The Zacks Analyst Blog Highlights: Sprint, T-Mobile US, Verizon Communications, AT&T and Microsoft

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Jun 06, 2014, 09:30 ET

CHICAGO, June 6, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Sprint Corp. (NYSE:S-Free Report), T-Mobile US Inc. (NYSE:TMUS-Free Report), Verizon Communications Inc. (NYSE:VZ-Free Report), AT&T Inc. (NYSE:T-Free Report) and Microsoft (Nasdaq:MSFT-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Thursday's Analyst Blog:

Sprint Nears T-Mobile Takeover

Sprint Corp. (NYSE:S-Free Report) is reportedly nearing an agreement to acquire T-Mobile US Inc. (NYSE:TMUS-Free Report). According to Bloomberg, the company is expected to pay around $40 a share to acquire T-Mobile US, which represents a total valuation of $31 billion.

We believe the prospective deal should bring meaningful synergies to Sprint and help stabilize its financials and market share in the wireless industry.

Sprint plans a stock-and-cash deal split equally for T-Mobile US. Alongside, it also seeks to offer a 15% stake holding in the combined company to Deutsche Telekom AG – parent company of T-Mobile US, which currently holds a 67% stake in the latter. Although nothing has been officially announced as yet, the deal is reportedly expected to take place as early as July this year.

For Sprint, the merger with T-Mobile US implies a gain of over 100 million customers. The deal will also place its parent company, SoftBank in a much stronger position as opposed to major carriers such as Verizon Communications Inc. (NYSE:VZ-Free Report) and AT&T Inc. (NYSE:T-Free Report).

The merger will give birth to a new entity that will likely be the second largest carrier in the world in terms of revenues, surpassing global giant Vodafone Group . It will also give the Japanese carrier, Softbank a shot in the arm, with a solid foothold in the world's largest economy.

However, Sprint's ambitious plan has raised quite a few eyebrows in the U.S. telecom industry's regulatory body. According to previous reports, antitrust officials at the U.S. Department of Justice have expressed their contempt toward the T-Mobile and Sprint merger.

As a result, we believe skepticism on the part of the regulators is the biggest hurdle that Sprint needs to overcome in the coming days, in order to make this deal a success.

Sprint currently has a Zacks Rank #3 (Hold).

PC Shipment Decline Narrower than Expected?

PC shipments, though a continually disturbing factor so far, have showed signs of improvement of late. As per the latest report provided by research firm IDC, 2014 PC shipments are expected to contract 6.0%, marginally lower than the research firm's earlier forecast of a decline of 6.1% predicted in March this year. The improved estimate is largely due to stabilization in Western Europe and higher-than-expected sales in other mature markets.

The research firm also stated that demand for tablets continues to slow down this year, leading to the stabilization in the PC market. The system refreshes and enterprise system migrations beyond Microsoft's (Nasdaq:MSFT-Free Report) XP operating system are the primarily factors driving desktop PC shipments. We believe that PC market growth will be moderate in the next few years, as enterprises are keen to buy computers rather than opting for tablets and mobile devices.

While the outlook for the PC market appears to be improving somewhat, overall PC shipments continue to be hurt by consumer preference for tablets and mobile devices in emerging markets. IDC had earlier stated that PC shipments declined 9.8% to 315.1 million units in 2013, largely as a result of an 11.3% decline in emerging markets to 182.1 million units.

The emerging markets were once considered to be the key growth driver but now pose challenges primarily due to macroeconomic weakness and political turmoil. According to BI Intelligence as quoted by CNET, one out of five persons in the world owns a smartphone and the numbers are expected to increase.

Recently, IDC projected that smartphone shipments worldwide will likely reach 1.2 billion units this year, up from 1 billion units in 2013. Furthermore, the upside will probably be sustained with the smartphone market reaching 1.8 billion units by 2018.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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