|| Miscellaneous: Oracle, Microsoft Could Take a Beating in Trump's Tech World|
diversified tech behemoths could be negatively affected by Trump presidency
while U.S.-centric companies are... |
...likely to benefit.
As investors navigate through Donald Trump's
shocking victory against Hillary Clinton in the U.S. presidential election,
there may already be potential winners and losers within the technology
universe. Behemoths with international revenue streams are likely to be hurt by
the Trump presidency while cybersecurity stocks can anticipate a boost,
according to industry analysts.
Short-term, movements in currency will affect
companies with international revenue streams, Morningstar analyst Rodney
Nelson said by phone, adding that this has been a point of contention since the
Brexit vote for companies with exposure to the pound. Salesforce.com (CRM)
, for instance, translates its European revenue to the pound.
Nelson explained that long-term, potential changes to
international trade agreement may hurt hardware manufacturers that source
components from overseas such as Microsoft
"While it may take time for the election results
to change the overall demand environment, given valuations of many growth
software names, we think the software market could trade with a multiple to the
market," wrote RBC Capital Markets analysts Matthew Hedberg and Ross MacMillan
in a note Tuesday night.
Trump's victory may lead to a short-term pause in IT
spending against the backdrop of weak equity markets, Hedberg and MacMillan
Trump's exclusionist philosophy could bode well for
U.S.-centric software companies such as
, Ultimate Software Group
and Paylocity Holding
, according to the analysts. On the flip side, it could hurt geographically
diverse behemoths like Microsoft,
, SAP (SAP)
TurboTax owner Intuit sees about 95% of its revenue
come from the U.S. while Ultimate Software and Paylocity both count 100%
of their respective revenue from the U.S., according to data from
By comparison, only about 47% of Microsoft's revenue
stems from the U.S., with Mainland China contributing to around 10%. Japan
makes up about 4% of the pie, Germany forms about 3.2%, United Kingdom is
approximately 2.7% and France constitutes around 2.3%.
Oracle's pie of revenue looks quite similar. After the
U.S. that makes up 47% of the software giant's revenue, the U.K. comes a close
second with 6.3% of revenue and Mainland China making up approximately 6.2%.
Japan contributes to around 4% of total revenue.
For SAP, about 33% of revenue stems from the U.S. and
Germany makes up a big chunk of the pie with around 13%. Mainland China is
estimated to generate approximately 6.5%.
Within the tech universe, cybersecurity stocks have
been a beneficiary of the election.
"Cybersecurity was going to benefit no matter who
won," said Wedbush Securities analyst Steve Koenig by phone. "They
could benefit from any federal programs that would involve upping federal
spending in security."
For instance, the government is a customer of FireEye (FEYE)
, he said, adding that Proofpoint
is among the best-positioned in the sector thanks to its strong technology
for email security, Koenig explained. Republican National Committee, for
example, is Proofpoint's customer.
Meanwhile, market volatility will lead to valuation
compression and the tech sector could expect to see changes in M&A,
Morningstar's Nelson said.
For instance, the proposed tie-up for AT&T (T)
and Time Warner
is likely to experience even greater scrutiny under Trump who had publicly
criticized the $85 billion merger during the campaign. It remains to be seen
how telecom consolidation will pan out now that Republicans are in control.
Article by Jaewon Kang
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