Sometimes a major CEO seems like a foolish child more than a competitive leader. And sometimes the head of Verizon Communications, Inc. (NYSE: VZ), Ivan Seidenberg, has said things that make many of us scratch our collective heads. With Apple, Inc.'s (NASDAQ: AAPL) 3G iPhone about to hit the street (but not the Verizon network), Seidenberg must have been driven by jealousy to say something silly.
In response to the impending release of the 3G iPhone, Seidenberg said: "There goes the conspiracy again. You're declaring them a winner before they've earned it on the field." This in response to a reporter's question about the new iPhone achieving mass market appeal due to the lower entry price of $199. The iPhone does not have a huge market share when all sold phones are considered, but the new $199 price tag could sure put the Cupertino company in a position to ramp up that share pretty fast. This apparently concerns Seidenberg.
Sometimes waiting out the competition is a strategy that doesn't involve much R&D. Seidenberg went on to say, "Steve Jobs eventually will get old . . . I like our chances." Instead of trying to find some innovation to provide to the Verizon customer, maybe Verizon (along with all the other wireless carriers) will just try to wait out Apple's wireless offerings until Steve Jobs retires. Doesn't sound like a recipe for success to me. But then again, Seidenberg has said some pretty clueless things before. Maybe this is just another example of a corporate leader who's out of touch with his industry.
TheStreet.com's Jim Cramer says this is a crucial moment for the dividend-payers, which should be getting support here.
You can't even find protection in yields these days. It just went away. Perhaps we will get it if Sen. Obama gets elected. Perhaps with higher rates. Perhaps with the downfall of the high-yielding American financials. (Nice discussion of the lack of dividend safety courtesy of the man who knows more about dividends than anyone, Dave Peltier, in the Columnist Conversation last week.)
For ages, it seemed you could get to a magic number, typically 4% yield, where stocks would bounce, or at least be given a parachute that opened for a gentle landing.
Last week that parachute failed. You have stocks like Con Ed (NYSE: ED) (Cramer's Take) just getting trashed here, pushing the yield to 6%. You have stocks like Weyerhauser (NYSE: WY) (Cramer's Take), Carnival Cruise (NYSE: CCL) (Cramer's Take), Gannett (NYSE: GCI) (Cramer's Take), just slicing through the protection. The former's got cyclicality, the middle's got consumer and fuel worries, and the latter is in secular. But they all have no trouble paying the dividend.
Or consider Verizon (NYSE: VZ) (Cramer's Take) and AT&T (NYSE: T) (Cramer's Take). The first is at a 5% yield, the other is almost there. No one questions their ability to support that dividend.
Verizon (NYSE: VZ) is making a fairly concerted effort to get Vodafone (NYSE: VOD) out of its equity position in Verizon Wireless. The question is, why would Vodafone get out? Verizon Wireless makes a lot of money.
According to the FT, the head of Verizon, Ivan Seidenberg said, "Would I like to have 100 per cent of the earnings given we're doing 100 per cent of the work? Yeah, I would."
Verizon Wireless does not pay dividends to Vodafone, so it does not get much of a cash benefit from its piece of the pie, but the FT points out that the British company's stake is worth about $60 billion.
Reflecting on the debate, it would probably be in the best interests of Vodafone shareholders to sell out to Verizon. Their benefits of ownership are limited. Vodafone could use the cash for expansion in Europe, Asia, and the Middle East.
Perhaps the greatest reason for Vodafone to make a graceful exit is the US market itself. Growth of wireless subscribers is slowing as the market reaches a point of saturation. Competition is tough, especially with AT&T (NYSE: T) having about the same number of subscribers as Verizon Wireless. A price war could take down margins at both companies.
Vodafone's stake may never be worth more than it is now.
Douglas A. McIntyre is an editor at 247wallst.com.
During the challenging market conditions over the past year, the telecom sector has felt its fair share of the pain. BusinessWeek brings Standard & Poor's Todd Rosenbluth who suggests that some of these telecommunication stocks could now be good investments for traders as they have a safe dividend.
Despite worries tied to the slowing U.S. economy and increased competition, "we think that some of the concerns are overdone and believe selective stocks are attractively valued," Rosenbluth stated. Rosenbluth also noted that telecom stocks have started showing signs of recovery for the past few weeks, helped by the launch of new handsets and merger and acquisition agreements.
Some of investors' favorite companies are AT&T Co. (NYSE: T) and Citizens Communications Co. (NYSE: CZN). Rosenbluth believes that the launch of Apple (NASDAQ: AAPL)'s new iPhone, 3G iPhone, will stir increased demand for smartphones, helping such companies, while putting pricing pressure on some of their competitors.
MOST NOTEWORTHY: Verizon, AT&T, Invitrogen and General Electric were today's noteworthy downgrades:
UBS downgraded Verizon (NYSE: VZ) and AT&T (NYSE: T) to Neutral from Buy citing the weak economy and increased wireless competition.
Banc of America downgraded shares of Invitrogen (NASDAQ: IVGN) to Neutral from Buy as the company's acquisition of Applied Biosystems (NYSE: ABI) alters their investment thesis. The company's target was cut to $38 from $50.
JP Morgan downgraded General Electric (NYSE: GE) to Neutral from Overweight citing further risk to earnings and dislocation from necessary portfolio management in 2009.
OTHER DOWNGRADES:
Office Max (NYSE: OMX) was cut to Neutral from Outperform at Credit Suisse.
Goldman lowered Ryanair (NASDAQ: RYAAY) to Sell from Buy.
WebMD Health (NASDAQ: WBMD) was downgraded to Sell from Source of Funds at ThinkPanmure.
UBS downgraded Verizon (NYSE:VZ) from "buy" to "neutral" and took the same action with AT&T (NSYE:T) according toBriefing.com. The news service also reports that JMP upgraded Sandisk (NASDAQ:SNDK) to "market perform" from "underperform".
General Electric (NYSE: GE) was cut to Neutral from Outperform at JPMorgan, according to24/7 Wall St. The financial website also reports that Wendy's (NYSE: WEN) waised to Equal Weight from Underweight at Morgan Stanley.
Verizon (NYSE: VZ) had decided that customers do not have to be landline clients to get the company's new fiber broadband and TV service. In other words, it is willing to walk away from its core business to move into the future.
According to the AP, "Surveys point to about one in seven U.S. households now lacking landlines." More people are using their cellphones instead of the traditional home phone connection.
The announcement points to the lengths to which Verizon will go to get customers away from cable companies like Comcast (NASDAQ: CMCSA). Cable does not require that people use its voice system, VoIP, to get cable television or broadband connections. If Verizon wants to match cable packages, it has to do the same.
To a large extent, the news is an indication that Verizon is not really a traditional "phone company" any more. The revenue from that part of its operations is shrinking. Its growth comes from cellular customers, home fiber subscribers, and DSL.
Alexander Graham Bell is turning in his grave.
Douglas A. McIntyre is an editor at 247wallst.com.
Ah WorldCom. Aside from its storied history as one of the world's biggest accounting frauds, I remember it as my first cell phone company. My husband bought me a WorldCom phone as a gift and it turned out to not only have terrible service, but ridiculous billing practices, and we ended up paying to get out of the contract as I recall. I remember thinking that there was something really wrong with that company and later wishing I had pursued it as an investigative story, since I was then a writer at BusinessWeek Online and WorldCom was a hot stock.
But no, I never got onto such a story. In fact, I followed WorldCom's stock with interest since I had picked it in an office stock-picking contest years earlier and felt some satisfaction at its meteoric rise through the 1990s (even though I never actually owned the shares; it was just part of a fantasy portfolio).
But here's the WorldCom history that is worth remembering now: WorldCom started as Long Distance Discount Services (LDDS) in 1983. It changed its name to WorldCom in 1995. A series of mega-mergers transformed the company, culminating in its $40 billion deal for MCI. It was rechristened MCI WorldCom in 1998, the second largest long-distance calling company. The following year, just as it announced a deal with Sprint (now Sprint Nextel (NYSE: S)) that never came to fruition, the telecom industry started a prolonged downturn.
Last year, the Chinese government invested a cool $3 billion into The Blackstone Group LLP (NYSE: BX). It was before the IPO and seemed to be a good bet.
Of course, it wasn't. The shares of Blackstone have plunged since.
Despite this, China is still hungry for private equity. In fact, according to a report in the Financial Times, the State Administration of Foreign Exchange of China has agreed to invest $2.5 billion in TPG's latest fund (which may reach as much as $20 billion).
Simply put, China is overflowing with cash, so why not seek out higher returns?
True, private equity is ailing right now, but then again, the investment horizon is for the long-term. And with lower valuations, private equity firms are positioned nicely to pick up some attractive buyouts.
Something else: TPG has a strong track record. And, by all accounts, the firm is continuing its winning ways, such as with its latest score in selling Alltel to Verizon Wireless, a joint venture of Verizon (NYSE: VZ) and Vodafone (NYSE: VOD).
ADC Telecommunications (NASDAQ: ADCT) provides infrastructure equipment used by wireline, wireless, cable, broadcast and enterprise networks. Its systems connect high-speed Internet, data, video and voice services to residential, business and mobile subscribers. The firm also provides network management software and integration services. Ciena (NASDAQ: CIEN), Morgan Stanley (NYSE: MS) and Verizon Communications (NYSE: VZ) are on the company's customer list.
The firm surprised the Street last week, when it reported Q2 EPS of 39 cents and revenues of $403.4 million. Analysts had been looking for 30 cents and $384.8 million. Management also guided Q3 revenues to about $403.4 million ($395.70 million consensus), FY08 EPS to $1.25-$1.33 ($1.21 consensus) and FY08 revenues to $1.52-$1.54 billion ($1.5B consensus). Friedman Billings, Robert W. Baird, UBS and Deutsche Securities subsequently reiterated "buy" ratings on the shares. Lehman Brothers reiterated its "equal weight". All five firms boosted their price targets to the $18.50-$20.00 range.
AC/DC has become the latest veteran music act to join with Wal-Mart Stores, Inc. (NYSE: WMT) to release a new album solely with the retailer, according to the Wall Street Journal. The currently untitled album is expected later in the year and will be the first album of new material from the Australian rockers since 2000, while a tour in support is also expected to follow the new release. Although slated for release solely in Wal-Mart stores, the album is distributed by the band's longtime label Columbia Records, a part of Sony BMG Music Entertainment.
AC/DC follows a number of large selling artists: Garth Brooks, the Eagles, and Journey. The Eagles famously released their first new album in 28 years with Wal-Mart and according to Nielsen Soundscan for Billboard, Long Road Out of Eden has sold almost 3 million copies in the United States. Journey released an album of new material and newly recorded hits last month with Wal-Mart. In addition to this coup from Wal-Mart, AC/DC continues to remain one of the only acts not present in Apple Inc.'s (NASDAQ: AAPL) iTunes Store, the largest music retailer.
The band's music has been available in digital from from Verizon Communications (NYSE: VZ) VCast Music service since March 2007, but only in album form -- a format iTunes does not support. However, AC/DC digital downloads were not available on Verizon phones as full albums were too large. The new album from the band certainly has excellent prospects with Wal-Mart, but an even greater coup for the retailer would be to score the digital catalog for sale on the company's own digital store.
Now that Verizon Wireless has agreed to purchase privately held Alltel from its private equity owners (giving them a small profit and an out), what else is on tap for the soon-to-be largest wireless carrier in the U.S.? Verizon Wireless is chomping at the bit to overtake AT&T Inc. (NYSE: T) as the largest wireless carrier in the U.S., and its acquisition of Alltel will give it an 8 million+ wireless subscriber advantage over Ma Bell.
Although Alltel's buyout by Verizon was expected last year, it's now going to finally happen. Both companies use the same technical wireless standard, so this will be an easy merger. There will be no issues like when Sprint merged with Nextel in 2005 and the two incompatible networks caused an epic failure of those two companies to merge into one. Speaking of Sprint Nextel Corp. (NYSE: S), where does it play into the Verizon-Alltel landscape? Does its WiMAX plans now become derailed with the Verizon announcement, adding more insult to injury about the state of the company?
If anything, look for Verizon to take a strong look at buying Sprint Nextel shortly after its deal with Alltel closes. There would be way more regulatory scrutiny than the Alltel deal (overlapping markets, etc.), but a one-two knockout punch like this would make Verizon Wireless the pre-eminent wireless carrier in the U.S. for a long time. AT&T would have no choice but to plead with Deutsche Telekom to buy T-Mobile USA, the nation's fourth-largest wireless carrier, and one who also shares the same type of technical network as AT&T. Perhaps 2009 will see some of the neatest consolidation in the wireless world yet.
As Lehman Brothers Holdings Inc (NYSE: LEH) is about to report a second quarter loss of about $2B, the firm is closing in on raising over $5B in new capital, the Wall Street Journal reported. Once source of Lehman's new funding is reportedly the New Jersey Division of Investment.
The Financial Times reported that General Electric Company's (NYSE: GE) NBC Universal and British private equity firm GMT Communications Partners are expected to soon acquire Bigpoint, a German-based computer games website.
OTHER PAPERS:
According to the Independent, the credit crunch has cost the jobs of about 100 bankers at Barclays Plc (NYSE: BCS). The bank cut about 20 individuals on the leveraged finance team and will reportedly cut 80 more in investment banking and IT support.
Apple Inc. (NASDAQ: AAPL) Chief Executive Officer Steve Jobs will deliver his keynote speech Monday June 9 and may unveil then an iPhone that works with third-generation, or 3G, wireless networks, which are much faster than current AT&T (NYSE: T)'s network as Apple tries to lure business users from Research in Motion Ltd. (NASDAQ: RIMM) BlackBerry users and reach more international customers. If the iPhone was at first positioned as a consumer phone, the business segment is too lucrative to avoid, not to mention that many overseas customers are used to 3G networks.
Verizon Wireless has agreed Thursday to buy Alltel Corp. for $5.9 billion, which would make it by far the largest cellular carrier in the U.S. Verizon Wireless is a joint venture of Vodafone (NYSE: VOD) and Verizon Communications (NYSE: VZ). The deal comes just seven months after Alltel was taken private by TPG Capital and a unit of Goldman Sachs Group (NYSE: GS). Together, they would have some 80 million subscribers, surpassing AT&T (NYSE: T)'s 71 million.
Shares were higher today after the weekly jobless claims were reported as 357,000, down 18,000 from last week. While new claims are down, the four week average of those filing for benefits was up to 3.086 million, the highest level since March 2004. The good news is that the markets largely ignored that S&P downgrade of bond insurers today. The stock market even ignored a $5.00 rise per barrel in oil today. Here are the unofficial closing levels today:
Broadcom Corp. (NASDAQ: BRCM) was an example of just how strong today was by being up almost 3% at $28.90 late in the day. If you read trough the co-founder and former CEO's indictment charges you might think shareholders would have gone the other way.
Sometimes a major CEO seems like a foolish child more than a competitive leader. And sometimes the head of Verizon Communications, Inc. (NYSE: VZ), Ivan Seidenberg, has said things that make many of us scratch our collective heads. With Apple, Inc.'s (NASDAQ: AAPL) 3G iPhone about to hit the street (but not the Verizon network), Seidenberg must have been driven by jealousy to say something silly.
TheStreet.com's Jim Cramer says this is a crucial moment for the dividend-payers, which should be getting support here. 
During the challenging market conditions over the past year, the telecom sector has felt its fair share of the pain. 
.gif){kind=logo}
This post is part of a series on some of the most memorable 
Last year, the Chinese government 
and 
. He also operates 
Now that Verizon Wireless has agreed to purchase privately held Alltel from its private equity owners (giving them a small profit and an out), what else is on tap for the soon-to-be largest wireless carrier in the U.S.? Verizon Wireless is chomping at the bit to overtake 
Before the bell: Futures steady ahead of payroll report
Wal-Mart's launch of $20 slimming jeans will be a huge success
Why I spent some of my stimulus check on GE
Why the dollar will keep falling
