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Halftime Pt 1: Is Tech About To Explode With M&A?

The traders are keep a close eye on technology amid chatter that a growing number of M&A deals could signal a turn in the market.

Not only have a flurry of new deals hit the tape but speculation is growing that other tech titans are also mulling some big moves.

In fact, JJ Kinahan has spotted some unusual options action that suggest to him big investors are making a bullish bet on the market – possibly in anticipation of more M&A.

What should you be watching now? Following the Fast Money gang breaks down the deals they're watching most closely.

INTEL TO BUY WIRELESS UNIT OF INFINEON

On Monday Intel agreed to purchase Infineon’s mobile chip business for $1.4 billion.

The move by the world’s largest chip maker will help boost the company’s presence in smartphones, which have begun to dominate the computing landscape. Rumors of the deal have been around for a while.

The boards of the two companies have approved the deal, which will close in the first quarter of 2011.

What’s the trade?

I like what Intel is doing, but it suggests to me that Intel may be overexposed to PCs as compared to tablet computers such as the iPad, adds Joe Terranova. For me the trade is long Apple.

It also suggests the future is cloud computing, adds Brian Kelly. People can buy less expensive tablets with less memory if they can store their info "in the clouds."


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PACIFIC CREST: EMC NEXT TARGET?

If Brian Kelly is right and the Intel deal signals a positive trend for cloud computing, could EMC be the next take over target?

Pacific Crest analyst Brent Bracelin thinks it just might be.

“EMC’s growing arsenal of strategic assets, which are critical to enabling the shift to cloud computing - VMware, Zimbra, SpringSource, Greenplum, Data Domain, RSA, Pi Corporation - combined with an improving profit structure that includes 2013 gross and operating margin estimates above 60% and 24%, respectively, make it one of the most profitable and strategic cloud arms dealers across the entire tech vertical, in our view,” he writes.

What’s the trade?

I think EMC as well as VMWare are great places to play in the long-term, says Brian Kelly. But, short term I’m cautious because of the tape.

In the space I also like the Eastern Company , adds Jon Najarian.

Or look at Red Hat, adds Joe Terranova.


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EAR TO THE WALL: CISCO TO BUY SKYPE?

The traders also suggest putting Cisco on the radar Monday after technology blog TechCrunch suggested that the networking giant had made an offer to acquire Internet communications firm Skype.

TechCrunch, citing what it described as "one of our more reliable sources," said the Cisco hopes to acquire Skype before the Internet telephony company makes its IPO.

"Google was also rumored to be sniffing around Skype," TechCrunch said, "but antitrust concerns may have persuaded them not to make an actual offer."

Luxembourg-based Skype announced plans in early August to list on the Nasdaq.

What’s the trade?

I think it's perfectly reasonable that Cisco could be doing something like this, speculates Jon Najarian, especially in the wake of the Tandberg acquisition. (Tandberg is a major player in video communications.)

If this is true and I’m AT&T or Verizon, it makes me a little scared, says Brian Kelly.

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3M TO BUY COGENT

Conglomerate 3M on Monday agreed to buy Cogent for more than $900 million or $10.50 a share, a 19.8% premium.

Cogent, based in Pasadena, California, makes automated fingerprint and palmprint identification systems -- called biometrics -- that allow its customers to capture fingerprint and palm print images electronically, encode prints into searchable files, and compare sets of prints.

What’s the take away?

Options action suggests a higher price will be paid than $10.50, says Jon Najarian. But I only see it going to $11.

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TOPPING THE TAPE: H-P

It looks like Hewlett Packard is flexing some financial muscle. Despite the bidding war with Dell to acquire 3Par the tech titan also announced a $10 billion stock buyback.

What’s the trade?

The buy back should put a floor under the stock, explains Jon Najarian.

I find HP more appealing than Dell, says Joe Terranova. But quite frankly in this space I like IBM best.


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RESEARCH IN MOTION

Elsewhere in tech, India withdrew a threat Monday to ban BlackBerry services for at least two more months after the device's maker, Research In Motion, said it would give security agencies greater access to corporate e-mail and instant messaging.

The Ministry of Home Affairs said in a statement it would review the situation in 60 days after the Department of Telecommunications studies the feasibility of routing BlackBerry services through a server in India.

What’s the trade?

I'm concerned about RIM, reveals Brian Kelly, but not because of any emerging markets issues. They don't have an ap store like Apple does, and I see that as a problem. Apps drive growth.

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BROAD MARKET TELL

As we mentioned above JJ Kinahan has spotted some unusual options action in the SPY .

A large purchase of the 107 –110 call spread suggests to Kinahan that big investors are making a bullish bet on the market – possibly in anticipation of more M&A.



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Trader disclosure: On Aug 30, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (AXP), (GS), (IBM), (QCOM), (AAPL), (GOOG), (BRCM), (TER), (MSFT), (C), (MRVL), (BMO), (V), (POT), (OXY), (GLD), (SU), (FCX), (APA), (XBI); Kinahan owns (INTC), (SPY), (AKS), (CSCO)

For Brian Kelly
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own (TBT)
Accounts managed by Kanundrum Capital own (RGR)
Accounts managed by Kanundrum Capital own Japanese Yen
Accounts managed by Kanundrum Capital own Swiss Franc
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (IAI)
Accounts managed by Kanundrum Capital is short (MCO)
Accounts managed by Kanundrum Capital is short (RTH)
Accounts managed by Kanundrum Capital is short (RSX)
Accounts managed by Kanundrum Capital is short the U.K. Pound
Accounts managed by Kanundrum Capital is short the Australian Dollar

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (DRYS)
Virtus Investment Partners own more than 1% of (EXR)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
Virtus Investment Partners own more than 1% of (LPHI)
Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (MGRC)
Virtus Investment Partners own more than 1% of (NRCI)
Virtus Investment Partners own more than 1% of (DBV)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (XLK)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)

For Gary Shilling
Funds managed by Shilling own Treasuries

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