August Tech Recap: Patents, Buyouts, IPO Woes, and Surviving a Market Crash

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Investors of all kinds can be glad that August is over. The Nasdaq shed 6.4%, even after a strong recovery at the end of the month. Just eight trading days ago the Nasdaq was down a whopping 15% for the month!

However, of all industries, technology saw some of the most dramatic changes. Here are four of the top storylines that emerged.

August tech news No. 1: The patent wars heat up
The brewing storyline of companies accumulating patent arsenals hit a fever pitch in August when Google announced it was buying Motorola Mobility on Aug. 15. The acquisition was the direct result of a consortium led by Apple, Microsoft, and Research In Motion purchasing a trove of Nortel patents. Elsewhere, Apple and Samsung have an ongoing battle in court that could result in Samsung's popular Galaxy Tab tablets being pulled from store shelves.

Looking forward, a few key questions have emerged:

  • Will Android partners rebel? The Korean government recently said it was exploring an alternative mobile OS to reduce Korean electronics companies' reliance on Android. Then reports surfaced that Samsung, the largest Android partner in terms of smartphone sales, was exploring buying Hewlett-Packard's webOS business. Google will have to juggle pleasing Android partners with producing its own hardware. That won't be an easy task.
  • Who's next on the buying block? With Motorola gone, some key patent companies remain. InterDigital (Nasdaq: IDCC  ) has seen its share price soar as patent wars have heated up. Enthusiasm over VirnetX (NYSE: VHC  ) reached a peak in July when shares crossed $40 on patent mania. Since then, they've retreated to half that level, with rumors routinely sending shares up or down 10% a day. While it has little value left as a stand-alone business, a recent estimate valued Eastman Kodak's patents at over $3 billion. OLED-patent king Universal Display (Nasdaq: PANL  ) isn't a likely buyout candidate, but managed to secure new licensing contracts with its major customers in August. It closed out the month up 64%.

August tech news No. 2: The CEO of a generation steps down
After a decade of stunning product successes, Steve Jobs stepped down as Apple's CEO. He leaves a company that's in a neck-and-neck race with ExxonMobil for the title of the most valuable company in the world. While Steve Jobs' vision can't be replaced, he leaves behind a capable management team that has a deep talent bench.

Here are some Fool articles looking at the impact of Steve Jobs' reign and departure, and an examination of his replacement, Tim Cook:

August tech news No. 3: HP's not-so-bold reinvention
HP started August out trading at $35.80 a share, and ended the month at $26.03. Ouch. Somewhere in the mess, HP issued poor guidance, announced it was divesting its PC business, killed its tablet offering, and purchased a $10 billion software company. Yeah, that's a lot of news.

I haven't been a big fan of how HP's going about reinventing itself. It's not that expanding across the technology stack (that is, offering services across services, software, and hardware) is a bad idea; seemingly every big technology company wants to clone IBM's wildly popular model. However, HP's strategy doesn't look entirely focused. Before buying Autonomy for $10 billion (a hefty 50 times earnings), the company also snooped around Tibco and Teradata.

Those are both fine companies, but I think HP's willingness to pursue such disparate software companies shows its strategy amounts to little more than "get into software -- any kind of software." With IBM, their consulting business offers more high-end services than HP's EDS business, so cross-selling software is a much easier proposition. Plus, they have a huge breadth of offerings, whereas HP's software side is pretty slim aside from Autonomy. While HP's trading on the cheap, I think there's plenty more headaches ahead while it implements its transformation into a full-service IT company.

August tech news No. 4: A thawing IPO market
The main technology discussion point at the start of the year was whether we were in another technology bubble. Raucous IPOs from Zillow (Nasdaq: Z  ) and LinkedIn seemed to confirm we were. However, with markets pulling back, IPOs from Internet stars like Zynga and Groupon are rapidly being pushed back.

The most notable IPO of August was Tudou, a Chinese video company that attracts 200 million unique visitors a month. The stock quickly dropped a third from its IPO pricing but has since rebounded. It competes not only against other Chinese Internet giants like largest peer Youku.com, but also Baidu (Nasdaq: BIDU  ) , SINA, and Sohu.com. The interesting question in the months ahead will be whether companies like Youku and Tudou can go it alone, or whether large Chinese Internet companies like Tencent, Baidu, and SINA will form partnerships or buy them outright. Just this week, SINA invested $66 million in Tudou.

Looking back at the American IPO market, recent IPO Pandora (NYSE: P  ) exceeded expectations in its first public earnings release. The month also saw an attempt by Research In Motion to launch its own streaming service. While I'm bearish on Research In Motion's service due to the limited nature, the broader idea is that the media landscape is rapidly changing. Watching the evolution of how users consume media and how large companies distribute their own media on mobile devices will be central to your investment thesis in coming years, especially if you're an investor in Sirius XM (Nasdaq: SIRI  ) . The reshaping of delivering media in America should be a storyline should have plenty of turns in the years ahead.

That's it for August's tech recap. To stay appraised, add any of the major companies listed above to our free My Watchlist service today:

Eric Bleeker owns no shares of companies listed above. You can follow Eric on Twitter to see all of his technology and market commentary. The Motley Fool owns shares of Exxon, Apple, Microsoft, Research In Motion, IBM, and Google. Motley Fool newsletter services have recommended buying shares of InterDigital, Google, Apple, Baidu, Universal Display, SINA, Microsoft, Sohu.com, Tibco Software, and Teradata. Motley Fool newsletter services also have recommended creating a bull call spread position in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Source: http://feeds.fool.com/~r/usmf/foolwatch/~3/QE2f6B7kWVE/august-tech-recap-patents-buyouts-ipo-woes-and-sur.aspx

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Keeping Your College Student Out Of Debt

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As a new school year approaches, many young adults are heading off to college for the first time. Armed with many new responsibilities, these young adults have much to learn about their futures. Sadly, it has been reported that financial literacy is declining with each generation. This suggests that as our children grow up and go off to college, they haven't been adequately trained on good money management skills. Many college students fall into the trap of credit card debt before the end of their first year.

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Keeping Your College Student Out Of Debt

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As a new school year approaches, many young adults are heading off to college for the first time. Armed with many new responsibilities, these young adults have much to learn about their futures. Sadly, it has been reported that financial literacy is declining with each generation. This suggests that as our children grow up and go off to college, they haven't been adequately trained on good money management skills. Many college students fall into the trap of credit card debt before the end of their first year.

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Source: http://ezinearticles.com/6527103

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Tips for Getting College Loan Debt Under Control

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When college students take on the responsibility of a private loan, it is a new experience that takes some getting used to. In most cases, repayment does not begin until the student stops taking classes or graduates from school. Regardless of whether the individual completes a degree, the student loan must be paid in full under the conditions specified in the agreement.

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Source: http://ezinearticles.com/6529909

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United Rentals May Be Hiding Weakness

United Rentals (NYSE: URI  ) carries $319 million of goodwill and other intangibles on its balance sheet. Sometimes goodwill, especially when it's excessive, can foreshadow problems down the road. Could this be the case with United Rentals?

Before we answer that, let's look at what could go wrong.

AOL blows up
In early 2002, AOL Time Warner was trading for $66.27 per share. It had $209 billion of assets on its balance sheet, and $128 billion of that was in the form of goodwill and other intangible assets. Goodwill is simply the difference between the price paid for a company during an acquisition and the net assets of the acquired company. The $128 billion of goodwill in this case was created when AOL and Time Warner merged in 2000.

The problem with inflating your net assets with goodwill is that it can -- being intangible, after all -- go away if the acquisition or merger doesn't create the amount of value that was expected. That's what happened in AOL Time Warner's case. It had to write off most of the goodwill over the next few months, and one year later that line item had shrunk to $37 billion. Investors punished the stock along the way, sending it down to $27.04 -- or nearly a 60% loss.

In his fine book It's Earnings That Count, Hewitt Heiserman explains the AOL situation and how two simple metrics can help minimize your risk of owning a company that may blow up like this. Let's see how United Rentals holds up using his two metrics.

Intangible assets ratio
This ratio shows us the percentage of total assets made up by goodwill and other intangibles. Heiserman says he views anything over 20% as worrisome, "because management might be overpaying for the acquisition or acquisitions that gave rise to the goodwill."

United Rentals has an intangible assets ratio of 8%.

This is well below Heiserman's threshold, and a sign that any growth you see with the company is probably organic. But we're not through; let's also take a look at tangible book value.

Tangible book value
Tangible book value is simply what remains after subtracting goodwill and other intangibles from shareholders' equity (also known as book value). If this is not a positive value, Heiserman advises you to run away because such companies may "lack the balance sheet muscle to protect themselves in a recession or from better-financed competitors."

United Rentals? tangible book value is -$295 million, which obviously raises a yellow flag.

By the way, I asked Heiserman about the tendency for some large-cap blue chips -- names like Procter & Gamble, IBM, and Altria -- to have a high intangible assets ratio and negative tangible book value. He says this can be OK, provided the company has (1) modest or no net debt, (2) persistent and rising levels of free cash flow, and (3) stock buybacks at a discount to intrinsic value.

Foolish bottom line
To recap, here are United Rentals' numbers, as well as a bonus look at a few other companies in its industry:

Data provided by Capital IQ, a division of Standard & Poor's.

If you own United Rentals, or any other company that fails one of these checks, make sure you understand the business model and management's objectives. You can never base an entire investment thesis on one or two metrics, but there is a yellow flag here. I'll help you keep a close eye on these ratios over the next few quarters by updating them soon after each earnings report.

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Source: http://www.fool.com/investing/general/2011/08/31/united-rentals-may-be-hiding-weakness.aspx

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Understanding Credit Counseling

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This article explains the difference between Chapter 13 Bankruptcy and Credit Counseling. It also gives the reader specific information to help them determining if Credit Counseling is the correct option for their specific situation.

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Source: http://ezinearticles.com/6506560

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