Charter Stock Falls; Digital Realty Up On S&P 500 Add, Equinix Deal

Charter Communications ( CHTR ) stock fell Monday after the soon-to-be No. 2 cable TV firm was not added to the S&P 500, as some analysts and investors had expected, following the final approval of its Time Warner Cable acquisition. Standard & Poor’s announced late Friday that Digital Realty ( DLR ), a data center operator whose stock has been rising of late, would replace Time Warner Cable in the S&P 500 . Digital Realty will take TWC ‘s place on the index after the close of trading on Tuesday. Charter expects to close its purchases of Time Warner Cable and Bright House Networks on Wednesday, after gaining the final regulator OK on Thursday. It will then become the No. 2 cable company, behind Comcast ( CMCSA ). Equinix ( EQIX ) early Monday announced that it will sell eight European data centers to Digital Realty for $874 million. Regulators required Equinix to divest some assets in approving its acquisition of Telecity. The eight data centers consist of five in London, two in Amsterdam and one in Frankfurt. Shares of Digital Realty, which announced an equity offering to fund the Equinix deal, were up 2.5% early Monday, near 96 and touching an all-time high for the sixth day in the past eight trading days. Digital Realty stock is up 25% this year. Equinix stock was up a fraction early Monday. Charter stock was down nearly 4% in early trading in the stock market today , near 206. California regulators last week approved the Time Warner Cable ( TWC ) deal, the final hurdle to Charter’s makeover. Liberty Broadband ( LBRDA ) will own about 18% of the new Charter, while privately held media firm Advance/Newhouse will own about 13.5%.

Google Worries Mount Over EU Antitrust Fine, Oracle Case Outcome

The European Commission may hit Alphabet ‘s ( GOOGL ) Google with a $3.4 billion fine as early as June on grounds that the U.S. Internet giant favors its own shopping service in Internet searches. The European Union’s biggest antitrust fine to date was $1.45 billion, against chipmaker Intel ( INTC ) in 2009. The EU in 2013 also fined Microsoft ( MSFT ) $730 million for failing to respect an antitrust settlement with regulators. The most Google could be fined would be 10% of annual revenue under EU law, which would be roughly double the $3.4 billion fine. Google posted revenue near $75 billion in 2015 and reported $75.3 billion in cash, cash equivalents and marketable securities in its Q1 earnings release. The Sunday Telegraph first reported the antitrust fine. Google has not commented. The EU’s European Commission (EC) regulators in recent years have investigated other U.S. companies — including Amazon.com ( AMZN ), Facebook ( FB ) and Apple ( AAPL ) — over antitrust and privacy issues. If the EU fines Google, it would put U.S. regulators in the spotlight. The Federal Trade Commission in 2013 ended an investigation into whether Google abused its dominance in the Internet search market without bringing charges. The EU has opened up a separate probe involving Google’s Android smartphone software. Meanwhile, a copyright infringement case involving Oracle ( ORCL ) and Google is heading into its second week. Oracle claims Google violated its copyright on parts of the Java programming language when it created the Android mobile operating system, now used in mobile phones worldwide. Oracle is seeking $8.8 billion in damages. “If the EC does issue the ruling, Google is required to comply with the nondiscrimination ruling even while pursuing a possible court appeal, which could take three to five years,” said Paul Gallant, an analyst at Guggenheim Partners, in a research report. “This is not well understood by investors. “In addition, if Google refuses to comply — or if its revisions are deemed inadequate — it can be subject to an ongoing noncompliance fine  of up to 5% of its global annual revenues, pro-rated daily.” Alphabet stock was flat in early trading, near 724. Alphabet stock broke out of a cup-with-handle base at a 777.41 buy point on April 14, but it is now near the 7% to 8% decline where selling shares is recommended.

Cisco Pressured By Enterprise Trends Ahead Of Fiscal Q3 Earnings

Negative trends in the enterprise market — large companies and government agencies — are lowering expectations ahead of Cisco Systems ‘ ( CSCO ) fiscal Q3 earnings, due out Wednesday after the market close. Many large companies are outsourcing business computing workloads to cloud computing service providers such as Amazon Web Services, part of Amazon.com ( AMZN ), lessening their need for the routers, switches and other networking gear sold by Cisco and others. Analysts polled by Thomson Reuters estimate Cisco earnings minus items will rise 2% to 55 cents, though they see revenue falling 1% to $11.97 billion. “We see three major issues into this earnings release, including weak IT data points, all signaling industrywide IT spending weakness, less visibility around service provider spending, and global macro exposure,” Kulbinder Garcha, a Credit Suisse analyst, said in a research report. “Year to date, we have seen weak IT spending indications from large bellwethers including IBM ( IBM ), EMC ( EMC ), Juniper ( JNPR ), Brocade ( BRCD ) and SAP ( SAP ),” added Garcha, who has an underperform rating on the stock. JPMorgan analyst Rod Hall, in a research report, cited negative enterprise market commentary from Intel ( INTC ), Oracle ( ORCL ) and Hewlett Packard Enterprise ( HPE ). Reports of slower tech spending was a factor in the stock market’s plunge early in the year. With many tech companies struggling to meet expectations recently, an in-line quarter for Cisco might be good enough to move shares higher, said Citigroup analyst Jim Suva. RW Baird’s Jayson Noland was another analyst citing slower spending of late. “Our partner survey results indicate a softer-than-expected April quarter, with improved prospects for growth for the remainder of calendar 2016,” Noland wrote in a research note. Cisco stock, up 1% near 27 in early trading in the stock market today , is about even in 2016. Cisco stock is up 20% since touching a two-year low in early February.