What to Expect From Tech and China

 | Dec 30, 2011 | 6:30 AM EST
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Here are some predictions for 2012 related to technology and Chinese stocks:

Google (GOOG) will hit $750 as its high of the year next September and then begin to show weakness. Google appears finally ready to vault past its 2011 high of the year. Things should continue to go well for the company as Android continues to proliferate. However, slow growth in index search and the incorporation of the low-margin Motorola Mobility (MMI) business will act as weights on the stock by the second half of the year.

Yahoo! (YHOO) to be acquired by a consortium of Alibaba Group, Softbank, Blackstone (BX) and Bain Capital before April. Alibaba and Softbank will get their stakes back in their own businesses and retain small stakes in the new Yahoo! Blackstone and Bain (and possibly other private-equity firms) will get the core Yahoo! business that's still the third-most-popular website in the U.S. There won't be any issue with the U.S. government review of the deal with the U.S. private-equity firms taking the lead. Price for Yahoo! longs: $22.

Research In Motion (RIMM) stays independent and hits a low of $7.50 in 2012. Despite many negative media stories pleading for the company to sell, it won't. It will stay independent and try to turn itself around. Its new QNX phones will debut before the end of December but will disappoint. The two co-CEOs will continue to tell shareholders that they need to be patient and that redoubled marketing efforts will help right the ship.

The Facebook IPO will be the biggest business story in 2012, and the company will reach a post-IPO valuation of $120 billion. Although the IPO (and subsequent secondary offerings) will help the company raise a lot of money, Facebook's 2012 high will not be reached again for the next four years.

The second biggest IPO of 2012 will be Alibaba Group. The Chinese company will go public near the end of 2012 and will become the most valuable Chinese Internet company, with a bigger market capitalization than Baidu (BIDU) or Tencent. It will initially be valued at $65 billion.

Other Web 2.0 companies will not fare as well in 2012. LinkedIn (LNKD) will hit a low for 2012 of $25. Groupon (GRPN) will bottom out at $7. Even Salesforce.com (CRM) will come under suspicion of not being able to live up to the "cloud" hype and see its stock bottom out at $20.

Large-cap tech -- such as Microsoft (MSFT), Cisco (CSCO) and Hewlett-Packard (HPQ) -- will see their stocks largely unchanged on the year.

The smaller Chinese IPOs from 2010 and 2011 will be taken out at very low prices in 2012, including Mecox Lane (MCOX), Dangdang (DANG) and Renren (RENN).

360Buy will be the second-biggest Chinese IPO of 2012 after Alibaba Group. It should also become big a acquirer of smaller Chinese e-commerce companies that prove to be unprofitable, such as VANCL. 360Buy, unlike Alibaba Group, will struggle with its own profitability for the first two years post-IPO but ultimately be successful.

The worst-performing tech stock in 2012 will be Zynga (ZNGA), which will close 2012 at $2.50 a share.

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volatility is quite low here, and we could see some downsides here in the short term. ...



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