How Apple's Acquisition of AuthenTec Will Affect Your Portfolio...And Your Next Phone
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Don't worry. You weren't alone. In fact, even I was with you at first, and I have never even owned an iPhone. Truth be told, I'm not an iProduct person at all. Yet, even this had me thinking of switching.
When I say that I'm not an iProduct person, that includes the MacBooks, etc. I've personally been a Vaio/HP laptop person my whole life. That being said, one of my favorite features that my Mac friends tried to pretend that they weren't jealous of was the reason for my excitement over the new iPhone 5.
Electronic security has recently been taken to new levels. When I touch my mousepad to light up my screen on my computer, my camera turns on and, if it recognizes my face, logs me in to my computer. Incredible, right? Well, it's just the start of increasingly-commercially available technology like this, and Apple (NASDAQ: AAPL) is just now starting to get their hands on it too.
But what Apple is getting their hands on is something completely different: Apple's recent acquisition of AuthenTec (NASDAQ: AUTH) shows that they're trying to get their hands on fingerprint technology. So, yes, you are free to get excited.
But don't get too excited. Like me, you're thinking that the new iPhone 5 is going to have technology that will allow you to scan your finger to access your iPhone. Unfortunately, we're both wrong. You see, the iPhone 5, rumored to be released September 12th, is supposedly already in production, making it impossible (unless, somehow, secret under-the-table negotiations were in progress between these two companies for a long time) for the new version of America's favorite phone to have this new technology. So, when can you expect it? Well, probably on a later release, like the iPhone 5S or the iPhone 6.
Even if the new fingerprint technology isn't going to be on the next iPhone, it will eventually find its way to your pocket, giving Apple another step up over rivals Motorola or Nokia (NYSE: NOK) who both have no feet in the fingerprint circle.
So, as wonderful as that is for you and the newest hardware destined for your pocket this fall, the reason you came here was for a different side to the story: how does, or how could this affect your investment portfolio.
The financial side
If you bought shares of AuthenTec just before the merger, you'd be up almost fifty percent already. In fact, you could have held the share's overnight and nearly doubled what you invested. But, I'm going to go out on a limb and guess that none of you did that; don't worry, neither did I. But, what you can do is wait before your jittery fingers make the jaunty click of the mouse to buy shares of this company, and here's why:
AuthenTec is currently under investigation, although they're doing a great job of keeping the news under the table, which you can credit to Apple, who can not afford to deal with a scandal like that. However, this small cap company is under investigation by a New York-based law firm called "Levi & Korsinsky," who recently filed a report saying, "The claims concern whether the AuthenTec board of directors breached their fiduciary duties to AuthenTec stockholders by failing to adequately shop the company before entering into this transaction and whether Apple is underpaying for AuthenTec shares, thus unlawfully harming AuthenTec stockholders."
The investigation could end in any number of ways, but it's best to stay out of it for now, especially because AuthenTec won't be making any huge upward movement any time soon, being that they're work with Apple won't be until later models of the iPhone.
So, how about the financial side for Apple? Well, if you're long Apple, congrats to you, give yourself a pat on the back. You could be up anywhere from several hundred to several thousand percent, depending on when you bought. Otherwise, I would still lay off for a bit. The truth is, Apple's revenue is flirting with meeting/not meeting expectations. The new iPad's "new features" didn't quite stack up: not enough people saw a retina display as a reason to upgrade from their old iPad. Not only are they hurting now, but Apple is reportedly releasing (soon) an iPad Mini, to compete with tablets such as the Kindle Fire, the leader in Amazon's (NASDAQ: AMZN) charge to rival tablets like the iPad. Rumor has it that it will be the same thickness as the iPod touch, but it won't even include a retina display!
All of these details spell out trouble for me, which is why I'm keeping my money elsewhere for now. I've learned that companies involved with scandal are worth staying away from. It's only a little bit, it won't kill you. You can always go back once the whole thing is resolved. But, until then...
The Foolish bottom line
No one investor can guarantee the future of any particular stock. However, now that you know which stocks to stay away from for now, why don't you check out my other latest article, One Stock to Buy Right Now which details once small stock that's on the rise for the long haul.
Of course, no portfolio should be based off of one stock. That's why, to build a balanced portfolio, you should check out the latest free article from The Motley Fool, "The World's Best Dividend Portfolio." Click here to access the article now!
mpnolan222 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services recommend Amazon.com, Apple, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.