You may be in for a shock when you see that Verizon (VZ) is trading around $41 and has been struggling on the market lately. Furthermore, this is in the midst of its decision to purchase Hughes Telematics for the grand price of $612 million. Verizon hopes this acquisition will help it reach a wider customer base, as Hughes Telematics focuses on GPS tracking and other features in terms of car safety. This will not take place until much later in the year, however, so this may help explain why the stock has not benefited from this move.
With the purchase, investors may also be concerned by the fact that the purchase is not even safe yet. Rigrodsky & Long, P.A. is investigating the whole buyout of Hughes Telematics by Verizon for possible breaches of fiduciary duties and other law violations. Investors hope that this ends up being nothing other than someone going after a non-existent issue with no real basis. Whether or not these claims have a basis, however, there is still reason for concern, as the potential trouble may drive away some investors and hurt the stock.
Before investigating Verizon's situation more thoroughly, it is worthwhile to look at its competitors and their presence in the market recently.
USA Mobility (USMO) has people wondering if it will fizzle out, as reports claim that dividend yields will likely drop soon. Even if there seems to be a margin and people are buying, investors should pay attention to this change in sentiment. People may soon begin to lose confidence in this stock. This does not seem like a good alternative to Verizon, therefore, and although it may still take a while, I think this stock will be facing decreases in the future.
AT&T (T) may seem like a good investment because of its strength, but this can be misleading. It is never good for a company to get reports of bullying its consumers into upgrading services, and this is exactly what is happening to AT&T. A customer recently had her internet connection cut as a result of not agreeing to upgrade her service plan from an old plan to the much faster U-verse service. When she refused, AT&T apparently pulled the plug on her internet and forced her to upgrade. This is certainly not the friendliest of customer-service moves, but if all you are after is the bottom line, it is good to get more people hooked on the new service. The negative media might make this a rough time to buy shares in AT&T though, so investors should proceed with caution.
Another company that people might want to keep their eyes on is Sprint Nextel (S). It seems that Sprint must go a long way to prove itself with its consecutive losses in profit. On the other hand, it is relatively cheaper than the other competitors, and while you should not quickly invest in this, it might be a good idea to keep it in your sights for the future. At its low price, it may draw many investors, especially if it begins to make bigger moves. For the time being, however, I expect this stock to remain fairly consistent with its current trends.
One other competitor that is worth watching is MetroPCS (PCS). If you want to play the waiting game, this stock may be for you, but it will not bring very quick profits. For those more aggressive risk-takers who want a company that is willing to use huge amounts of capital in order to make acquisitions that could either fizzle out into nothing or become the next big source of income, this is not your company. In fact, MetroPCS has just had its "neutral" rating reiterated across the board. This shows that the company is not expected to be a risky investment, but it will not be overly profitable either, as it will likely remain stable in stock price.
Going back to Verizon, one may be hoping for good news. There is some good news, but first, I will look at the bad news. Verizon's purchases of DVR technology from Cisco (CSCO) may be leading to difficulties. Cisco and TiVo (TIVO) are in a legal battle to determine who has the right to profit from the sales of these machines. Verizon is not the only company that will be affected, as AT&T and Time Warner Cable (TWC) also purchase DVRs from Cisco. TiVo claims that Cisco and its customers are infringing on TiVo patents, however, so a TiVo victory would be bad for Cisco, Verizon, AT&T, and Time Warner Cable. Investors should watch as this case continues to develop.
Verizon is in the news for some better things as well though. Its joint venture with Vodafone (VOD) recently revealed that it was working on a comprehensive data plan for consumers. This would allow it to make use of the same data plan for multiple devices. Verizon has also secured a contract with Univision, a company that caters to the viewing needs of Hispanic America. This shows that the company is looking at growing populations and continuing to expand with intelligent decisions. In addition, Verizon is going to launch a program to help small-time investors reach 100 shares or sell all of their existing shares with its assistance. This eliminates commission fees and other headaches.
All of these stories point toward growth, while the negative stories for Verizon may prove to be nothing. Furthermore, the battle between Cisco and TiVo will mostly only affect Cisco and TiVo. While I would not suggest buying Verizon stock, as even these positive stories are rather inconsequential at the moment, I would not suggest selling this stock either. It will likely remain fairly stable in the near future, especially as things get resolved with the investigation into its acquisition of Hughes Telematics.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.