Can Yahoo Earnings Give Verizon a Boost?

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The technology sector is full of news that has the potential of creating some buying opportunities. Before Yahoo! Inc.(YHOO) and Verizon (VZ) consummate their new relationship, YHOO has announced positive fourth quarter earnings from 2016. It may be a little late to jump in and expect a great return on a purchase of YAHOO, but the opportunity to be involved with VZ's expectations of greater gains, after the acquisition of YHOO is complete, is present.

YHOO reported the closing of the deal,  expected during the first quarter of this year, will be delayed and pushed to the second quarter. The delay was caused by the disclosure of two major cyber breaches that exposed information from more than a billion Yahoo accounts. This delay has raised some concerns that the deal may not be completed at all.

 

                   

YHOO has reported earnings of US $0.25 per share on revenues of $1.47 billion versus analysts estimates of $0.21 per share and $1.38 billion, pushing YHOO's stock price up 0.35 cents to $42.40 after the news. The concerns that VZ will not be able to pull the deal off has put pressure on VZ's share price. VZ closed down 0.31 cents to $52.41.

My summation regarding these events is that this is only a minor setback and the deal will go through. My expectation is reinforced by a statement from the CEO of YHOO, Marissa Mayer who said, that the "continued stability in user engagement trends" confirmed a sunny outlook going forward.

I therefore view the news of the delay, and the drop in VZ's share price, as a potential buying opportunity, bearing in mind that both parties still want the deal to happen. I have confidence that VZ's near $5 billion dollar investment is being made for the purpose of the company making greater gains than the initial investment over time. This gives me a reason to monitor VZ with the prospect of them potentially making substantial gains in their revenues and their stock price over a long term.

VZ hasn't made any statements requiring concessions or give backs. And even if that does happen, and the deal goes through, the concessions or givebacks should work in the favor of VZ.

If the Verizon deal goes through, Yahoo would transform into a holding company called Altaba, whose primary assets include a 15 percent stake in Alibaba Group Holding Ltd and a 35.5 percent interest in Yahoo Japan Corp.

Another event I found interesting was the drop in the price per share of Qualcomm (QCOM). QCOM lost about $10 a share after a lawsuit against them was filed by Apple Inc. (AAPL). A wave of profit taking may also be a factor in this loss of value for QCOM stock. The squabble between the two tech giants is over licensing agreements and royalty fees. AAPL claims QCOM is charging them fees for technology they had nothing to do with. While QCOM maintains that their fees are in line with the agreements made with AAPL and the technology they are sharing with AAPL to use in their cell phones.

Personally I have no empathy for either side, because I am sure the fees paid by AAPL were already passed onto the consumer. If they win this court battle I don't believe they will make the technology any cheaper for consumers. I believe if there is a revenue gain in the aftermath of this court battle, those revenues will go right in the pockets of AAPL and not the consumers.

With that being said, what makes QCOM's drop in share price and this wave of fear that brought on the loss of share value interesting to me? The fact that QCOM is engaged in one of the biggest deals of all time. QCOM's plan to merge with NXP Semiconductors (NXPI) is worth almost $50 billion. That's a whole lot of cheese on the table for these fat rats in the technology business. When I think about that deal, all I can say to myself is that QCOM is gearing up for something really big and they have spared no expense to be a big player in the new technology that is going to be delivered to the masses of consumers worldwide. The size of the deal represents something a lot larger than AAPL's cell phones.

I'm keeping my eyes focused on the prize and on the bigger picture. It appears as though the bleeding has stopped and QCOM's share price is holding steady at $55 a share, at the time of my writing. This may have the potential to be a buying opportunity in disguise for those looking to invest in QCOM's bold move to be a major force in the manufacturing of computer chips and semiconductors.