Technology Results & Merger Rumors Offset Industrial Weakness, Dreary Debate

Steve Jobs, Bill Gates, Henry Ford, Sam Walton, Elon Musk.  All are considered visionaries because the public looked at the products they offered and adopted them en masse.  In some cases, the technology was new, different, and better than the existing mouse trap.  In other situations, it was purely a function of price. In either scenario, these leaders had a different viewpoint about how the future would look and it turned out to be accurate.  The takeaway is that in many parts of society, especially in competitive fields like business, sports, and politics, the ability to peer into the future and see what could be is a crucial part of leadership.  Over the course of the last week, we have seen examples of this play out.

For instance, in the industrial arena, General Electric (GE) and Honeywell (HON) reported their earnings and projected lower growth projections for 2017.  The leaders of these giants noted the drag on earnings from the energy complex, especially GE. Both are considered leaders in the heavy industrial sector so their perspective is viewed as credible by institutional investors.  In the technology arena, Netflix (NFLX), led by its soothsayer Reed Hastings, had a strong outlook and blew out expectations for new subscribers. Microsoft (MSFT), now in the capable hands of Satya Nadella, blew past estimates on the strength of its cloud performance and shift to emphasize data services to large enterprises. Note the theme of seeing consumption change among viewers for video and large companies wanting more flexibility of technology usage.  Microsoft also is part of the next issue involving seeing ahead, that of deal making.  If you recall, they are in the midst of closing the purchase of LinkedIn, also founded by a unique visionary, Reid Hoffman.

Over the last five days, three very big corporate transactions have all been rumored close to being finalized. The first would be AT&T (T) buying Time Warner (TWX) in an $80 billion dollar deal. Apparently it may be done this weekend, though Apple may potentially be involved. Time Warner, the owner of treasured properties like HBO and CNN (and several others), is clearly a crown jewel company.  It is why AT &T desires it as it can secure one of a kind content. Detractors believe the $200 billion in debt would be a big problem, as will regulatory approval.  Putting on the investment banking and analyst hat, the combined company could handle the debt load. The big question is going to be the politicians, as always. They might make a call to Mr. Malone, as he tried this years ago and decided you have to split distribution and content.

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