Say Goodbye To Your Margins: What Google Fi Means For Verizon
Cameron Graham • 73 Comments
Cameron Graham • 73 Comments
Yesterday, 6:31 PM
- Verizon (NYSE:VZ) -- in talks last month to acquire video firm Vessel -- has sealed the deal.
- Terms weren't disclosed. The subscription video start-up was co-founded by former Hulu chief Jason Kilar.
- He'll stay through a transition period to the end of 2016, but isn't expected to stay with the company long-term; co-founder Richard Tom will stick around to run the operation.
- Verizon's acquiring the technology and software, so Vessel proper will be shut down Oct. 31 and refunds will be issued -- and no doubt Vessel tech will be applied to Verizon's Go90 mobile video service.
Yesterday, 2:00 PM
- Verizon's (VZ -0.4%) $4.83B deal to acquire the core of Yahoo (YHOO -1.3%) still makes sense even in light of Yahoo's massive security breach, says Verizon exec Marni Walden.
- That doesn't mean Verizon doesn't still need more information about the intrusion, says Walden, the president of Product and New Business Innovation, speaking at a WSJ conference.
- "The reason we wanted to get this asset is we wanted to increase the audience scale that we had at AOL," she says. "So it very much makes sense, but what we have to be careful about is what we don't know ... we're working closely with that team to try and better understand. And so I've got an obligation to make sure that we protect our shareholders and our investors ... so we're not gonna jump off a cliff blindly."
- "We're hoping that in the next 60 days or less that we can have an outcome," she adds, "but right now they're conducting the investigation and will be providing us information."
- Can she think of a scenario that would make Verizon walk away? "Why don't we move on to your next question?"
- Previously: Reuters: Yahoo mail-scanning government order unlikely to be publicized (Oct. 25 2016)
- Previously: Verizon call: Lawyers are talking over materiality of Yahoo breach (Oct. 20 2016)
- Verizon/Yahoo coverage
Fri, Oct. 21, 4:29 PM
- Some shine is coming off Verizon (VZ -1.9%) for analysts, in the wake of a disappointing Q3 report, and new threats from trailing players as it works to digest Yahoo's Internet business.
- Baird's William Power says yields are "more likely to rise than not, which creates a headwind," and reiterates the firm's Neutral stance while cutting price target to $52, implying just 7.9% upside.
- Citigroup's Michael Rollins (Neutral) thinks the subscriber-adds disappointment is an omen for slower revenue growth in 2017, and says it's facing a moment of truth: "The reality of postpaid phone losses puts Verizon to a decision point, one that AT&T has faced for more than two years: fight for customer retention and growth or improve profitability for higher-value customers." Cost-cutting is a focal point, he argues.
- FBR's David Dixon stays bullish -- he's maintaining an Outperform rating and $57 price target -- but "competitive network quality is converging" and Verizon needs to be able to fend off market-share competitors.
- "VZ still leads the market but may need to use the pricing lever to a greater extent to maintain market share, as all other national competitors are offering unlimited data plans at attractive price points," he writes. "Strategically, VZ will seek to differentiate through accelerated 5G deployment, relying on 3.5 GHz unlicensed spectrum as its indoor play and spectrum refarming, which should yield cost savings and expedite launch due to a growing ecosystem around 3.5 GHz."
Thu, Oct. 20, 9:24 AM
- On Verizon's (NYSE:VZ) Q3 earnings conference call, retiring CFO Fran Shammo recapitulated a company line on the data breach at Yahoo (NASDAQ:YHOO), saying he did expect the intrusion could have a "material impact" on a $4.83B takeover deal.
- "This was an extremely large breach that has received a lot of attention from a lot of people," he says, noting the lawyers had their first call yesterday "but that's going to be a long process."
- Yahoo itself had canceled a call tied to its earnings released Tuesday, citing the deal.
- Upgrade activity was affected by both short supplies of iPhone 7 as well as the recall of Samsung's Galaxy Note 7 devices, Shammo and incoming CFO Matt Ellis said. Meanwhile, when it comes to pricing, "unlimited is still not something we're going to move to."
- The company is negotiating with one party on a sale of its data centers, Shammo says.
- User engagement measured as viewing time on its video service Go90 is up, now past 30 minutes per user each day, with less than 20% of the traffic served on Verizon's network.
- Shares are off 1.8% premarket with the call still ongoing. YHOO -0.2% premarket.
- Earnings call slides
- Previously: Verizon turns lower as postpaid subscribers disappoint (Oct. 20 2016)
- Previously: Verizon beats by $0.02, misses on revenue (Oct. 20 2016)
Thu, Oct. 20, 8:03 AM
- The Q3 bottom line topped consensus by two cents, but revenue fell 6.7% as the company added just a net 442K postpaid subscribers vs. the 766K expected.
- BTIG's Walt Piecyk notes this is the first time the postpaid phone base has declined in Q3. There was also postpaid churn, which rose to 1.04% of total wireless subscribers vs. expectations for 0.99%. It's the first time above 1% in the last six quarters, says Piecyk.
- VZ -2.6% in active premarket action.
Thu, Oct. 20, 7:31 AM
Wed, Oct. 19, 5:30 PM
Wed, Oct. 19, 10:46 AM
- Yahoo (NASDAQ:YHOO) is up 2.5% today, just 4.8% below last month's 52-week high, after it posted profits that beat expectations in Q3 and analysts mostly looked past them to a pending buyout by Verizon (NYSE:VZ).
- Considering the lack of comment from Yahoo management, the results are likely to be overshadowed by Verizon's commentary when it delivers earnings tomorrow, analysts agree.
- Nomura raised its price target to $45, from $39, to reflect appreciation of the company's stake in Alibaba. Analyst Anthony Di Clemente believes Verizon would be hard pressed to show material adversity for the deal, based on similar past events, and the Yahoo results aren't likely to add any pressure there.
- An implied discount on Yahoo's Alibaba stake has increased since Verizon commented on Yahoo's breach, says SunTrust Robinson Humphrey's Bob Peck, who has a Hold rating and $42 price target. But the key question tied to the Verizon deal is whether Yahoo could even open up the process again to new bidders, he says.
- Morgan Stanley (Equal-Weight, $42 price target) and Oppenheimer (Outperform, $53) agree that any risk to the deal is overshadowed by the fact that Yahoo's basically a trading vehicle for the Alibaba stake, so BABA bullishness can outweigh any M&A concerns.
- Yahoo yesterday guided to Q4 revenue (ex-TAC) of $880M-$920M, below estimates for $938M, and to adjusted EBITDA of $260M-$300M (above a consensus for $245M).
Tue, Oct. 18, 4:19 PM
- Yahoo (YHOO -0.3%) is up 1% after hours in the aftermath of its Q3 earnings report, featuring profits that beat expectations and in-line revenues
- GAAP revenue was $1.305B (up 6.5%). The previous change in revenue presentation tied to its Microsoft Search Agreement contributed $258M; excluding that, GAAP revenue would have been $1.048B (down 15% Y/Y).
- "Mavens" revenue (mobile, video, native and social) was $524M (up 24.2%); non-Mavens revenues were $726M (up 4.8%). Total traffic-driven revenue grew 12% to $1.25B, while non-traffic-driven revenue fell to $55M from $111M.
- Mobile revenue jumped 46.1% to $396M, while desktop revenue inched up to $854M from $844M.
- The company had said it wouldn't hold a call to discuss the earnings due to its pending buyout deal with Verizon (NYSE:VZ).
- "I am pleased with our Q3 results," says CEO Marissa Mayer. "This quarter, we launched several new products and showed solid financial performance across the board; both are a testimony to the tremendous teamwork, focus, and resilience of our employees," she added, noting the company is working hard to retain user trust after its data breach and ahead of the Verizon integration.
- Press Release
Tue, Oct. 18, 10:34 AM
- Needham has cut Yahoo (NASDAQ:YHOO) to Hold with talk in the air of Verizon (VZ -0.4%) potentially walking away from its deal to buy the Internet business, or getting a lower deal price.
- But valuation also plays a part as the firm reduces its rating to Hold from Buy, as does Yahoo's cancellation of its Q3 earnings call, which "also troubles us." Yahoo's up 1.5% today to $42.40, above Needham's $40 price target.
- Last week, Verizon's general counsel was quoted as saying there was a "reasonable basis" to think that the massive 500M-account data breach at Yahoo would prove material to Verizon's $4.83B deal to acquire it.
- Yesterday, Credit Suisse set a price target of $52 on Yahoo shares (implying 23% upside), and MKM Partners boosted its price target to $51 from $44.
- Yahoo reports after the bell today, but won't hold a conference call because, it says, of the pending acquisition.
Thu, Oct. 13, 2:52 PM
- Verizon (NYSE:VZ) General Counsel Craig Stillman has raised alarm bells over the company's $4.83B deal to buy the Internet business at Yahoo (NASDAQ:YHOO) in saying that a "reasonable basis" exists to believe a massive user data breach at Yahoo is material to the takeover deal.
- Late last month, Yahoo confirmed a breach that happened two years ago that it believe affected 500M user accounts. And earlier this month a Reuters report said the company built a secret program to scan incoming user mail at the behest of the U.S. intelligence community.
- The breach could trigger a clause allowing for Verizon to get out of the deal, Stillman says.
- "I think we have a reasonable basis to believe right now that the impact is material and we're looking to Yahoo to demonstrate to us the full impact," he said. "If they believe that it's not, then they'll need to show us that."
- Right now: VZ +0.04%; YHOO -1.5%.
Thu, Oct. 13, 2:34 PM
- The general counsel at Verizon (NYSE:VZ) is now saying there's a "reasonable basis" to believe that a massive data breach at Yahoo (NASDAQ:YHOO) had a material impact on Verizon's $4.83B takeover agreement, Reuters reports.
- Yahoo shares are headed down, now -1.8%. VZ is flat on the day.
- The comment adds some fuel to speculation that Verizon could look to change up the existing deal, or even get out of it.
- A New York Post report last week suggested that Verizon would seek up to a $1B discount on the purchase price, with sources saying Verizon's Tim Armstrong was getting some "cold feet."
Thu, Oct. 13, 12:20 PM
- Verizon (VZ -0.1%) is closing seven of its call centers in five states, including New York, its home state.
- The moves, to consolidate call centers, will affect about 3,200 workers overall. The company has 162,000 employees in the U.S.
- The workers are being offered jobs at other sites or severance packages if they decide not to relocate.
- About 850 jobs will be lost at two New York state locations, which got a spokesman for governor Andrew Cuomo to call it "an egregious example of corporate abuse" and "astounding" corporate negligence. "I'm not sure what abuses he's referring to," says Verizon spokeswoman Kim Ancin. "These are jobs that are staying within the U.S."
- Another 700 jobs are being cut in California, and another 300 relocated, while other cuts include 320 in Nebraska, 200 in Maine and 550 in Connecticut.
Wed, Oct. 12, 1:28 PM
- A civil liberties group with experience working civil rights and surveillance issues with Web companies has called on Verizon (VZ +0.7%) to improve user protection at its acquisition target, Yahoo (YHOO -1%).
- In the wake of reports that Yahoo allowed for scanning of incoming customer mail by government intelligence, international group Access Now is pressing Verizon to improve data protection at Yahoo, keep security staff informed of policy decisions and keep commitments to surveillance reform.
- "Verizon has a long way to go to establish trust with millions of users who now know Yahoo as inattentive to their rights and security," Access Now says. "Implementing these measures will serve as first steps."
- "We have an ongoing and constructive engagement with Access Now and will review their recommendations and consider them carefully," Verizon said in a statement.
Tue, Oct. 11, 3:38 AM
- Verizon (NYSE:VZ) CEO Lowell McAdam is "not that shocked" about Yahoo's (NASDAQ:YHOO) massive data breach and said the company is 50%-60% done with its investigation.
- Will Verizon demand a price negotiation on their $4.8B deal? "That is just total speculation - we still see a real value to the asset there," he said. "But in fairness, we're still understanding what is going on, to define whether it's a material impact to the business or not."
Mon, Oct. 10, 5:38 PM
- Verizon (VZ +0.5%) may shift its holiday marketing away from Samsung's (OTC:SSNLF) problem-plagued Galaxy Note 7 phone, a spokeswoman says.
- That would follow a move by rival AT&T to consider stopping all sales and replacements of the devices, which have been the source of numerous reports of fires. Verizon may await a government look into the devices before deciding for sure, though it has suspended sales for now.
- A change-up is no small matter heading into the critical selling season.
- "We have the new iPhone, we’re about to launch the new Google Pixel, which is exclusive to us," says spokeswoman Kelly Crummey. "We’ve got great phones from Motorola as well ... I think you’ll see our marketing focused on those devices because there is certainty on those at this time.”