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Verizon to Buy EdgeCast? - Analyst Blog

By: Zacks.com
Posted: 12/9/2013 3:06:00 PM
Referenced Stocks: CBS;DIS;TWC;VZ

Leading telecom company,  Verizon Communications Inc. ( VZ ) is reportedly planning to acquire Los Angeles-based content delivery company, EdgeCast Networks. Neither company has made any official statement over this deal, but according to media reports, the deal is set to be worth over $350 million.  We believe, EdgeCast Networks will provide significant advancement in expanding the content delivery business of Verizon.  The company's rising focus on boosting its enterprise business has accelerated in the recent past, as evidenced by the recently proposed acquisition of U.S.-based upLynk.

Given the surge in demand for online video streaming thanks to developments in technology, Verizon remains focused on growing in content delivery services through its Digital Media Service business. Launched in 2011, Verizon's Digital Media Services has successfully enabled eminent advertising, entertainment and media companies to deliver live and on-demand, customized video content to consumers through multiple devices such as TVs, smartphones and tablets.

We believe with the latest acquisition foray into companies like EdgeCast and upLynk, Verizon will be able to integrate its advanced infrastructure with simplified media content delivery solutions. Nevertheless, Verizon is also likely to gain from the customer base of upLynk and EdgeCast, which includes the media giant, The Walt Disney Company ( DIS ), social Media like Twitter and Pinterest, along with video streaming companies like Hulu.

Besides, Verizon consistently collaborates with media and cable companies to foster market share gain in different service categories. It also enters new sectors without seeking merger and acquisition strategies. The company has tied up with Cox Communications to offer bundled service packages consisting of video, phone and Internet in Phoenix and Las Vegas. The telecom carrier has also extended its multi-year agreement with National Football League (NFL) for content delivery. The renewed agreement is expected to extend the ties between the two entities through the inclusion of live afternoon coverage of games aired by CBS Corporation ( CBS ) and Fox Sports on Sunday and for off-season games. 

Verizon has also entered into a long-term contract with Turner Broadcasting, a unit of Time Warner Cable Inc. ( TWC ) for providing Turner's content to FiOS TV Subscribers. The deal would provide Verizon's FiOS TV Subscribers with access to several entertainment channels including TBS, TNT and Cartoon Network, which can be watched through television, PC, tablet and mobile handsets. All these developments reflect Verizon's increased efforts on going beyond conventional telecom market development. We believe that the new takeovers, coupled with organic growth in multimedia content delivery platforms will provide Verizon with a significant opportunity to grow, despite the saturated and fiercely competitive U.S. wireless market.

Verizon currently has A Zacks Rank #3 (Hold).



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