Hold the phone: Verizon, Microsoft deals dominate
The chase by Frances Horodelski:
"The Misnamed Months - As you may recall from Latin class back in the third grade, we are entering a string of misnamed months. Based on their respectiveLatin bases September means 7th month; October means 8th; November, the 9th and December the 10th. That confusion came from inserting a month to honourJulius Caesar (July) and Augustus Caesar (August)." - Art Cashin
25% more traffic on the road; 25% more news stories to report. Welcome to September.
Hold the phone. It is a telecom day. Verizon is buying Verizon Wireless for $130 billion US from Vodafone for a combination of cash ($58.9 billion) and stock ($60.2 billion). VZ says the deal will be immediately accretive to earnings. VZ had its credit rating reduced to BBB+ from A- while also raising its dividend by 1.5 cents quarterly. Interesting twist - according to reports, Vodafone will pay only $5 billion in taxes on the transaction in the U.S. (none in the UK as the deal is structured through its Dutch subsidiary). What do you think the G20 will say about that? The UK's Independent calls it an "84 billion pound tax avoidance bonanza" which is an overstatement, but still a topic of conversation.
Following this announcement, VZ's CEO Lowell McAdam told Bloomberg that it had only limited interest in Canada and has no interest now. He also noted that the speculation about Canada was "way overblown". And that's the other major "phone" story as BCE (owner of Bell Media/BNN), Telus and Rogers are expected to post substantial rallies this morning. But "hold the phone", could someone else with deep pockets still be interested in supporting the new wireless entrants in Canada? Maybe this is one of many questions to ask today. RBC is the first off the mark with new buys on Telus and BCE. Canaccord has raised targets on Telus (now $39), BCE (now $45) and Rogers (now $49).
Sticking with phones, Microsoft has announced an agreement with Nokia to acquire the handset business and patents of the latter for $7.2 billion. The devices and services business represents about half of revenues leaving Nokia to be a network equipment supplier company. Microsoft is paying 0.35x revenues. Questions here include: can two weak entities in the wireless business make one strong one; what does this mean for BlackBerry as one buyer is potentially now gone; what are the valuation comparables for a BlackBerry buyout. BBRY is up 4.8% (!) Note that in the most recent data on short positions, the bears increased their short position on the company by almost 7 million.
But don't think this is it - there is an extraordinarily full calendar of things to consider as we move through September. Today we get monthly production numbers from the likes ofCanadian Oil Sands and Suncor; The Bank of Canada meets tomorrow (no rate change is expected); the G20 begins their conversations this week (September 5); September 6 is the U.S. (and Canadian) jobs numbers; September 9 sees the Italian government assessing the Berlusconi situation and also the Fall session of the U.S Congress where they will debateSyria; September 10 sees Intel and Apple before analysts and industry types (and a new iPhone for apple); September 12 - the SEC reviews the Nasdaq outage from two weeks ago; the Fed meets on September 17-18 (will they or won't they?); Microsoft is having an analyst day on September 19; the Germans go to the polls on September 22. And overarching it all will be the possibility of a debt ceiling debate that may go very well (or not). Whew - can we go back to the summer please.
And September often brings one of the busiest seasons for early previews for the quarter and for the rest of the year. With the Street still expecting 4th quarter earnings growth in the order of about 11% (on easy comparisons), there is room for disappointment. The equity markets aren't particularly overbought now as they were a few weeks ago, but September has a nasty habit of hitting you when you least expect it. Be careful - and keep your pencil sharp - there will be plenty of opportunities.
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