DIRECTV and AT&T Shares Fall in the Wake of Merger Agreement

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was up 25 points as of 11:45 a.m. EDT. AT&T (NYSE: T  ) was one of the index's biggest laggards, while shares of DIRECTV (NASDAQ: DTV  ) also moved lower. Shares of Google (NASDAQ: GOOG  ) rose 1.3%.

Dallas Fed Head to speak
Dallas Federal Reserve Bank President Richard Fisher will speak in Dallas on a panel about the role of the Federal Reserve. Over the years, Fisher has been a noted hawk, playing down the gains that come from further Fed-fueled stimulus and warning about the potential for inflation.

Fisher is a voting member of the Federal Open Market Committee, so any comments he makes regarding the Fed's role could move the Dow Jones later in Monday's session. 

Source: Wikimedia Commons.

AT&T agrees to buy DIRECTV
AT&T and DIRECTV on Sunday announced a merger agreement under which the telecom giant will pay $95 per share for the pay-TV provider. Shares of DIRECTV were down more than 1% in late-morning trading, suggesting the deal may not be as good as some shareholders had hoped.

AT&T's near-1% tumble might be because the company will have to pay more than $67 billion for DIRECTV, including its debts. AT&T gets a business that is generating cash flow, but there are obvious doubts about the long-term viability of DIRECTV's pay-TV model.

Still, the combined entity does have some obvious synergies. AT&T has only a few million subscribers to its U-verse pay-TV program. DIRECTV has no major Internet offering, or for that matter, phone service -- wireless or otherwise. As one entity, AT&T/DirecTV could offer subscribers a bundle of services: pay TV, phone, and high-speed broadband Internet.

AT&T could also use DIRECTV's deals with content providers to stream content over Internet-connected devices such as smartphones and tablets, and DIRECTV's services could be sold through AT&T's large network of retail stores.

Federal regulators could still block the deal, but as U-verse remains a relatively small player in the larger pay TV landscape, it would be surprising if the deal faces a major struggle.

Google's YouTube said to plan Twitch buy
Google, meanwhile, could also be planning an acquisition -- the search giant's YouTube unit is said to be mulling a $1 billion deal to acquire Twitch, an upstart streaming service.

Twitch, like YouTube, is focused on providing user-created Internet video, but is not truly a competitor. Twitch's service focuses entirely on streaming live video game matches, and is integrated with the newest consoles (PlayStation 4 and Xbox One) to allow players to easily upload videos of themselves playing games to the Internet.

Buying Twitch would be a big bet on the future of online video gaming, but given its impressive traffic figures (which at times surpass the largest social networking sites) it might not be a bad deal for the search giant.

Why is AT&T buying DirecTV?
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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8/31/2015 9:30 AM
^DJI $16567.45 Down -75.56 -0.45%
DTV $0.00 Down +0.00 +0.00%
DirecTV CAPS Rating: ***
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Google (C shares) CAPS Rating: ****
T $33.29 Down -0.15 +0.00%
AT&T CAPS Rating: ****