America Movil Slims Down: Tech Winners & Losers

NEW YORK (TheStreet) -- America Movil (AMX) shares surged Wednesday after the Latin American telecom provider said it would sell assets to cut its Mexican market share.

The Mexico city-based company announced Tuesday that it would "reduce its national market share in the Mexican telecommunications market under 50%." The assets to be sold were not disclosed.

This move coincides with the Mexican government's attempts to eliminate the quasi-monopolies in the country's telephone and media markets, virtual monopolies that have made telecom services in Mexico among the highest in the hemisphere. If the company didn't reduce its market share, the government said it could be subject to operating restrictions. 

According to The Wall Street Journal, America Movil controls about 70% of Mexico's mobile subscribers and fixed phone lines. It has 272 million wireless subscribers, making it the largest operator in the Americas. The company is controlled by Carlos Slim, the world's second-richest man. At yesterday's close, the company was valued at $73 billion. Slim, 74, and his family hold a 57% stake, more than half of his $71.5 billion total net worth.

Liberalizing the telecommunications market is one of the seven reforms undertaken by Mexican president Enrique Pena Nieto when he took office in 2012. He has also reduced a state oil monopoly and improved competition in Mexican banks. Since he took office, America Movil's market value has declined by $17 billion. PeAAA±a Nieto's term ends in 2018. 

"This decision is a direct consequence of the regulatory framework created by the telecommunications reform," the Communications and Transportation Ministry, which reports to Pena Nieto, said in a statement yesterday. "This decision may transform the conditions of effective competition in the telecommunications sector, with greater quality and better prices for services to end users."

Gigamon (GIMO) shares sank 31.0% to $12.54 after cutting its revenue forecast for the second quarter 2014.

Gigamon, a network traffic management software provider, revised its revenue expectations to between $34.5 and $35 million from between $38 and $42 million. The company cited challenges with closing deals as the reason for the reduction.

In response, several analysts downgraded Gigamon. Goldman Sachs lowered its rating of the stock from 'Buy'A to 'Neutral' and lowered the 12-month price target to $14 from $29. The report admitted that Goldman's previous bullishness had been misguided: We were wrong to recommend that investors buy shares of Gigamon in our January 31, 2014 upgrade.Goldman expects Gigamon shares to remain depressed unless it can re-accelerate product revenue growth.

Credit Suisse was less negative, lowering the price target to $19 from $25 but maintaining the AAAA¢AAAAAAOutperformAAAA¢AAAAAAA rating due to the companyAAAA¢AAAAAAs AAAA¢AAAAAAreasonable valuation,AAAA¢AAAAAAA noting that the companyAAAA¢AAAAAAs two consecutive bad quarters AAAA¢AAAAAAraise concerns over execution.AAAA¢AAAAAAA

Lastly, William Blair downgraded Gigamon to Market Perform from Outperform.The report cited a lack of confidence in Gigamon management's ability to predict the business combined with our increased concern that growth challenges in the visibility fabric market and competitive pressures may have led to the recent misses.These factors, combined with uncertainty on future growth and profitability, make Gigamon's valuation a poor reason to stick with the story.

"We are disappointed in these preliminary results," CEO Paul Hooper said in a statement. "However, we remain confident in our market opportunity and our leading technology that created this market. We will take steps to improve our execution in order to grow revenue and improve the predictability of our business."

Gigamon will release its earnings after the markets close on July 24.

Shares of Twitter (TWTR) rose 2.2% to $38.24 after record-setting use of the social network during yesterday's Brazil vs. Germany World Cup match.

The match prompted 35.6 million tweets, the most ever for a single sports event. The previous record-holder was the 2014 Super Bowl, which had 24.9 million tweets. The match also set a record in tweets per minute, with 580,186 tweets following German player Sami KhediraAAAA¢AAAAAAs goal in the 29th minute, the fifth goal of the match.

Twitter has successfully exploited the World Cup, seeing record traffic. For the final match of the tournament, this Sunday, Twitter is teaming up with the Archdiocese of Rio de Janeiro to illuminate the famous Christ the Redeemer statue in Rio with colors of each of the finalist's flags (Germany and either Argentina or the Netherlands).

Twitter users can vote for colors by tweeting #ArmsWideOpen followed by the abbreviation of one of the countries. The length that each flag color is displayed will be proportional to the number of votes received for each country.

Carlos Moreira Jr., Twitter's director of marketing development for Latin America, told Reuters, "we will capture the opinions of fans around the world and project them over Rio's Christ.

Pixelworks (PXLW) shares spiked 16.7% to $8.87 following a bullish assessment.

3D Analytics assigned Pixelworks a "Buy" rating and a price target of $22. Pixelworks, based in Oregon, designs and produces semiconductors for digital-visual display on devices ranging from phones to televisions and projectors. The report notes that Pixelworks has "sizeable contracts with many market leaders in the smart-phone, tablet and smart-television industries." One of these market leaders is Apple (AAPL).

Pixelworks' most recent 10Q filing, in May 2014, disclosed that Apple accounts for 14% of Pixelworks' revenues. It is unknown which Apple products will use Pixelworks products, but 3D speculates that these products are either the iPhone 6, the iPad, or Apple TV. The same filing indicates that in the last quarter, Pixelworks topped its revenue growth a year earlier by 64%.

The 3D report describes Pixelworks as an "undervalued company with a superior product in a rapidly growing industry." The acquisition of a new "powerhouse client" in Apple represents "a possible long-term relationship as well as a gateway to future large clients."

Shares of Facebook (FB) edged up 2.5% to $64.34 following the release of contradictory analyst reports.

Zacks Equity Research upgraded Facebook to a "Strong Buy." The firm wrote that Facebook's "strong return of 146.3% over the past one year, long-term expected earnings growth rate of 32.1%, impressive growth in mobile ad market and a positive estimate revision trend" account for the upgrade. The report added, "We believe that Facebook's huge scale and loyal customer base will continue to attract app developers, helping it to further gain traction and improve monetization in the long run." 

In contrast, Tigress Financial Partners Director of Research Ivan Feinseth downgraded Facebook to "Neutral" from "Buy." Feinseth expressed concern regarding Facebook's growth rate and monetization, with particular concern that the social network's active user growth rate may have plateaued. In addition, the report noted that Facebook's acquisitions of WhatsApp and Instragram "may be an overhang for shares."

Facebook will announce its second quarter results two weeks from today, on July 23 after market close. The company conference call discussing the results will take place at 5 p.m. Eastern time.

--Written by Laura Berman in New York

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