Today we are watching…
1. Microsoft (#msft)
Microsoft wants to knock Amazon Web Services (AWS) of its perch, but it doesn’t want to do any of the actual work. It’s on an inorganic acquisition spree. There are telecommunications companies that might add to the Azure public cloud service, and deals are being tied up for two; Metaswitch Networks and Affirmed Networks. They can connect Azure to customers using British Telecom and Sprint. Usually, the acquirer in a buyout deal experiences a large fall in stock price as it parts with the cash to seal a risky deal like this, but Microsoft investors saw the upside. If Azure can steal just a slither of market share from Amazon Web Services, Microsoft will be paid back!
2. Bank of America (#bankamer)
The big banks dragged indices into positive territory yesterday despite the number of unemployed catapulting to around 25 million Americans, worse than expected. Investors had been waiting for bank stocks to get swept up in the historic rebound, but it was yesterday that Bank of America caught up 7%, and Wells Fargo, more than 6%. These companies are facing zero interest rates, making it very difficult to earn decent spreads on deposits. Their earnings have been hit hard, but luckily a bank counts as an essential business, and banks today are much better run than ten years ago. You can bet that banks will come back, but you can’t bet where interest rates will go!