AT&T's Acquisition Interest Shakes Up the Dow's Gains

Could AT&T buy DIRECTV? It's not a done deal by any means, but reports indicate the telecom giant's on the hunt for a big buy.

May 8, 2014 at 2:30PM
Daily Fool

Major U.S. stock indices were drooping in afternoon trading, though all were at least slightly over breakeven, with only the Dow Jones Industrial Average (DJINDICES:^DJI) up 48 points as of 2:30 p.m. EDT. AT&T (NYSE:T) is making big news on the day with a possible blockbuster acquisition in the cards, while around the market Tesla (NASDAQ:TSLA) is taking a big hit post-earnings. Let's catch up on what you need to know.

Is AT&T headed for a game changer?
AT&T's stock has jumped by 1.9% to lead the Dow today on refreshed reports that the telecom giant is in talks with DIRECTV (NASDAQ:DTV) over a possible buyout. DIRECTV's shares have sunk by 4.3% on the news, but sources told Reuters the company is seriously considering the offer. 

The deal would combine the two companies into a TV and mobile giant, a big event in the wake of the earlier deal between Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) that sparked concerns over consolidation and dwindling competition in the cable industry. Even if AT&T and DIRECTV find common ground, don't expect the deal to happen overnight: Regulators still are probing the Comcast acquisition, and with DIRECTV's market cap of more than $42 billion, the sheer size of the deal involved would likely draw similar attention.

Att Logo

Source: Wikimedia Commons, User Lzamoras

Still, it's easy to see the appeal of a deal to AT&T: While the company has struggled to close the gulf with leading wireless provider Verizon (NYSE:VZ), acquiring DIRECTV would open up a huge new video market to pave the way into the future. According to The Wall Street Journal, the two companies combined service more than 25 million subscribers. That would put AT&T amid the leaders in the market and poised to capitalize on video demand via wireless and broadband for years to come. Analysts have also pointed out that the deal would secure AT&T's high-yield dividend via the added revenue, according to the Journal. The deal's not in place yet, but don't expect AT&T to ease off of the pressure.

Meanwhile investors soured on Tesla following its earnings release, sending the stock down nearly 10%. The electric-car maker did beat guidance estimates by delivering more than 6,400 vehicles during the most recent quarter and still sees increasing production to 1,000 vehicles per week by the end of the year. It also expects to deliver 35,000 vehicles through the end of the year, a significant jump on 2013's total. However, that didn't stop investors from focusing on the $50 million that Tesla lost in net profit over the past quarter, a trend that put a pause in some investors' step as the company. Still, Tesla's revenue jumped by 27% in the prior quarter. While the net loss hurts, Tesla's long-term picture isn't sullied by today's report. It's another reason why it's best to keep your eye in the long term while reviewing market-shaking information like this.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends DirecTV and Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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