Stocks gyrated on Wednesday as the market digested the widely expected announcement of a quarter-point increase in short-term interest rates. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) dipped and recovered, but ultimately closed down.
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Data source: Yahoo! Finance.
Tech shares continued their slide, originally triggered by news of mishandling of personal data by Facebook, although its stock managed a small gain today. The Technology Select Sector SPDR ETF (NYSEMKT: XLK) fell 0.6%. Energy shares rose sharply on higher crude prices; the Energy Select Sector SPDR ETF (NYSEMKT: XLE) gained 2.6%.
As for individual stocks, salesforce.com (NYSE: CRM) announced a previously rumored acquisition of MuleSoft, Inc. (NYSE: MULE), and General Mills (NYSE: GIS) gave a disappointing profit outlook.
Image source: Getty Images.
Salesforce goes shopping
Cloud software pioneer Salesforce announced yesterday after market close that it is acquiring MuleSoft in a $6.5 billion cash-and-stock deal. MuleSoft jumped 5.3% after gaining 27% on Tuesday when news of the deal leaked, while Salesforce shares dipped 2.7%. MuleSoft shareholders will receive $36 in cash and 0.0711 shares of Salesforce common stock, for a total value of $44.89 per share, based on the price of Salesforce shares at Monday’s close.
MuleSoft went public a year ago. It makes a software platform that allows companies to build application networks, joining together disparate cloud-based and on-premise applications, databases, and devices. The company is relatively small, having generated only $296.5 million in revenue last year, but is growing rapidly. In its most recent quarter, MuleSoft posted a non-GAAP loss of $0.12 per share.
“Every digital transformation starts and ends with the customer,” said Salesforce CEO Marc Benioff in the press release. “Together, Salesforce and MuleSoft will enable customers to connect all of the information throughout their enterprise across all public and private clouds and data sources — radically enhancing innovation. I am thrilled to welcome MuleSoft to the Salesforce Ohana.”
Salesforce has proven adept at snapping up software companies to enhance its offerings, helping to fuel its ambitious top-line growth goals. The price tag of 22 times revenue may be breathtaking, but with cloud software now one of the hottest areas of growth in technology, the purchase could well pay off in the long run.
General Mills sinks on rising costs
Shares of General Mills slumped 8.9% after the company reported fiscal third-quarter sales and earnings that beat expectations, but slashed its profit outlook for the year. Sales increased 2.3% to $3.88 billion compared with analyst expectations of $3.78 billion, and adjusted earnings per share came in at $0.79, beating the consensus forecast by $0.01.
Despite the earnings beat, CEO Jeff Harmening sounded the alarm on rising costs, saying in the press release:
Our primary goal this year has been to strengthen our topline performance while maintaining our efficiency. While I’m pleased that we’re delivering on the first part of that goal, with strong consumer marketing, innovation, and in-store execution leading to a second consecutive quarter of organic net sales growth, I’m disappointed in our results on the bottom line. Our third-quarter operating profit fell well short of our expectations, and cost pressures are impacting our full-year outlook.
Looking forward, General Mills cut its operating income forecast from previous guidance of flat to minus 1% to a decline of between 5% and 6%. The company blamed “higher-than-expected supply chain costs, including freight and logistics.”
General Mills is trying to reinvigorate growth by divesting older, stagnant brands and replacing them with new growth businesses, as exemplified by its acquisition of Blue Buffalo Pet Products. But the headwind of input cost inflation, especially shipping expenses, is turning out to be stronger than expected.
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Jim Crumly owns shares of FB and Salesforce.com. The Motley Fool owns shares of and recommends FB. The Motley Fool is short shares of General Mills. The Motley Fool recommends MuleSoft and Salesforce.com. The Motley Fool has a disclosure policy.