We Were Just Talking About…
…The streaming wars that are heating up with Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOG) reported interest in the web-TV space. As a result, many companies are starting to engage in partnerships or even make acquisitions to be prepared for the next wave of content consumption.
Quickly touching on Alphabet, I've seen some question who would pay for such a bundle. Well, if Disney (NYSE:DIS), Fox (NASDAQ:FOXA) (NASDAQ:FOX), CBS (NYSE:CBS) (NYSE:CBS.A) and NBC are all in, then I don't think subscribers will be a huge issue for Google. It will have the content necessary to get cord-cutters' attention and if people are looking to ditch traditional TV, there are few outlets available in terms of going skinny. There's no reason Google can't be a leader in this arena, especially with YouTube.
Time Warner is an enormous player - here's its list of properties - and assuming AT&T can gain regulatory approval for the deal, would strain the latter's balance sheet even more than it already has following the DirecTV deal.
Sources says the deal would be for "way north of $90." How far is "way north?" That's the golden question, but at the current price - $90 per share - the company sports a market cap of roughly $65 billion.
Let's say the deal is for $125 a share - nearly 40% premium - in a deal worth about $90 billion. Could AT&T absorb such a move? I'm no accountant here, but with $117 billion in debt on the balance sheet already, another $90 billion seems like concerns would mount.
Seeking Alpha community: Can anyone shed light on the AT&T debt situation? Am I missing something and it's not as straight forward as it appears? For instance, Ford's (NYSE:F) debt, on paper, looks much higher than it actually is - is AT&T similar?
If it's not, then this deal would be heavy, (presuming it's not done with stock). Perhaps that's why the stock is down more than 5% the past two days and down 3% Friday. It now yields 5%, which is surely tempting for some in this environment, but given the possibility that the company's debt could balloon by so much may keep some from stepping in right now.
Provided that the debt situation is as it appears, the deal might be too big for AT&T, despite it resulting in what would be a mega-player in the consumer space. It's hard to hate all the businesses under one roof, but again, the debt is the issue.
What Just Happened to Our Internet?
I was up early this morning, sitting on my couch with the pup in my lap. An Amazon (NASDAQ:AMZN) Kindle was in one hand, a warm cuppa joe in the other. I was reading the end of CyberStorm, a story about a New York apocalypse that ensues when the wicked side of Mother Nature combines with a massive cyber hacking/shutdown that leaves the Big Apple paralyzed.
(Incidentally, the book is available on Kindle for free for Prime members, part of the program we talked about earlier this month.)
Ironically, after finishing the book I opened up Twitter (NYSE:TWTR) to find that many users were complaining about outages. Indeed, my desktop version of Twitter was not working, but I figured it was an issue with my internet. More and more sites started to pop up though, and companies like Amazon, Etsy (NASDAQ:ETSY), Spotify (Private:MUSIC), Netflix (NASDAQ:NFLX) and a number of others were being impacted.
Of course, this felt like an ominous coincidence thanks to the book I just read. So what happened?
Dyn, an internet traffic company, was hit with a distributed denial of service attack. Since I'm not no cyber security expert, here's the gist, compliments of CNBC:
"A Distributed Denial of Service (DDoS) attack is when a web service is intentionally overwhelmed by traffic from many sources. It is a common method for digital assaults.
Dyn said the attack may also impact 'Dyn Managed DNS advanced services with possible delays in monitoring.'
It was not known who was behind the distributed denial of service attack."
The company has been hit more than once by the coordinated attack and the Department of Homeland Security is now looking into the situation. This is something that's hard for investors to prepare for, it being somewhat of a "black swan" event, so to say.
Even temporary hits can really screw things up, although thankfully in this case it seems temporary. Looking beyond sales and profits, it's not hard to think about the devastation a company like Amazon would suffer should its service be rendered useless for several days or more.
It goes to show how vulnerable we really could be. The internet is a major power in our lives. It controls not just the things we buy or content we consume, but it plays a big role in communications, logistics and health care.
Without it, we really would be dealt a paralyzing blow - and not just economically.
I'm not trying to sound like that crazy guy who screams from the mountains about a pending doomsday. I'm not saying that. But I am saying that investors should be prepared for not only individual cyber attacks against the companies they're invested in, but also system-wide chaos that could ensue.
Friday proved that it's more than possible.
Nintendo's New Console
On Thursday, we got a look at Nintendo's (OTCPK:NTDOY) new Switch game console. It's hard to describe it, so have a look at the video:
Any immediate thoughts? Please, leave them in the comments sections. We want to see what people think so far.
The device will be available in March and the price has not been released yet. While some have speculated that it would could be £350 - roughly equivalent to $425 - that figure seems a little high, at least to me. Gamers can buy a high-powered Xbox One (NASDAQ:MSFT) or Sony (NYSE:SNE) PlayStation 4 for that much.
Then again, under-charging may suggest to some that Nintendo feels its product is inferior to its competitors, a mindset I'm sure they do not share.
My thoughts are that serious gamers won't be into the new console. They'll stick with their Xbox or PlayStation, while casual gamers would likely rather go with an iPad or smartphone.
Don't get me wrong. The features are pretty neat, but how realistic are they? Most people like to sit down and game. Or go to a friend's house and game. They don't want to unhook their Switch and go to the park to play a video game. Maybe on the subway or something, I guess. And perhaps meeting up with friends would be a selling point for younger users.
The Switch could definitely do good with young gamers, but it seems like the price would need to come down (assuming the one above is anywhere near accurate). It also would have been nice for it to be out in time for the holidays.
That's just my thoughts on the system. I think it has limited upside potential and will still sit in the No. 3 spot, behind Xbox and PlayStation.
Disclosure: I am/we are long DIS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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