Investors Still Questioning AT&T's DIRECTV Bid
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 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 , which is reportedly readying a $50 billion offer for satellite-TV provider DIRECTV . 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.
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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The article Investors Still Questioning AT&T's DIRECTV Bid originally appeared on Fool.com.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.
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