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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.

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.

Google Books Copyright Suit Ends As Supreme Court Rejects Challenge

The U.S. Supreme Court on Monday declined to take up a case focused on whether Alphabet ( GOOGL ) unit Google carried out copyright infringement when it scanned millions of books and made them searchable online for free, dealing a final blow to a group of book authors who had first sued the search giant more than a decade ago. In a brief written order, the justices said they won’t take up an appeal by the Authors Guild and individual writers who argued Google engaged in copyright infringement “on an epic scale,” the Wall Street Journal said on Monday. Lower courts had sided with the company, ruling that the search giant engaged in “fair use” of the writers’ works for its Google Books digital database, which allows individuals to search for specified terms in more than 20 million works and view excerpts of many of the books that appear in the search results. In the most recent court decision, the Second U.S. Circuit Court of Appeals in New York last October ruled Google’s actions were legal. Because the Supreme Court declined a review, those rulings are the final word in the matter, and it’s the end of the road for the authors’ legal push. The authors in their court petition  argued that the lower-court decisions represented “an unprecedented judicial expansion” of the concept of fair use and threatened copyright protections in the digital age. They said Google copied the books for profit and shouldn’t be excused “based upon the perceived social benefit” of its search product. Google said its books database gives readers a new way to find books and advances the interests of authors. “We’re pleased the court has confirmed that the project is fair use, acting like a card catalog for the digital age,” Google said in a statement to IBD in October, when the circuit court in New York rejected the infringement claims against Google, initially filed in 2005. The three-judge panel had affirmed a 2013 District Court judgment that the online-search service does not violate intellectual property law because it provides “several important educational purposes.” Google had said it could face billions of dollars in potential damages if the authors prevailed. The Authors Guild had said that Google makes 78% of the books, including those under copyright, available for display to its users for free, through the use of  “snippets” — short bits — of the books online. The Guild had asked for  “fair compensation for Google’s commercial use of their books and for Google’s distribution of their e-books to libraries.” The Google Books project began in 2004, when some of the world’s leading research libraries started to allow Google to scan books in their collections. The company gave the libraries digital copies of the books it scanned. Many of the books in the Google database are out of print. A sizable number of them are in the public domain, no longer eligible for copyright protection. But millions of other books are under copyright protection, and Google didn’t seek permission from the copyright holders for its scanning activity. The individual plaintiffs who filed the proposed class action against Google included, among others, former New York Yankees pitcher Jim Bouton, the author of the acclaimed memoir, “Ball Four.” Alphabet stock was up a fraction in midday trading in the stock market today , near 787.