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Verizon Spills Beans On Go90 Video Service, Yahoo, To Analysts

Verizon Communications ( VZ ) aims to expand its ad-supported Go90 mobile video service to multiple video streaming platforms starting by mid-2016, say sell-side analysts briefed at a meeting on Monday. Verizon’s analyst meeting came after Verizon reported Q1 revenue on April 21 that missed estimates . On Monday, Verizon executives discussed a broad range of market opportunities, including offering  5G wireless broadband services by 2020. Verizon has not disclosed how many subscribers it has for Go90, which targets millennials (ages 18 to 34) and Gen Zers (teens). Verizon launched the Go90 service in September. Verizon plans to “extend Go90 from a mobile app to a multiscreen platform in an attempt to drive scale and distribution of advertising from Verizon’s owned content,” said Paul de Sa, an analyst at Bernstein Research, in a report. Go90 provides a mix of original Web TV series, live sports, concert streaming, prime-time TV and more. “By midyear, Go90 will leverage (Verizon-owned) AOL and be available on multiple platforms,” said Macquarie analyst Amy Yong in a research report. Verizon management told analysts that the company plans to expand its digital media strategy with or without Web portal Yahoo ( YHOO ). Verizon, which acquired AOL for $4.4 billion in 2015, has stated its interest in buying part or all of Yahoo. The Internet firm is reviewing offers from Verizon, private equity firms and other entities. By acquiring AOL, Verizon gained both online content and advertising technology . With AOL’s “programmatic” ad technology, Verizon aims to provide advertisers with tools to target users with the most relevant ads based on anonymous subscriber data. Verizon last year also snapped up online ad firm Millennial Media for a reported $250 million. Alphabet ’s ( GOOGL ) Google and Facebook ( FB ) now reap the lion’s share of mobile advertising revenue. Verizon says that the mobile ad market is growing fast, providing room for many companies to grow, and that it doesn’t need Google’s scale to succeed. Verizon told analysts that it does need to “out-google Google,” said Colby Synesael, a Cowen & Co. analyst, in a report.  Verizon has around 100 million wireless phone subscribers to target, Synesael said.

Yahoo Not Alone, Many Techs Facing Active, Agitated Shareholders

In recent years, no industry has provided shareholder activists with as many opportunities to force changes — or generate financial gains — as technology. In its Shareholder Activism 2015 report issued last November, Moody’s found that 33% of the 178 shareholder activism cases it had tracked through Oct. 15 of last year focused on tech firms, far more than any other industry. Tech firms, ironically, can blame their successes as well as their failures for their preferred status among shareholder activists. The sector’s growth potential attracts the hedge funds and equity investors that are less inclined to sit docilely on the sidelines. “You really have to have a stomach for it,” said Gerry Granovsky, an analyst at bond rating firm Moody’s Investor Service. “A lot of it is confrontational. You have to not be afraid to ruffle feathers.” Where many of the most famous shareholder activism cases have focused on poorly managed companies that represented turnaround opportunities — which does include a fair number of tech companies, to be sure — many tech firms instead have been targeted for not sharing their riches enough. Granovsky points out that as the tech sector has demonstrated historic stability over the past 10 years, it has enjoyed growing access to debt. Meanwhile, as scores of tech firms have grown into thriving global businesses, many have amassed massive amounts of cash overseas and have chosen to keep it there rather than pay U.S. tax rates. Apple Finally Convinced To Share Some Wealth It’s that cash, and companies’ explanations for hording it, that often attracts the attention of shareholder activists more than anything. “Activists don’t care about policies. They see Apple having $216 billion in cash,” Granovsky said. “To some extent they have a point.” The activities of shareholder activists do at least potentially benefit a larger group of stakeholders, and shareholder activists do function as a sort of corporate watchdog, so they have to be willing to get dirty for the cause. After finding itself on the receiving end of pressure from big-name shareholder activists Carl Icahn and David Einhorn, Apple ( AAPL ) has in the past couple of years been returning cash to shareholders in programmatic fashion. Similarly, persistent pressure from activists helped spur ATM maker NCR ( NCR ) to embark on an effort to buy back $1 billion worth of stock, funded by a deal with Blackstone that gives the financial advisory firm three seats on NCR’s board — a deal activist investor and NCR shareholder P. Schoenfeld Asset Management has questioned. Targeting excess cash is not a new shareholder activism strategy. In fact, it appears to have been one of the original strategies. In his just released book, “Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism,” Jeff Gramm, a portfolio manager and adjunct professor at Columbia Business School, traces shareholder activism back to the 1920s. Gramm explores a 1927 case in which economist and investor Benjamin Graham, considered the father of value investing, led an effort to get Northern Pipeline to release some of its stockpile of unused cash back to its shareholders. That strategy has been used against tech firms to great effect in recent years, with a number of companies succumbing to similar pressures. And Granovsky says that trend might not peak until interest rates rise, causing tech firms to slow their borrowing and instead start tapping those overseas cash reserves. No worries. Even if all the cash-rich tech companies start giving back to shareholders, there are always underperformers to turn around. Microsoft, Qualcomm Also Among Those Targeted Despite the stability in the tech market Granovsky points to, there are plenty of tech companies that have found themselves in activists’ cross-hairs for other reasons. In 2013, Microsoft ( MSFT ) granted its first board seat to an activist — ValueAct Capital — after facing widespread criticism for being a step behind a series of emerging tech trends such as cloud computing and mobility. Last year, Qualcomm ( QCOM ) launched a “strategic realignment plan” after activist hedge fund Jana Partners began pressuring the company to spin off its struggling chip business from its profitable licensing business. Also last year, eBay ( EBAY ) spun off PayPal ( PYPL ) after pressure to do so from several activists, led by Icahn, who argued that both companies would perform better if separated. More recently, Yahoo ( YHOO ) has been girding itself for a battle with one of its biggest shareholders, activist Starboard Value, as the Internet giant has been unable to forge much revenue growth in the past decade. Consider the case of Motorola Solutions ( MSI ). Shareholder activists have besieged the company since 2007, when its former entity, Motorola, was embroiled in a series of legal skirmishes over allegations the company had made misleading financial statements. (It eventually split into two companies in 2011, establishing Motorola Solutions as a communications provider, while it spun off the cellphone business into a separate company, Motorola Mobility, acquired by Google in 2011 and then sold to China’s Lenovo in 2014.) Between 2007 and 2015, Motorola granted board seats to at least three shareholder activists: Icahn, ValueAct and Silver Lake Partners, according to Investopedia. Shep Dunlap, an investor relations spokesman at Motorola Solutions, spoke with IBD about the company’s experience with ValueAct, describing the relationship as “generally collaborative” and nothing like the contentious battles for which other shareholder activists, such as Icahn, have become known. “Their approach has been much more constructive with management rather than using the press and media as a mouthpiece,” says Dunlap said. Motorola Solutions Cut $550 Million In Costs, With Prodding He says ValueAct’s objectives have been aligned with Motorola’s leadership from the get-go, and that ValueAct’s guidance has helped streamline the company. In particular, he cites more than $550 million in costs removed since 2012, and $12 billion returned to shareholders, mostly through stock buybacks. “There’s been a lot of progress in terms of optimizing our cost structure,” Dunlap said. “We’re really a pure-play mission-critical communications company at this point.” Naturally, ValueAct has profited from the relationship, and today still owns 4.7% of the company’s stock, a stake worth about $619 million based on the current valuation of $13.2 billion. Dunlap points to the fact that ValueAct has been a Motorola shareholder since 2011, longer than most activists stick around, as evidence of its commitment to the company’s long-term health. He said not every activist is out to create a firestorm, cash out, and move on. “You have to keep an open mind when you’re learning about an investor, whether it’s an activist or not,” he said. “I think every company should use the feedback that’s available to them from the investor community.” Its unlikely that the relationship has been as Pollyannaish as Dunlap paints it. Granovsky stopped short of describing shareholder activism as bullying, but was comfortable calling it intimidation. “Companies don’t want to deal with activists,” he said. That said, there are times when they’re a necessary evil if a company is to thrive, and Motorola may be an example of this. One thing is certain: Shareholder activists aren’t going anywhere, and tech companies, and their piles of cash and occasional missteps, are clearly in their sights.

Apple, Alphabet Cut Lobbying Spend As Facebook Pumps It Up: Report

Alphabet ( GOOGL )-owned Google, Apple ( AAPL ) and Comcast ( CMCSA ) have slashed spending on D.C. lobbying, according to a report Thursday from Consumer Watchdog. Still, Consumer Watchdog Privacy Project Director John Simpson said in a statement, “It’s important to understand just how much money these companies are throwing around in Washington to buy the policies they want. Policymaking is now all about big bucks, not big ideas.” In Q1, Google slashed spending on lobbying by 25.5% to $3.80 million, the consumer group said. AT&T ( T ) had the highest lobbying outlay, at $4.48 million, among the group of 16 tech and communications companies that Consumer Watchdog monitored. AT&T rival Verizon ( VZ ) spent $3.59 million, up 7.2%. Consumer Watchdog based its report on new disclosure reports from the Clerk of the House of Representatives. Social networking leader  Facebook ( FB ), which has been increasing its Washington presence, spent $2.78 million, up 13.9% year over year. Microsoft ( MSFT ) also topped $2 million in lobbying spending, Consumer Watchdog said. Microsoft reported expenditures of $2.02 million, a 6.9% increase. Lobbying spending jumped 39% at Amazon.com ( AMZN ), to $ 2.65 million, marking the fourth consecutive quarter that the e-commerce leader’s spending topped $2 million, the disclosure records show. Apple’s spending fell 8.9%  to $1.13 million while spending by Yahoo ( YHOO ) dipped 5.5% to $690,000. Cable firm Comcast ( CMCSA ) spent $3.72 million, a 19.5% decrease. Digital Advertising Rising, Helped By Presidential Election Research group eMarketer said on Thursday that spending on paid media worldwide will climb 5.7% in 2016 to $542.55 billion, propelled by increased investments in digital advertising. While down from eMarketer’s previous forecast, the amount still represents accelerated growth compared with 2015, when spending on paid media worldwide rose 5%. Major events including the U.S. presidential election and the Rio Summer Olympics will contribute to rising ad spending, eMarketer said. While TV remains a dominant ad spending destination, ad spend on digital channels is showing the fastest increase year over year, eMarketer said. In the U.S., political ad spending on digital this year is estimated to nearly triple its rate of spending from 2014, says eMarketer, which adds that Nomura Securites estimates that digital will capture 9.8% of total U.S. political ad spending share this year, up from a 3.6% share in 2014. Broadcast TV will see a 59.4% share this year compared with a 61.3% share in 2014. In total, political advertising is expected to reach $10.2 billion this year, up from $7.49 billion in 2014 and $8.81 billion in 2012.