanley's technology equity-research team offered something that you could take with you on your Nook, Kindle or iPad, and that you definitely wouldn't want to carry around in printed form: a 104-page research report on cloud computing.
THE CLOUD, OF COURSE, IS ALL THE RAGE in tech circles these days. Basically, it means the shift by companies to running computing tasks on someone else's computing facilities, for a fee, rather than what companies have been doing for years, which is buying their own software and hardware.
Rent-a-computer, in other words.
Morgan Stanley's team took the temperature of 300 information-technology executives, and came to the conclusion that the amount of computer work performed on a rental basis will rise by 50% each year, compounded annually, through the next three years.
Again, nothing you couldn't safely let slip for consideration until some time post-Labor Day, but if you want to get a running start, Morgan Stanley recommended shares of several cloud aspirants, if you will, including Salesforce.com (CRM) and Rackspace (RAX).
Now, these stocks will cost you a bundle: Salesforce, trading at a recent $152, is at about 116 times the most generous assessment for the profit it may make in the year ending next January. Rackspace, at a recent $44 per share, is trading at about 70 times forward estimates.
Chances are, if you forget about the Cloud while off yachting in coming weeks, you might actually pick up Salesforce and Rackspace at a more reasonable discount, and the Cloud opportunity will no doubt still have many, many years to run.
Lately, even more than the Cloud, it's the new, young pioneers of tech demanding that attention be paid. Yandex (YNDX), a Russian search engine that's conspicuously similar to Google and Yahoo! (YHOO) in many respects, chose last week to make its debut. After pricing Tuesday at $25, it closed up 55%, though it slumped the rest of the week.
Have no fear, for there are even things in the pipeline with the word "cloud" in their names: Goldman Sachs and Merrill Lynch last week filed for an IPO of Cloudary, based in Shanghai, which is a kind of online vanity press for China's paperback writers: Its online publishing "community" boasts 5.2 million literary works by 1.3 million authors.
Unclear if any of the works are suitable for the beach.
It will be interesting to see if Cloudary gets as favorable a reception as Boston-based Carbonite, which filed for an IPO on May 12. The company describes its business of backing up your digital junk on its Website as the "Carbonite Personal Cloud." At last! No more having to tell someone to get off your cloud.
The best bets, I think, are still some of the traditional tech areas of software, chips and equipment. Freescale Semiconductor (FSL), which makes chips for all manner of gadgets, and also for automobiles, went public last week and promptly fizzled. It suffers under a debt burden of $7.4 billion. The proceeds of the IPO will cut its debt measurably, so it's one to keep any eye on.
Hotter at the moment are companies dedicated to making chips for 4G wireless networks, the next speed bump up. They include Avago Technologies (AVGO), NetLogic Microsystems (NETL) and Sequans (SQNS). Sequans is based in Paris, so check them out if you're heading over there.
I'm going to suggest one of the best ways to look at the Cloud this summer is NetApp (NTAP), which is expected to increase revenue 30% this year, and which trades at 22 times forward earnings, hardly a stretch.
Last Wednesday, the company beat earnings expectations and forecast the current quarter higher than expected. As the Cloud takes shape, NetApp's data storage equipment could be of increasing value.
Hate to say this just as you're heading to the beach, but send in the clouds!
Hedge-fund manager David Einhorn called for Microsoft CEO Steve Ballmer to quit, lifting its shares. The Nasdaq Composite closed at 2797, down 0.2% on the week.
Tiernan Ray can be reached at tiernan.ray@barrons.com or at blogs.barrons.com/techtraderdaily or www.twitter.com/barronstechblog
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