More breakup news today: Qualcomm has launched a strategic review, under pressure from activist investor Jana Partners, which could lead to a split of the company’s patent licensing business from its chip production business. And it may only be a matter of time before IBM, which reported its 13th straight decline in quarterly earnings yesterday, faces similar pressures. Meanwhile, Lockheed made a $9 billion deal to buy Sikorsky.
In yesterday’s post, I suggested the current excess of splitting and merging was driven by investors seeking returns in a zero interest rate world. Several readers quickly pointed out it’s also being driven by banks seeking business. Fortune’s Stephen Gandel reported yesterday banks brought in $19.5 billion on U.S. deals in the first half of this year — the second highest ever, and only slightly below the $20.1 billion record in 2007. Indeed, five years after the passage of Dodd Frank, the banks seem to be doing quite well, thank you very much.
For what it’s worth, investors rewarded the split of PayPal from eBay yesterday. The digital payment company’s shares rose five percent in the first day of trading, giving it a market value of $49 billion. Ebay’s shares also rose slightly, giving it a market value of $35 billion. So everyone is happy.
Still, we doubt that will lead Alibaba to spin off Alipay. In Jack Ma’s world, at least, having a digital marketplace and a digital payment system in the same company still makes some sense.
• PayPal’s big debut
Investors lauded the return of PayPal to the pubic markets, giving the digital payments company a higher market value than that its former parent company eBay. The share movement makes sense as PayPal continues to grow fast as users flock to the Web and their mobile devices to make orders. EBay faces tough competition from Amazon.com and others in the e-commerce retail space. Fortune
• Nasdaq achieves record close
The Nasdaq composite hit another record close on Monday and the S&P 500 came close amid some good earnings reports and as investors were encouraged that the situation in Greece is becoming less dire. The second quarter is off to a relatively strong start and this week, all eyes will be on earnings, with 126 companies in the Standard & Poor’s 500 stock index reporting their second quarter results. USA Today
• IBM still can’t generate sales growth
Tech giant IBM has now reported 13 straight quarters of revenue decline as executives continue to funnel money into “strategic imperatives” like cloud and data analytics to hunt for some top line improvement. Executives did their best to reassure investors the company is on the right track, saying cloud computing and other initiatives brought in $25 billion in revenue in 2014 with hopes that can increase to $40 billion by 2018. Fortune
• Toshiba CEO to step down
Japan-based Toshiba said its chief executive and president Hisao Tanaka will step down after an independent investigation found he had been aware the company had been inflating its profits over a number of years. The report said the consumer electronics company had overstated operating profits since 2008, claiming numbers that were up to three times the actual level. Fortune
• Qualcomm to mull a break up
Qualcomm, the world’s largest maker of chips used in mobile phones, is expected to conduct a strategic review that will look into the possibility of a breakup, among other options, after an activist investor pushed for change at the company. People familiar with the matter told WSJ that the company may announce it is considering its options, which include potentially returning more cash to shareholders, when Qualcomm announces quarterly results on Wednesday. WSJ (subscription required)
Around the Water Cooler
• Nike CEO gets massive stock award
Nike has awarded CEO Mark Parker a restricted stock award with a target value of $30 million on the condition he continues to work at the athletic-gear company for the next five years. Parker, who has served as Nike’s CEO since 2006, was recently endorsed by co-founder Phil Knight to succeed him as chairman when he retires next year. Bloomberg
• Growing pains for Gawker, Reddit
Gawker and Reddit are two websites with not a lot of similarities. But both are experiencing very public revolts involving management and the direction of their brands. While it can be argued neither are traditional media outlets, in both cases there is an effort to balance the site’s past behavior ad the need to become a more traditional business. Fortune