Investors Still Questioning AT&T's DIRECTV Bid

AT&T and DIRECTV are both down on continued reports surrounding their merger, but one Fool thinks it's good for both sides.

May 13, 2014 at 3:30PM

U.S. stock markets are mixed today the latest report of U.S. retail sales fell short of expectations. The Commerce Department said that retail sales rose 0.1% in April, lower than the 0.4% forecast. But let's not forget that these increases are measured month over month and March's retail sales jumped 1.5%, so just maintaining that rate was a positive sign.  

The Dow Jones Industrial Average (DJINDICES:^DJI) was up a paltry 0.11% in mixed trading as of 3:30 p.m. EDT.

AT&T's drag on the Dow
One company heading in the wrong direction today is AT&T (NYSE:T), which is reportedly readying a $50 billion offer for satellite-TV provider DIRECTV (NASDAQ:DTV). The stock was down 1.2%, while DIRECTV's shares slid 0.7% in late trading.  

The deal is reportedly for a combination of cash and stock, which would make it more of a merger than simply a buyout. At $50 billion, it's also not a big premium from DIRECTV's current $44 billion market cap.


AT&T stores may soon sell wireless service and satellite TV.

Consumers are cutting the cable cord, including satellite, where DIRECTV has seen subscriber growth slow. The company has exclusive content that could be valuable to deliver via other mediums, and that's where AT&T comes in. Not only does it have wireline subscribers, but AT&T's wireless network is one of the best in the country and adding content subscriptions to cell phone packages could be the future of media.

The key in the future of media will be either owning content or the delivery infrastructure; DIRECTV has the satellite side, AT&T has the wireless business, and wireline broadband would complete the next-generation triple play for the telecom.

The complications come in dividing the proverbial piece, establishing the merged company's management, and determining how AT&T's huge 5% dividend yield will be paid. Once those questions are answered, I think the deal makes a lot of sense for AT&T. It sees the content landscape changing and is adapting along with it in an effort to play a bigger role for consumers. Strategically, I think that makes the DIRECTV buyout good for both sides.

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Travis Hoium manages an account that owns shares of AT&T. The Motley Fool recommends DirecTV. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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