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Cable Firms Prepare To Fight Set-Top Rules That Help Google, Apple

Cable TV companies are readying a court challenge if the Federal Communications Commission approves new set-top box regulations that would let companies like Apple ( AAPL ), Alphabet ( GOOGL ), Amazon.com ( AMZN ) and others sell devices that provide access to cable programming. The National Cable & Telecommunications Association has hired Theodore Olson, an attorney at the noted law firm Gibson, Dunn & Crutcher, to battle the FCC’s set-top box proposal. Olson, a former solicitor general, represented George W. Bush in the contested 2000 election vs. Al Gore that ultimately was decided by the U.S. Supreme Court. Apple also recently hired Olson and Gibson, Dunn & Crutcher in its battle vs. the Federal Bureau of Investigation involving a court order to unlock an iPhone used by an assailant in the San Bernardino terror attack. President Obama last week stated his support for opening up the set-top box market for more competition. The proposal would require pay-TV and technology companies to jointly develop new standards for devices providing access to cable TV networks. The cable TV industry pays programmers billions of dollars for content rights, and it’s unclear how that business model would be impacted. Comcast ( CMCSA ) and phone company AT&T ( T ), also a pay-TV provider, have criticized the set-top box initiative. The FCC, with three Democratic members and two Republicans, is expected to vote on the plan after a public comment period closes. FCC Chairman Tom Wheeler says the plan will make it easier for consumers to switch from pay-TV companies’ set-top boxes leased monthly to new devices sold on a retail basis by consumer electronics or Internet companies. Gibson, Dunn ‘Most Certainly Preparing For Litigation’ “We are most certainly preparing for litigation in the event the FCC moves forward with its invasive and illegal plan to restructure the video programming market,” said a spokesperson for Gibson, Dunn & Crutcher. Brian Dietz, a NCTA spokesman said, “We are exploring all options.” The NCTA previously hired Gibson, Dunn & Crutcher to challenge the FCC’s Title II-based net neutrality rules that were enforced in mid-2015. The U.S. Court of Appeals for the District of Columbia Circuit is expected to rule soon on the net neutrality case. Pay-TV companies may have an uphill legal battle vs. the FCC’s set-top box rules, says Paul Gallant, an analyst at Guggenheim Partners. “Cable/telcos will almost certainly challenge any FCC final new set-top rules in court,” Gallant said in a February research report. “They will likely argue, among other things, that the FCC lacks authority to give app makers access to programming/guide information. “It’s far too early to predict the court outcome, but it’s important to note that the FCC is operating under a clear congressional mandate to make the set-top business competitive. That doesn’t necessarily mean the FCC will prevail, but the agency probably will feel good about its chances with that statutory starting point.” Under the proposed new set-top rules, the FCC says that only pay-TV subscribers will gain access to programming, and that copyright protections will be preserved. Google, critics say, aims to swap its own advertising for the local ads sold by cable TV companies.

Netflix, Delta Air Follow Apple In Undercutting This Key Support Area

Netflix ( NFLX ) and Delta Air Lines ( DAL ) are among the big-name companies that undercut their 200-day moving averages Monday, following on the heels of Apple ( AAPL ). Los Gatos, Calif.-based Netflix fell 2.8% to 108.40 on the stock market today , closing above its 200-day line after falling as low as 106.02 intraday. Netflix moved above the support/resistance level last week. But shares crashed late Monday after Netflix beat Q1 earnings estimates but gave weak Q2 subscriber growth targets. The streaming video giant faces stepped-up competition with Amazon.com ( AMZN ), which is now offering its Amazon Prime Video as a stand-alone service for $8.99 per month, $1 cheaper than Netflix’s standard streaming plan. Amazon, which reports Q1 results on April 28, broke out of a cup-with-handle formation last week, rising more than 6% in the process. Amazon rose 1.5% Monday. Delta Air Lines fell below its 50- and 200-day moving lines Monday, losing 2%, while most other carriers’ stocks were little changed. The Atlanta-based airline last week reported strong Q1 earnings, boosted by cheaper jet fuel, but revenue slipped 1% as passengers paid slightly less for each mile they flew. Meanwhile, Apple stock fell 2.2%, falling further below its 200-day line after falling below that area on Friday. A research note from Pacific Crest Securities found that consumers prefer data-collecting gadgets such as Fitbit ( FIT ) opposed to more complex wearables such as the Apple Watch. Fitbit sold 21 million units last year compared to the 10 million Apple Watches sold, Pacific Crest Securities said. IBD’s Take: How does Apple stock rate? Objective analysis at IBD Stock Checkup Finally, keep an eye on social networking giant Facebook ( FB ). Facebook stock rose fractionally Monday as continues to find support at its 50-day moving average. Facebook is well above its 200-day line but has lost sight of a buy point at 117.09.

Alphabet Seen Riding Strong Mobile Ad Sales To ‘Stellar’ Q1

When Google parent firm Alphabet ( GOOGL ) reports Q1 earnings on Thursday, analysts are expecting the search giant to deliver what one of them terms “stellar” top-line results, riding strong mobile advertising sales. But Wall Street also wants to see that the sultan of search is serious about monetizing its various so-called “moonshot” initiatives. The diverse group that Alphabet calls its “Other Bets” range from self-driving cars to smart home device maker Nest to a life sciences division that developed a glucose-monitoring contact lens for diabetics. Capital expenditures for the “Other Bets” segment are expected to increase this year, although no details have been offered yet. When Alphabet released Q4 earnings in February , the tech giant revealed that it logged an operating loss of $3.6 billion on such moonshot projects in 2015. The company broke out its spending on its search core and “Other Bets” for the first time in Q4 2015. Far-out innovations aside, “it will be interesting to see if they can continue growing their business-oriented solutions, such as Google Drive and Google Docs, which also have correlation with their monetization capabilities,” Hannu Verkasalo, CEO of Verto Analytics, told IBD via email. For Q1, analysts polled by Thomson Reuters expect Alphabet to see total sales — including TAC (“traffic acquisition costs” or fees paid to bring traffic to its site) — rise 18% year over year to $20.36 billion. They are modeling EPS ex items of $7.97, compared with EPS ex items of $6.47 in Q1 2015. Subtracting out TAC, revenue will rise to $16.54 billion, up nearly 19% year over year, according to FactSet. Alphabet subsidiary Google saw a double-digit increase in ad spending on its site last year, led by mobile gains and new offerings that let shoppers buy directly by clicking ads, according to a research report from Cowen analyst John Blackledge in January. “Overall, Google’s core search business appears strong, with room for further innovation,” Blackledge wrote. Google, which dominates the global digital ad market, will see its net ad revenue rise 9% this year, while No. 2 Facebook ‘s ( FB ) net ad revenue will jump 31%, says eMarketer’s latest ad spending forecast , released in March. Google CEO Sundar Pichai said in February that seven of the company’s products, including YouTube and Gmail, each have more than 1 billion monthly active users around the globe. In March, 243.1 million users accessed one of Google’s online services in the U.S. at least once, which puts Google’s net reach in the U.S. at 98.2%, Verto Analytics said. The company is looking to make headway into the $27.4 billion cloud computing market with Google’s Cloud Platform, which now trails Amazon.com ( AMZN ) unit Amazon Web Services, with approximately 37% market share, and Microsoft ‘s ( MSFT ) Azure. But Google’s cloud service may get a boost from Apple ( AAPL ), which in March signed a deal worth between $400 million and $600 million to use Google’s Cloud Platform for its iCloud service. The Google unit of Alphabet also sells high-speed Internet and TV services in four markets and has trumpeted expansion plans. Google Fiber bundles video and gigabit-per-second broadband service for $130 monthly and also sells stand-alone Internet for $70 monthly. “Foreign-exchange headwinds should continue to damper the company’s otherwise stellar top-line results, but to a lesser degree than in recent quarters,” said Pivotal Research analyst Brian Wieser in a pre-earnings research note on April 11. “Current-quarter results for Alphabet and core Google business trends should be positive overall.” Wieser said he estimates the company will show 16% revenue growth and 18% revenue ex-TAC growth year-over-year. “The company’s hegemonic position in digital advertising alongside Facebook is fundamentally unchanged, and we continue to expect Google to sustain double digit growth rates in advertising on an ongoing basis,” said Wieser. “The factors which were cited as supporting growth last quarter — including YouTube and programmatic display-related revenues associated with Google Display Network (collection of Google-run websites) will undoubtedly continue.” Alphabet stock was up 1% in afternoon trading in the stock market today , near 787. Alphabet stock has risen 45% compared to this time last year. The company’s stock is trading 3% below its all-time high of 810.35, brushed on Feb. 2.