Microsoft, Yahoo and Google

Last week at the World Economic Forum in Davos, Switzerland, Bill Gates in an interview with CNBC mentioned that Google and Apple were good competitors. Here is the link to that interesting part of the conversation:
http://www.cnbc.com/id/15840232?video=629449301

The appealing thing to note is that when asked about Google, Bill Gates very confidently mentioned, "We are going to challenge them and surprise them." He also said that Microsoft is working on several good ideas. This could present an intriguing situation. Yahoo! (YHOO) is coming out with its earnings reports today and I will be really surprised if they beat the street's expectations. Yahoo! has unfortunately lost it's mojo. It still may be a good company thanks to its talent. It's very experienced in the field of search engine, web-based e-mail and other services they offer. If YHOO reports "not satisfactory" earnings today, it's stock is going for a free-fall. This might be a golden opportunity for Microsoft. Microsoft is one of the best companies in the world with a huge market share and tons of cash. If they want to, they can very easily buy Yahoo out and perhaps that is what Bill Gates was insinuating? Based on what he said, I initiated an equity position in Microsoft (bought MSFT stocks) and bought YHOO calls last week. If Yahoo does drop after earnings today, I will add more YHOO calls.

If a rumor of Microsoft trying to buy Yahoo starts, there will be a huge upwards spike in the price of Yahoo. If Microsoft does actually make an offer, I will close my Yahoo positions.

This should actually not affect Google in any way. Google is in a league of it's own and no potential merger between any companies in the near future can affect Google's prospects. I have been long Google for a very long time and continue holding and adding to my existing position.

As for Apple, Apple is way beyond Microsoft or anyone's league. It's led by a visionary who has no parallel. I will always be long Apple and constantly be adding more Apple as long as Steve Jobs is at the helm. The iPhone is just a start. Just watch what he is capable of. 

Markets in turmoil

The past few days have seen a phenomenal downturn in the markets with DOW, NASDAQ and S&P declining steadily. Ben Bernanke in his address to the Congress expressed worries about inflation and economy downturn. Other experts have also expressed varied concerns about declining economy. This hasn't helped the stock market at all.

The tech stocks are the worse hit. Apple (AAPL), Google (GOOG) and Research In Motion (RIMM) have led the tech decline. A few days ago these were the high fliers and absolutely nothing could have hampered the march of these stocks. I own all of these and I felt the same way too. But once CSCO came out with 'not so good earnings and even worse guidance', the downfall of the entire tech sector began. In a dramatic reversal of fortunes, the three strongest tech companies shed several points, sending a wave of fear among investors. Thursday turned out to be one of those worse days for stocks like AAPL, GOOG and RIMM. People were hoping that Friday would be better. Oh boy, were they in for a rude shock! Qualcomm lamented about a weak forecast and tech bellwethers plummeted further. Wachovia and Barclays Plc reignited concerns about collapsing value of debt securities and subprime loan losses, sending jitters among the investors. The huge sell-off continued and the market kept dropping, NASDAQ being hit the hardest.

So, what's going to happen in the next week or few weeks from now? Will the market rebound? Will the tech stocks recover? I wish I knew the answer to these questions. I really do. Unfortunately, the situation still looks bleak and all indicators seem to be pointing towards further market deterioration. I have a feeling that many tech stocks (RIMM, GOOG, AAPL included) have started to get oversold. Of course they will bounce back. The question is when? The market sentiment is amazingly negative and bearish. How do you explain a 1.44% drop for a company like Nvidia (NVDA) who reported awesome earnings and a brilliant guidance? If CSCO and QCOM led to the NASDAQ decline, why didn't Nvidia's earning reports help propel NASDAQ? It seems as if investors are completely ignoring positive news and literally waiting for more negative news.

Big Institutional investors and fund managers seem to be on a profit taking spree. I am hoping that we have hit the bottom for some of the tech and financial stocks or at the very least hit the bottom soon. Next week is also the Option Expiry week which might lead to a further decline, hopefully a very small decline. The tech sector needs one strong report from one of the tech leaders. Let's hope that Research in Motion can put NASDAQ in sixth gear when it reports it's earnings on December 20.


In my next post, I would like to mention the stocks I am looking at and why I think they should do well. These are just my thoughts and I consider myself a rookie investor (yeah, the blog title is just intended to make it look cool! Whizinvestors looks better than Rookieinvestors, right?!).