The Wall Street Journal reported yesterday that telecom giant Sprint decided at a board meeting on Tuesday to end its attempted merger with T-Mobile. The deal would have valued T-Mobile at $32 billion. The attempted merger was spearheaded for months by Japanese billionaire Masayoshi Son, the founder and CEO of SoftBank, which controls Sprint.
Regulators repeatedly warned that merging the United States’ third- and fourth-largest mobile carriers would be met with serious opposition. FCC Chairman Tom Wheeler and assistant attorney general for the antitrust division William J. Baer both publicly expressed skepticism that the deal would pass regulatory muster. In a statement, Wheeler said that the merger’s failure was good for American consumers, adding that Sprint “now has an opportunity to focus their efforts on robust competition.”
Shares of Zillow (Z) were slightly lower this morning, falling 0.1% to $140.93 after reporting mixed quarterly earnings. In its second quarter, Zillow reported revenues of $78.7 million, a 68% increase year-over-year, ahead of analysts’ average estimates of $76.5 million, according to Thomson Reuters. However, the company lost 5 cents per share, while analysts had forecast a loss of 4 cents. Revenues from the Marketplace segment grew 72% year-over-year to $62.6 million, while revenues in Display increased 53% to a record $16.1 million. In July of this year, the online real estate company had almost 89 million unique visitors on its web and mobile properties, reflecting an improving housing market. Zillow also boosted its full-year guidance to between $321 million and $323 million. The company also announced that it would increase its projected yearly advertising spending to $75 million, up from the previously announced $65 million and more than double its 2013 advertising spending. "We had our strongest quarter yet with record consumer traffic and record revenue and bookings by Premier Agent advertisers," said Zillow CEO Spencer Rascoff. "Our deliberate focus on high-performing agents and their teams drove the significant increase in orders, and has prompted us to increase our full-year outlook. Advertisers are clearly following audience, and we're continuing to reinvest in the business to get the flywheel to spin even faster.” Several analysts were bullish after the results. Analysts at Barclays raised Zillow's price target to $150 from $115. RBC Capital Markets analysts raised their price target to $145 from $115. Analysts at Canaccord Genuity raised their price target to $150 from $130.
Groupon (GRPN) shares plunged 15.1% to $6.00 following the release of disappointing earnings last quarter. The online coupon company posted revenues of $751.6 million, a 23% increase year-over-year. Revenues rose 12% in North America; 42% in Europe, the Middle East, and Africa; and 40% in the rest of the world. Analysts expected revenues of $761.8 million. The company earned 1 cent per share, matching expectations. For the third quarter, Groupon expects earnings between flat and 2 cents per share on revenues between $720 million and $770 million, short of the consensus estimate of 3 cents per share on $760.6 million in revenues. “We had another record quarter in terms of demand, with worldwide billings increasing 29% and reaching their highest level ever,” said CEO Eric Lefkofsky in a statement. “Our marketplace continues to gain traction and add to our growth; we reached another all-time high in mobile, and with the launch of Gnome, we believe we’re making great strides in connecting local commerce.” After the results, analysts' expectations for the Chicago-based company's future were mixed. Jefferies analyst Brian Pitz reiterated his “hold” rating and lowered the price target to $7. Sterne Agee analyst Arvind Bhatia reiterated a “buy” rating and $12 price target, while Deutsche Bank analyst Ross Sandler kept his “buy” rating and a $7 price target.
21st Century Fox (FOXA) shares jumped 5.4% to $32.99 after withdrawing its takeover offer to Time Warner (TWX). Three weeks after Rupert Murdoch, who controls Fox, publicly expressed his interest in acquiring all the outstanding shares of Time Warner, 21st Century Fox said in a press release yesterday that it was withdrawing its proposal to Time Warner. Murdoch said in a statement that the proposal had “significant strategic merit and compelling financial rationale” and that his company’s approach to Time Warner had been “friendly.” He cited Time Warner’s refusal to “explore” the “highly compelling” offer, coupled with the negative reaction manifested in 21st Century Fox’s share price, as the reasons for withdrawing the bid. The 83-year-old Murdoch’s announcement of the $71 billion takeover offer sent 21st Century Fox shares tumbling 11%. In its own statement following the announcement of the withdrawal, Time Warner said it was “well positioned for success.” Time Warner shares fell 12.0% to $74.94, despite releasing strong second-quarter earnings this morning. Revenues were $6.79 billion, slightly below analysts’ expectation of $6.87 billion. The company earned 98 cents per share, 14 cents ahead of consensus. Net income rose from $771 million to $850 million. Revenues in the HBO network grew 17% year-over-year to $1.4 billion. The network garnered 99 Emmy nominations this year, the highest in the industry. The fourth season of Game of Thrones averaged 19 million viewers per episode, making it the most-watched original series in HBO history, beating The Sopranos’ fourth season. Warner Brothers revenues decreased 2% due to “softer theatrical performance” than last summer.
Read More: Why Zillow Sees Itself as an Online Real Estate Giant --Written by Laura Berman in New York >Contact by Email.
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