Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD), did not just sit on its hands while AT&T tried to push through the T-Mobile deal. The company paid $3.6 billion for unused spectrum owned by SpectrumCo, a consortium of Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), and Bright House Networks.

Other potential AT&T acquisitions include MetroPCS Communications Inc. (NYSE: PCS), Leap Wireless International Inc. (NASDAQ: LEAP), and even Sprint Nextel Corp. (NYSE: S). But none would be as good as a deal for Dish.

AT&T’s main problem is that it would have to pay a premium price for Dish — perhaps as much as $50/share, or about 70% above today’s share price. That would value Dish at around $22 billion, a steep price given that AT&T just paid out $4 billion to T-Mobile in break-up fees. Even Ma Bell can’t afford to pay that kind of money too often for nothing in return, and it’s a sure bet that Dish would want a substantial break-up fee as part of any deal.

A report at Bloomberg News notes that Verizon Wireless owns 56 percent more 4G spectrum than AT&T in the top 10 markets and 46 percent more in the top 100. Verizon Wireless also claims 107.7 million subscribers compared with AT&T’s 100.7 million. Had AT&T been able to acquire T-Mobile, it would have increased its spectrum by 62%, leveling the playing field.

Dish recently acquired wireless spectrum from two bankrupt satellite television companies for about $2.8 billion in a deal that is still awaiting FCC approval. Verizon’s deal with SpectrumCo also needs regulatory approval, and so far there is no indication that either approval is in trouble.

But what does AT&T want with a satellite TV business? Of course it could hive it off once the deal is done, but it might make more sense to go after MetroPCS or Leap, both of which are simply wireless carriers. Or AT&T might be able to get Dish to sell just the spectrum. That would not be the best deal for Dish shareholders, but the company’s management would certainly be able to retire following such a transaction.

Dish shares are trading up more than 2% today at $29.34 in a 52-week range of $20.85-$32.56. Shares of AT&T are up almost 1% at $30.30 in a 52-week range of $27.20-$31.94.

One issue to consider… Dish would have every right in the world to demand another massive deal break-up fee in case the telecom giant could not convince regulators that this is good for consumers.

Paul Ausick

Nuance has been thought of as a potential takeover name for Microsoft Corporation (NASDAQ: MSFT) and for Apple Inc. (NASDAQ: AAPL) on and off for some time.  This may not change the speculation status much.  But what this does accomplish is a new platform to “easily find content by speaking channel numbers, station names, show and movie names.”  This would allow for searching by content, actor, and genre.  The notion that this allows for staying connected through Twitter, Facebook and Skype may just be gravy.

Dragon TV was unveiled as a voice and natural language understanding platform for TV, device and set-top box OEMs and service operators geared toward making it easy to find and access the TV show that a subscriber wants to watch.

If Nuance can open this up to cable outfits Comcast Corporation (NASDAQ: CMCSA) and Time Warner Cable Inc. (NYSE: TWC), and to AT&T INc. (NYSE: T) for its uVerse, let alone DIRECTV, Inc. (NASDAQ: DTV) and Dish Network Corporation (NASDAQ: DISH) for satellite, then Nuance may get a much wider footprint.

How this gets monetized is up for anyone’s guess.  Nuance projected that about 1.6 billion TVs should be connected to the web by 2014 according to Strategy Analytics.  It even notes the difficulty in finding what is on television.  How many times have you been looking for a televised game or show and have no idea what channel it is on?

This will allow OEMs and service operators to deliver TVs, set-top boxes and applications that let consumers find and experience content with Nuance’s leading voice technologies.

Again, the trick is on the monetization.  If it can get a piece of a upcharge for the service then this may open up millions and millions more in revenues per month.  If it is a promotional feature, then this may just be a another brand building effort.

JON C. OGG

The US Federal Communications Commission is reviewing the purchase now, and the regulatory body is reportedly concerned about two major aspects of the deal: first, what happens to Verizon Wireless’s fibre-optic service, FiOS; and second, what effect will the cross-marketing agreements that were part of the deal have on competition?

Analysts at Goldman Sach have a suggestion, according to a report at Bloomberg News. Verizon should dump its wireline business and merge with Vodafone in the wireless business. A Goldman analyst claims, “[The] agreement on a frequency purchase and marketing cooperation that Verizon’s mobile-phone unit reached in December with U.S. cable operators led by Comcast would make separating [Verizon’s] divisions easier.” Vodafone shares jumped more than 2% in the UK on the news.

There are a couple of problems with Goldman’s analysis. First, the “separation” the firm is recommending is very likely the single thing that Verizon could do to assure that the FCC rejects the SpectrumCo deal. The only way the FCC would approve a “separation” is if Verizon found a buyer for its wireline business and the pension liabilities that would tag along.

That’s the second problem. Goldman’s analysts appear to think that there are potential buyers lined up for this. Verizon’s wireline business is likely to post revenues of more than $40 billion in 2011. A buyer would have to have pretty deep pockets. And then there’s this tidbit from Verizon’s third-quarter Form 10-Q:

Net cash provided by operating activities during the nine months ended September 30, 2011 decreased by $3.6 billion compared to the similar period in 2010 primarily due to inventory purchases for wireless devices and higher pension plan contributions.

The lion’s share of that $3.6 billion was certainly in pension plan contributions. What buyer is going to want to take over that part of the wireline business?

A cynic might say that Goldman’s analysis is not much more than beating the drum for some nice advisory, management, and underwriting fees should Verizon choose to follow this advice. A realist might say that Goldman’s proposal is a nominee for this year’s Mr. Dumas Award.

Paul Ausick

The US Department of Justice is investigating the spectrum deal to determine whether or not it is anti-competitive and could jeopardize competition in the telecommunications industry. AT&T Inc. (NYSE: T), Deutsche Telekom AG (OTC: DTEGY), and Sprint Nextel Corp. (NYSE: S) will be watching this very closely.

The Washington Post reports that the DoJ has confirmed the investigation, and an unidentified official has said that the department is most concerned about the cross-marketing aspects of the deal. In the press release announcing the deal, Verizon Wireless had this to say about the cross-marketing arrangement:

The companies also announced that they have entered into several agreements, providing for the sale of various products and services. Through these agreements, the cable companies, on the one hand, and Verizon Wireless, on the other, will become agents to sell one another’s products and, over time, the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis. Additionally, the cable companies and Verizon Wireless have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.

The DoJ does not want Verizon to give up on its fibre optic network, called FiOS, and focus entirely on the wireless market. The cross-marketing agreements also gives former competitors little reason to keep competing. Verizon gets to continue building out its 4G LTE network and to add value by getting access to Comcast and Time Warner content. The cable companies get to expand into wireless services without having to build a costly physical network. The spectrum licenses held by SpectrumCo were sold with the intention that they would spur competition, not kill it.

A month ago we could have said that it is unlikely that the DoJ will kill this deal. But now that the AT&T/T-Mobile USA merger is dead due to the mere threat of anti-trust litigation, it’s not out of the question that the DoJ will at least force some changes to the Verizon-SpectrumCo deal.

Paul Ausick

The unofficial closing bells put the DJIA up more than 78points to 12,097.83 (0.65%), the NASDAQ rose nearly 29 points (1.10%) to 2,655.76, and the S&P 500 rose 1.03% or nearly 13 points to 1,257.08.

There were several analyst upgrades and downgrades today, including Alcoa, Inc. (NYSE: AA) cut to ‘buy’ from ‘hold’at Goldman Sachs. Other ratings action include Chicago Bridge & Iron Co. (NYSE: CBI) removed from ‘Conviction Buy List’ at Goldman Sachs, but maintained at ‘buy’; Autodesk Inc. (NASDAQ: ADSK) cut to ‘sell’ from ‘neutral’ at Goldman Sachs; Cablevision Systems Corp. (NYSE: CVC) cut to from ‘outperform’ to ‘market perform’ at Wells Fargo; and Time Warner Cable Inc. (NYSE: TWC) raised to ‘outperform’ from ‘market perform’ at Wells Fargo. We include Cablevision and Time Warner in our story today about tomorrow’s release of new software for the Xbox from Microsoft Corp. (NASDAQ: MSFT).

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: Dollar General Corp. (NYSE: DG) is up more than 1.6% at $40.59, after posting a new 52-week high earlier today of $41.25; and Hi-Tech Pharmacal Co. Inc. (NASDAQ: HITK) is down more than -9% at $38.75, after posting a new 52-week high this morning of $44.58. Earnings releases have slowed significantly this month, but there are some noteworthy reports coming after markets close today: Chesapeake Granite Wash Trust (NYSE: CHKR), Blyth, Inc. (NYSE: BTH), Pep Boys-Manny, Joe, and Jack (NYSE: PBY), and Uranium Energy Corp. (AMEX: UEC).

Several other standouts from today are as follows…

SuccessFactors, Inc. (NASDAQ: SFSF) is up more than 51%, at $39.71. The cloud-based software maker is being acquired by SAP AG (NYSE: SAP) for about $3.4 billion ($40/share). We have more coverage on this story here.

Athersys, Inc. (NASDAQ: ATHX) is up more than 27%, at $2.11. The stem-cell research firm, which uses adult cells not embryonic cells, is apparently back in favor after falling to a 52-week low of $1.00 just over two weeks ago.

Taleo Corp. (NASDAQ: TLEO) is up more than 21%, at $39.99, after posting a new 52-week high of $41.23. Another cloud-based solution supplier, Taleo is one of a number of cloud developer stocks jumping today on the halo effect from SAP’s acquisition of SuccessFactors.

Tenet Healthcare Corp. (NYSE: THC) is up more than 11%, at $4.66. The health care facilities operator fell more than -10% on Friday, when investors over-reacted to some downgrades in the entire sector; today’s gains are just a reaction to last week’s over-reaction.

Recovery Energy, Inc. (NASDAQ: RECV) is up more than 22%, at $5.34. This small oil & gas E&P holds 137,000 net acres in the Denver-Julesberg basin in northwestern Colorado, and began trading on the Nasdaq just about one month ago.

Stay tuned for Tuesday. We have noted Federal Reserve Governor Daniel Tarullo scheduled to testify before the Senate Banking Committee on the Dodd-Frank bill. Here are other noteworthy events scheduled for Tuesday (all times Eastern):

• 7:45 a.m. – International Council of Shopping Centers/Goldman Sachs weekly sales report
• 8:55 a.m. – International Council of Shopping Centers Redbook

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Paul Ausick

The biggest problem with the cable companies’ set top boxes is the nearly impenetrable user interface. The new Xbox Live software completely changes that, replacing the hierarchical menus with a graphical interface that can accept voice, touch, and motion commands as well as commands from a smartphone or other handheld device. The idea is to make the TV interface as intuitive and easy-to-use as a smartphone.

Apple’s latest Apple TV offering lets users stream content from the iPhone to a TV set through its AirPlay feature. Google is working with Samsung Electronics (OTC: SSNLF) to integrate Google TV directly into a TV set. Users will still need a cable TV subscription to gain access to cable programming through the Xbox or other TV device.

One interesting thing about all this is that Microsoft, Apple, and Google are very likely to take over the distribution of content from cable companies like Comcast and Verizon Communications Inc. (NYSE: VZ). Not having to design, build, and market a set top box with a modern interface is not a bad thing for the cable guys, who will still make money by requiring users to pay for the cable subscription. Customers, of course, will very likely have to pay a (modest) fee to Microsoft, Apple, or Google for the privilege of connecting to the TV through another device. Xbox Live, for example, requires a $5/month fee for its premium service which allows users to control the TV.

Another possibility is that the TV control software will be paid for by advertising. Xbox Live does include advertising, and although Google has not revealed what it plans to do with its software, the company could choose to offer the TV software on an ad-supported basis.

A second interesting thing about Microsoft’s announcement is that this is one area in which Microsoft could actually be leading both Apple and Google. The Xbox Live interface is consistent with the Windows Phone 8 interface and will be the same as the user interface on Windows 8 which is due in the second half of next year. Apple was first to integrate handheld smartphones and tablets with a TV, but the Microsoft offering is far more mature than Apple’s offering. Google got sidetracked on a failed try with Logitech International SA (NASDAQ: LOGI), but its TV deal with Samsung could change things around because Samsung also sells more Android-based phones than any other company. Integrating Android with a TV is natural extension, but Google and Samsung are getting a bit of a late start.

The Xbox Live announcement could usher in the next big thing or it could just be another swing and miss at the integration of computing devices and TV sets. This time does look like it will be different.

Paul Ausick

Alcoa, Inc. (NYSE: AA) Cut to Neutral from Buy at Goldman Sachs.
Amgen Corporation (NASDAQ: AMGN) named as value stock of the day by Zacks.
Autodesk, Inc. (NASDAQ: ADSK) Cut to Sell from Neutral with new $32 target at Goldman Sachs. 
Cablevision Systems Corporation (NYSE: CVC) downgraded to Market Perform from outperform at Wells Fargo.
Chicago Bridge & Iron Company N.V. (NYSE: CBI) maintained as Buy but removed from the Conviction Buy List at Goldman Sachs.
China Life Insurance (NYSE: LFC) maintained Underperform with $35.00 price target and named as Bear of the Day by Zacks.
Incyte Corporation (NASDAQ: INCY) Cut to Neutral from Buy at Citigroup.
LinkedIn Corporation (NYSE: LNKD) Raised to Equal-Weight at Evercore; Reiterated “Hold” on growth versus valuation and overhang concerns by Argus.
Tenet Healthcare Corporation (NYSE: THC) Raised to Outperform with $5.50 target by Zacks and named as the key Bull of the Day.
Time Warner Cable Inc. (NYSE: TWC) Raised to Outperform from Market Perform at Wells Fargo.
TiVo Inc. (NASDAQ: TIVO) Started as Buy with $13 price target at UBS.

Here is a summary of the top analyst upgrades and downgrades from this weekend in a summary format for last week’s top (and a few lousy) Wall Street research calls.

JON C. OGG

If you just watched the Cablevision stock chart, it would seem as though cable was dying.  It is not.  Cablevision has been cleaning its books up and it has parted ways with Madison Square Garden and AMC Networks for the most part.  Again, those changes skew the stock charts.

We no longer have any serious hope of takeover ambitions resurfacing, but the Dolan family did try to buy it before at much higher prices and that deal was rejected.  The current market cap is only $4.3 billion and that does make it capable of a deal if another player wanted to make an offer.  A sum-of-the-parts analysis remains “oversold” and this value is solely on the merits of the company on a standalone basis. This one can still slide if the market softens, but this remains underpriced and we think higher prices will be reflected when things normalize.

Dividend and income investors now have an accidentally high-yield of almost 4%.  Even after the AMC spin-off, shares fell from $25 to under $15 and the selling was just too harsh for a company that trades at close to 11.5-times 2012 earnings estimates. 
Our take is that Cablevision should easily be a $20.00 stock after the dust settles, and that opinion has nothing to do with what Barron’s touted as being worth $30.00 per share in a buyout. 

The current $15.00 share price compares to a Thomson Reuters consensus price target of $22.14.  Our projection calls for close to 33% gains due to mispricing right now, and our projection is even less than the consensus target and far less than what Barron’s recently published.

This was one of seven oversold picks poised for a comeback which was offered recently to our readers who sign up for our free daily newsletter service.  Each morning’s free newsletter is sent by email and includes the top news headlines, shows the top 15 or so analyst upgrades and downgrades, covers activist investor and insider trading, and offer key trading alerts for investors. Sign up in the box below.

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JON C. OGG

There are plenty of challenges facing the network and cable TV industry these day, not the least of which is the growth in streaming video. The well-known troubles of Netflix Inc. (NASDAQ: NFLX) to one side for a moment, the market for streaming is growing, while some cable operators are losing subscribers. Broadcast networks with content to license are better placed to profit, while cable operators with their own spectrum might be in the best position of all, at least in the near term.We’re looking today at 10 companies with broadcast or satellite/cable businesses (or both): CBS Corp. (NYSE: CBS), Walt Disney Co. (NYSE: DIS), Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), Dish Network Corp. (NASDAQ: DISH), DIRECTV (NASDAQ: DTV), Viacom, Inc. (NYSE: VIA), Liberty Starz Group (NASDAQ: LSTZA), Discovery Communications Inc. (NASDAQ: DISCA), and Charter Communications Inc. (NASDAQ: CHTR).

All data from Yahoo! Finance and current stock prices were gathered about noon today.

CBS Corp. (NYSE: CBS) has a median target price of $31.00 from 22 brokers. Shares are trading today at $25.66, for an implied gain of $5.34, or 21%. CBS’s forward P/E is 11.62 and the company pays a dividend yield of 1.6%. The stock’s 52-week trading range is $15.99-$29.68, and at today’s price that’s about 60% above its 52-week low, posted earlier this morning, and 14% below the 52-week high. CBS is scheduled to release third-quarter earnings on Thursday. The consensus EPS estimate is $0.46 on revenue of $3.43 billion. A year ago the company posted sales of about $3.3 billion and last quarter revenue totaled nearly $3.6 billion. There’s room for the share price to rise, but neither the 52-week high nor the target price are endangered in the near term.

Walt Disney Co. (NYSE: DIS) has a median target price of $40.00 from 24 brokers. Shares are trading today at $35.34, for an implied gain of $4.66, or 13%. Disney’s forward P/E is 12.28 and the company pays a dividend yield of 1.1%. The stock’s 52-week trading range is $28.19-$44.34, and at today’s price that’s about 25% above its 52-week low, posted earlier this morning, and 20% below the 52-week high. Disney is much more than a distribution channel. Its ability to create compelling content and then license it for further distribution is practically equal to a license to print money. Analysts expect EPS of $0.54 on revenue of $10.36 billion when Disney reports third-quarter earnings next week.

Comcast Corp. (NASDAQ: CMCSA) has a median target price of $30.00 from 24 brokers. Shares are trading today at $23.60, for an implied gain of $6.40, or 27%. Comcast’s forward P/E is 12.35 and the company pays a dividend yield of 1.9%. The stock’s 52-week trading range is $19.19-$27.16, and at today’s price that’s about 23% above its 52-week low, posted earlier this morning, and 13% below the 52-week high. Comcast owns both content and the fat pipes to distribute that content. Because distribution of streaming content is fast becoming a commodity, it’s Comcast’s NBCUniversal media business that will carry Comcast forward. The $30 target price is probably safe for a while, but the company’s 52-week high could be in the sights.

Time Warner Cable Inc. (NYSE: TWC) has a median target price of $85.00 from 22 brokers. Shares are trading today at $62.91, for an implied gain of $22.09, or 35%. Time Warner’s forward P/E is 11.25 and the company pays a dividend yield of 3.1%. The stock’s 52-week trading range is $47.89-$79.21, and at today’s price that’s about 31% above its 52-week low, posted earlier this morning, and 21% below the 52-week high. In its last quarter, Time Warner lost subscribers and posted lower profits. The company believes it will make its forecast annual profit, but warned that advertising was falling. It’s easy for subscribers to drop cable subscriptions in a tight economy, and as the holidays come round, dropping cable service to have a few more bucks to spend on gifts will occur to a lot of viewers.

EU officials not expecting China to invest in the region’s bailout, despite reports to the contrary. (Reuters)

Hewlett-Packard (NYSE: HPQ) to keep its PC unit. (Reuters)

MF Global (NYSE: MF) loses clients because of reports of its poor performance. (Reuters)

Samsung smartphone sales move ahead of Apple’s (NASDAQ: AAPL) and the Korean company says it expects a strong Q4. Samsung had 23.8% of the global smartphone market in the third quarter, 9 points higher than Apple. (Reuters)

Water use is growing faster than the world’s population, according to the World Resources Institute. (Reuters)

Yahoo! (NASDAQ: YHOO) and potential bidders are at odds over a complex nondisclosure agreement. (Reuters)

Baidu’s (NASDAQ: BIDU) earnings rise sharply as search revenue in China climbs. The local search engine now has 80% of the market. (Reuters)

Research In Motion (NASDAQ: RIMM) sets up a surveillance system in India to help the government track BlackBerry use. (WSJ)

JPMorgan Chase (NYSE: JPM) will not charge customers who use their debit cards for purchases. (WSJ)

Ahead of IPOs, the heads of Groupon and Zynga set up share systems that will give them more voting rights. (WSJ)

Brocade (NASDAQ: BRCD) may try to find a buyer. (WSJ)

Poor results put Avon’s (NYSE: AVP) CEO Andrea Jung under pressure. (WSJ)

The NYSE and Nasdaq increase their competition for IPO listings. (WSJ)

Warner Music Group (NYSE: WMG) is close to a deal to buy EMI. (WSJ)

Chrysler posts a $212 million quarterly profit. (WSJ)

A study by the Carsey Institute at the University of New Hampshire shows relocations in the U.S. have slowed. (NYT)

Time Warner Cable (NYSE: TWC) loses both voice and cable subscribers. (FT)

France may have to make more budget cuts to keep its AAA rating. (Bloomberg)

Douglas A. McIntyre