The Nasdaq (INDEX: ^IXIC) soared a massive 1.78% today, far outperforming the Dow's (INDEX: ^DJI) 1.23% gain, and we have Ben Bernanke to thank. The Federal Reserve chief hinted that the government would continue "accommodative policies" toward assisting the economy's growth.
However, the tech space wasn't without its fair share of stories today. Let's go right to the top three storylines surrounding tech stocks today.
Tech storyline No. 1: Apple, meet China
Rumors swirled today that Apple (NAS: AAPL) CEO Tim Cook was visiting China. Presumably, he was discussing the launch of the next-generation iPhone with the country's major iPhone wireless partners, China Telecom and China Unicom. I've predicted in the past that China sales of the iPhone 4S would fuel a blowout quarter for Apple when the company next announces earnings. In a way, it would be irresponsible for Tim Cook to not pay more attention to a market that could someday (sooner than most investors expect) pass the United States as Apple's largest market. China already contributed 12% of revenue during China's last fiscal year, and that number is only set to continue growing.
However, another interesting wrinkle today involved reports that Apple could make Baidu (NAS: BIDU) the default search provider in China. Such a move wouldn't be game-changing for Baidu; Apple controlled only 7.5% of the smartphone market last quarter. Even if the company made significant market-share strikes this quarter, it wouldn't be as dominant as the cadre of Android providers. However, such a move would align Apple with the most popular search engine in the country. At the very least, it's expected Apple will continue integrating Baidu further within China.
Tech storyline No. 2: Fiber consolidates
The big mover on the day was Opnext (NAS: OPXT) , which was purchased by Oclaro for $1.90 per share. After hours, Opnext soared 57% to $1.77 per share. Opnext hasn't yielded positive operating cash flow since fiscal 2008. Likewise, Oclaro hasn't posted positive cash flow across the past five years but did post positive net income during 2010. Around that time, enthusiasm surrounding the optical market (call it the Dot-Com Bonanza Jr.) led Ocalro to reach its five-year high in February 2011.
However, as the reality set in that optical plays still can't make money even as Internet traffic continued to expand, investors fled the sector. With Opnext and Oclaro merging, the natural question is, "Can two bad companies make one good one?" My answer to that would be: Don't bet on it. While Oclaro and Opnext promise to create the No. 2 global optical component and module, they're still a combined entity that produces $200 million less in revenue than market leader Finisar. While the optical market always has plenty of promise, the brutal economics of the industry has made price wars and poor bargaining power with major players like Cisco an unfortunate way of life.
Another idea for the road
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At the time thisarticle was published Eric Bleeker owns shares of Cisco. The Motley Fool owns shares of Cisco Systems and Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and Baidu and creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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