Telecom Stock Roundup: Verizon Sells Tumblr, CenturyLink's Q2 Earnings & More
Zacks Investment Research | Aug 13, 2019 10:03PM ET
In the past five trading days, telecom stocks flattered to deceive as the initial rally was soon eclipsed by a continued downturn, as deteriorating trade relations between the United States and China took its toll. Trade uncertainty continued to play spoilsport and dragged the industry down with both the countries remaining firm in their respective stance. In addition, relentless pressure from the ongoing geopolitical crisis and challenging macroeconomic environment, triggered by a plunging Argentine peso, apparently led the industry to a free fall.
During the past week, the U.S. government formally implemented the new rule of the National Defense Authorization Act, which prohibits federal agencies from buying “telecommunications equipment or services as a substantial or essential component of any system” from certain Chinese entities. These include Huawei, ZTE (HK:0763), and several other providers of video surveillance equipment and services from the communist nation. The latest move follows President Trump’s decision to impose a fresh round of 10% tariff on $300 billion worth of imports from China, effective September, in addition to the existing set of tariffs, after the bilateral trade negotiations failed to yield any concrete result.
However, in a dramatic turnaround, the U.S. President has opted to delay taxing some items within the new import basket until Dec 15. These include cellphones, video game consoles, computer monitors, some clothing and footwear items that formed a sizeable portion of the consumer shopping basket. The strategic decision is aimed to offer some respite to the retailers and enable them to stockpile things for the back-to-school and holiday season. Although this is likely to benefit the industry as 5G deployment across the country gains pace, the continued tariff war is expected to affect the supply chain of various U.S. telecom firms that depend on the Chinese market to a large extent.
Regarding company-specific news, divestment, product launches and quarterly earnings primarily took the center stage over the past five trading days.
Recap of the Week’s Most Important Stories
1. Verizon Communications Inc. (NYSE:VZ) has inked an agreement to divest the social media blogging site Tumblr for an undisclosed amount. The blogging platform is being sold to San Francisco-based web developer firm Automattic Inc., which is the parent of publishing site WordPress.com, WooCommerce, Jetpack, Simplenote, Longreads, and more.
Although the selling price was not officially revealed, various unconfirmed reports have valued the transaction at about $20 million, which is less than 20% of its original buyout price. In 2013, Tumblr was acquired by Yahoo (NASDAQ:AABA) for $1.1 billion, when it was at the peak of its business. Later, this iconic brand became part of Verizon, when the telecom major acquired Yahoo for $4.8 billion in 2017. (Read more: Zacks Investment Research
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