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Verizon May Now Be Front-Runner For Yahoo, As Comcast, Google Bail

Verizon ( VZ ) is the front-runner for Yahoo ( YHOO ), now that several rumored bidders including Alphabet ( GOOGL ) unit Google and Comcast ( CMCSA ) have dropped out, the Wall Street Journal reported on Sunday . Yahoo reportedly sent a letter to possible buyers last month, asking them to submit preliminary bids, which are said to be due today. Some buyers might be interested in all or part of Yahoo’s core Web business, while others might want Yahoo’s stakes in Alibaba Group ( BABA ) or Yahoo Japan. Some reports estimate that as many as 40 groups have expressed interest in the wilting Sunnyvale, Calif.-based Web portal. Royalties from Yahoo Japan, thousands of patents and plentiful real estate could boost Yahoo’s bids, wrote SunTrust Robinson Humphrey analyst Robert Peck in a recent research report. Minus a “potential upside” from those assets, SunTrust expects Yahoo to fetch bids in the $6 billion-$8 billion range for its core business. Yahoo has not commented. Yahoo rose 1 cent to 36.52 in the stock market today  Yahoo stock has sunk about 20% on growth concerns, compared to where it was trading this time last year. Verizon stock rose 0.7% to 51.73. AT&T ( T ), IAC/InteractiveCorp ( IAC ) and Time ( TIME ) have also decided not to join the bidding for Yahoo and its core assets, the WSJ said. Yahoo’s core assets include a 15% stake in China e-commerce giant Alibaba and holdings in Yahoo Japan. Time concluded it would be too hard to revive Yahoo’s finances, the WSJ said. Most of Yahoo’s value comes from its 15% stake in Alibaba. Yahoo’s market cap is $34.5 billion. Verizon was likely to face competition from private equity companies, including Bain Capital, Advent International and TPG, according to the WSJ report. YP Holdings, formed in 2012 from AT&T’s Yellow Pages, planned to bid for Yahoo, Bloomberg said. PE firm Cerberus Capital Management owns 53% and AT&T 47%. Verizon, with a market cap of $210 billion and about $4.5 billion in cash on its balance sheet, has the means to purchase Yahoo’s declining Web assets and a logical blueprint for folding them into its fledgling digital media business. Those include AOL properties it acquired last year for $4.4 billion, according to the WSJ report. Verizon has identified video services and online advertising to be the company’s next avenue for growth. It plans to combine customer data from smartphones with advertising inventory on AOL — and possibly Yahoo — to create an online advertising technology platform that can compete with Web giants such as Facebook ( FB ) and Alphabet-owned Google. “Verizon is trying to pivot its business from analog to digital,” Craig Moffett, senior analyst at telecommunications-research firm MoffettNathanson, told the WSJ. “Verizon believes that a combined AOL/Yahoo would provide the digital advertising platform they need to execute their video reinvention strategy.” Either way, news site Re/Code said that documents Yahoo provided to potential bidders predict that Yahoo’s 2016 revenue will drop by close to 15% and its earnings by more than 20%. Yahoo CEO Marissa Mayer has been unable to spark significant earnings and revenue growth since she came aboard in 2012, as Yahoo has struggled to build online- and mobile-ad revenue vs. rivals Google , Facebook and others. Yahoo is set to report Q1 earnings after the close Tuesday. Analysts polled by Thomson Reuters expect Yahoo’s Q1 revenue to fall 12% year over year to $1.08 billion. Yahoo is guiding Q1 revenue at $1.05 billion to $1.09 billion, down 14% to 11%. FactSet expects Yahoo to report revenue ex-TAC of $847 million, down 18%. TAC, or traffic acquisition costs, refer to fees Yahoo pays other sites to carry its ads. Yahoo TAC spending has climbed during each quarter of 2015. The analyst consensus calls for Yahoo’s EPS ex items to plunge 53% to 7 cents.

Netflix Stock Dives On Weak Subscriber Guidance For Q2

Netflix ( NFLX ) late Monday beat forecasts for first-quarter earnings and subscriber growth, but disappointed with weak subscriber guidance for the current quarter. Netflix stock fell 10% in after-hours trading following the earnings news release. During the regular session Monday, Netflix fell 2.8% to 108.40. The Internet TV service gained 6.74 million total streaming subscribers worldwide in Q1, including 2.23 million in the U.S. and 4.51 million in international markets. In January, Netflix said it expected to add 1.75 million U.S. streaming subscribers and 4.35 million international subscribers for a total of 6.1 million additional subscribers in the first quarter. It expected to end Q1 with 80.86 million total streaming subscribers, but its actual total was 81.5 million. For the current quarter, Netflix said it expects to add just 500,000 U.S. subscribers and 2 million international subscribers. That would be the smallest customer growth in two years. The Los Gatos, Calif.-based company faces subscriber churn in the U.S. as a result of longtime customers seeing a $2 increase to their monthly fee to $9.99 a month. In the first quarter, Netflix earned 6 cents a share on sales of $1.958 billion. Analysts polled by Thomson Reuters expected Netflix to earn 3 cents a share on sales of $1.965 billion in the first quarter. For the second quarter, Netflix is targeting earnings per share of 2 cents. It did not give a revenue estimate. Wall Street had been modeling for Netflix to earn 5 cents a share, down 17% year over year, on sales of $2.117 billion, up 29%, in Q2. In the Internet TV sector, Netflix competes with Amazon.com ( AMZN ), Hulu, Time Warner ‘s ( TWX ) HBO and others. On Sunday, Amazon ramped up the competition with Netflix by announcing a stand-alone subscription video service at a lower price. Amazon is now offering its Amazon Prime Video for $8.99 a month, a dollar less than Netflix’s standard streaming plan. Amazon Prime Video was previously available only as part of the online retailer’s $99-a-year Prime service, which offers free two-day shipping on millions of items. Amazon stock closed up 1.5%.  

IBM First Quarter Earnings Come In Ahead Of Estimates

IBM ( IBM ) reported better-than-expected first-quarter earnings after the market close Monday, sending the stock up fractionally in late trading. IBM reported revenue of $18.7 billion, down 4.6% from the year-earlier quarter but edging the Wall Street consensus estimate of $18.3 billion. It reported earnings per share ex items of $2.35, well above views of 2.09, as polled by Thomson Reuters, but down 19% year of year and its fourth quarter in a row of EPS declines. It was the 16th quarter in a row of year-over-year revenue declines as IBM continues to undergo a major transition. Image provided by Shutterstock .