Acquisitions
Sprint Nextel Corporation (NYSE:S) is currently in the process of either being bought out by Softbank (which recently raised its buyout offer to $21.6 billion) or Dish, and its stock has run up to match roughly the price of the Softbank offer but is still $4 billion short of the $25.5 billion offered by Dish. The Sprint Vital may increase interest in owning Sprint by either of these companies and could be a small part of why Softbank raised its offer (other than the Dish offer).
If you buy shares of Sprint you are betting on Sprint’s board treating Dish’s higher offer seriously (which they haven’t done) and a bidding war ensuing between the two companies. There is a small chance of a bidding war, but I wouldn’t take more than a speculative stake in Sprint until its future is decided on. DISH Network Corp (NASDAQ:DISH) could offer a higher offer and force Sprints board to reconsider, or Softbank’s offer could be accepted and the shares are dead money for a while as its stock has already run up enormously.
Final thoughts
The best way to play this is with Google and the other telecom companies. If AT&T or Verizon decide to offer their own devices, that could push up their margins just like Sprint can. Verizon Communications Inc. (NYSE:VZ) pays out a 4.1% dividend and AT&T Inc. (NYSE:T) pays 5.1%; if they can boost their profit margin that will translate to a bigger bottom line, which will enable them to pay out larger dividends, rewarding long term investors. Verizon and AT&T have already alluded to cutting down on subsidies, and this is one great way to do so.
Google is another way to play this because if those self-branded devices are running on Android, it will take a larger share of the smartphone market. It doesn’t matter if the phone is made from HTC, Samsung, LG, or Sprint: as long as it runs Google’s Android OS Google reaps the rewards and sees both top and bottom line growth as it captures more advertising revenue from the rapidly growing Google Maps and from its continued domination of the search market.
If the choice is between one Android phone or other, then you are dominating the market. Bullish on Google and the dividend prospects of Verizon and AT&T.
The article Everyone Is Making Smartphones Now originally appeared on Fool.com and is written by Callum Turcan.
Callum Turcan has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google. Callum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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