Sell Verizon (VZ)
This iPhone thing just isn’t working out—for Verizon (VZ) that is.
The thought on Wall Street was that the company’s addition of Apple’s iPhone to its lineup of smart phones would drive Verizon’s smart phone market share higher and increase the all-important ARPU (average revenue per user) number.
But it just isn’t happening. At least not to the degree that Wall Street expected.
Maybe you could pass off the first quarter disappointment on these numbers as birthing pains for Verizon’s new offerings but the second quarter numbers came in much the same. I think we’ve got a trend here and it’s not one that investors in the stock should be happy with. The shares are up 6.71% for 2011 to date and 23.07% for one-year. Both of those numbers are ahead of the gains for the Standard & Poor’s 500 Index. Despite the 5.4% dividend on the stock, I’d take my gains here and look for a better total return play. (Verizon is a member of my Dividend Income portfolio http://jubakam.com/portfolios/ )
For the second quarter, reported on July 22, Verizon did add wireless subscribers to the tune of 1.23 million. Which would have resulted in really great news for the company’s revenue and profit lines except that the new and old users didn’t show much inclination to spend more on their monthly wireless bill by increasing their use of data services. ARPU grew by just 1.9% to $46.62 in the quarter and that was 6.5% below the Wall Street consensus on that measure. Verizon did increase its smart phone penetration among its customers by about 4 percentage points but the company’s smart phone sales as a percentage of sales (60%) continued to lag that of AT&T (70%).
I think this is an issue for a couple of reasons. Read more
5 stocks for the next generation Internet
Sigh, another thing to worry about. The U.S. is falling behind in the Internet race.
According to Akamai Technologies (AKAM), average Internet access speeds in the United States were just 18th fastest in the world at the end of the fourth quarter of 2009. And if you rank countries on the percentage of connections with speeds above 2Mbs (Megabits per second), the United States ranks just 40th.
I bet you can guess who’s winning. 62 of the top cities for speed were in Asia. The three top countries for speed, according to Akamai, were South Korea, Hong Kong (which Akamai counted as a country, but don’t tell the folks in Beijing), and Japan. Those three countries were also the only three to average connection speeds higher than 7.5Mbs.
Akamai, which in the business of accelerating Internet content over its global content delivery network (CDN) isn’t the only one to notice.
The FCC (Federal Communications Commission) has sent a 10-year plan to Congress that envisions a new high-speed, broadband Internet as the core of the U.S. communication network. The agency notes that roughly one-third of Americans don’t have high-speed Internet connections because they live in areas without high-speed service, can’t afford high-speed service, or have never signed up for it because they don’t see the benefits. The FCC has proposed diverting money from the Universal Service Fund, which now spends $8 billion collected from surcharges on telephone service to subsidize phone service for rural or poor Americans, adding that to money collected by auctioning off 500 Megahertz of over-the-air spectrum now used by TV broadcasters, and then using that funding for its 100 Squared plan to equip 100 million U.S. households with high-speed Internet at 100Mbs by the end of the decade.
Proponents of the FCC plan—and you might imagine TV broadcasters aren’t exactly thrilled—say that greater access to higher speed Internet connections is critical to U.S. economic competitiveness in the decades ahead. Slower speeds will raise costs for business and consumers by limiting such innovations as digital healthcare networks. New products that require high speed connections won’t be built or used here meaning that the jobs that go with the creation of these new products will go elsewhere. The comparative productivity of U.S. workers will suffer as workers in high-speed countries can more quickly communicate, share work, hold meetings or access data.
Anybody who now suffers with the inefficiencies of a slow or spotty mobile phone connection knows that argument is true.
The crisis, which is what the FCC argues that we’re facing, isn’t a solely U.S. phenomenon. Internet speeds are dropping all over the world, largely because increasing numbers of people are accessing the Internet over relatively slow mobile phone networks. Traffic from narrowband connections to Akamai’s network increased by 41% in the fourth quarter.
In crisis lies opportunity, investors know. So what companies and stocks might benefit from attempt to end the crisis? Read more
Update Verizon (VZ)
Third quarter earnings, announced before the open on October 26, should be a reminder of why I added Verizon (VZ) to my Dividend Income portfolio (http://jubakpicks.com/2009/10/09/my-dividend-stock-portfolio-income-and-less-risk-too/ ) on October 9 rather than to any of my more growth-oriented portfolios.
Making enough money to pay the stock’s 6.6% dividend doesn’t seem to be a problem. Getting enough growth in the new businesses to compensate for the decline in the old businesses continues to be a challenge. Read more
Buy Verizon (VZ)
Why? That’s always the first question to ask when you see a common stock like Verizon (VZ) trading with a dividend yield of 6.52%. That’s so much higher than the yield on the Standard & Poor’s 500 (2.3% as of the end of the September) that any reasonable investor wants to know what the market thinks is wrong with this company?
In this case I think it’s easy to figure out why enough investors hate this stock to drive the yield up so far.
And to conclude that the market is wrong in the degree of its worry. Which makes Verizon a buy for the investor in search of reasonably safe but high yields.
Here’s what’s wrong with Verizon: Read more
Apple gets its deal in China; iPhone goes non-exclusive in the UK
China Unicom (CHU) announced on September 28 that it will begin selling Apple’s (AAPL) iPhone in China on October 1. China Unicom is China’s second largest mobile phone operator. (For more on how the Chinese players line up and the coming battle between Apple and Google (GOOG) in China see my August 6 post http://jubakpicks.com/2009/08/06/apple-and-google-go-head-to-head-in-chinas-mobile-phone-market/ )
Unicom said it will start selling 3G iPhones for 5,000 renminbi or $732, although the company didn’t say what model it would sell.
China Mobile (CHL), the country’s biggest mobile operator, is set to begin selling the 3G OPhone, based on Google’s (GOOG) Android operating system, although the timing of that launch is still vague.
China Telecom (CHA), the smallest of China’s mobile operators, is in talks with Resarch in Motion (RIMM) to sell the Blackberry.
The question is, of course, how many consumers in China will buy an iPhone considering what seems to be a very high price? Read more
