2016-07-25 11:30:24 | On The Fly: What to watch in Verizon's earnings reportVerizon (VZ) is scheduled to report results of its second fiscal quarter before the market opens on Tuesday, July 26, with a conference call scheduled for 8:30 am ET. What to watch for: 1. YAHOO! ACQUISITION: Verizon announced that it will acquire Yahoo's (YHOO) operating business for approximately $4.83B in cash. The transaction does not include Yahoo's cash, its shares in Alibaba Group (BABA), its shares in Yahoo Japan, convertible notes, certain minority investments, and Yahoo's non-core patents, which is called the Excalibur portfolio. Yahoo will be integrated with AOL under Marni Walden. The deal expected to close in the first quarter of 2017. Until the closing, Yahoo! will continue to operate independently. Wells Fargo said the deal will "help accelerate the development" of Verizon's marketing services, and added that the deal could enable Verizon to become a significantly stronger competitor to Google (GOOG, GOOGL) and Facebook (FB). However, the firm thinks that Verizon could face some integration challenges. RBC Capital analyst Jonathan Atkin said he believes the acquisition will increase Verizon's potential online ad share. The analyst said the deal could drive more impressions to the company's digital platform and he does not expect the transaction to significantly affect the company's financials. 2. STRIKE IMPACT: Verizon reached agreements with its striking union workers on May 27. Verizon Chief Financial Officer Francis Shammo said at the Bank of America Merrill Lynch Telecom & Media Conference on June 7 that the strike will impact Q2 profits by 5c-7c per share. On May 24, at the JP Morgan Global Technology media and Telecom conference, Verizon Chief Executive Officer Lowell McAdam said, "We have pushed off installations. We're doing a lot of installations but we're not doing the same volume that we had before, so we won't be driving similar numbers in Q2 that we would in Q1 from an installation perspective." 3. "CAN YOU HEAR ME NOW?": Sprint (S) recently launched a new advertising campaign aimed directly at Verizon by hiring Paul Marcarelli, the actor who used to ask "can you hear me now" for Verizon. Sprint noted in its Q1 results that the campaign is "one of the most successful in company history." The ad has been viewed over 8M times on YouTube and the company became postpaid net port positive against all three national carriers for the first time in over five years. Sprint reported its highest Q1 postpaid phone net additions in nine years. 4. SPECTRUM AUCTION: Verizon is involved in the Federal Communications Commission's latest spectrum reverse auction. The FCC began the reverse bidding clock round for the initial clearing target of 126 Megahertz on May 31. FCC chairman Tom Wheeler remarked, "The wireless industry has said it needs additional spectrum to meet growing customer demand and usher in the age of 5G. The broadcasters have stepped up and done their part to fulfill that demand." The FCC website hasn't updated the progress of this auction since the bidding opened. | |
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