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Stocks fly and fall as earnings, M&A drive markets

It was a very busy news week in the media and communicationsindustry, with M&A, earnings and regulatory actions flinging stocks hitherand yon.

With more disappointing earnings results than not amongInternet companies, the SNL Kagan New Media Index traded down almost 3% for thefive days ended April 29. During the same period, an ambivalent entertainmentsector led to a 1% decline for the SNL Kagan Media & Entertainment Index,while the SNL Kagan Communications Index closed the period up almost 1%.

Driving one of the biggest moves in the industry, CEO Jeffrey Katzenberg managed to finally get his company off the auction blockand into an M&Acontract. The deal, which has yet to close, represented a big winfor DreamWorks shareholders with a massive valuation.

ComcastCorp.'s NBCUniversalMedia LLC agreed to buy the animation studio for $3.8 billion. Justa week before the announcement, DreamWorks Animation's market capitalizationwas about $2.34 billion.

Analysts were split on the deal, which comes after DreamWorks shoppedfor a buyer in 2014 then underwent a restructuring in 2015. While some pointedto a potential Universal theme-park opportunity for DreamWorks and the youth-skewingdigital properties that Comcast will get with the transaction, some believedthe valuation was far too high.

Still, DreamWorks investors bid shares up in accordance withthe hefty new valuation. The stock jumped over 46% for the week ending April29. But from the other side of the table, the deal was a thimble in the $147billion ocean of Comcast's market cap, and the MVPD's stock barely budgedduring the week.

Elsewhere on the M&A front, got a big boostin market cap after Gannett CoInc. swoopedin with an $815 million offer to buy the publisher. The$12.25-per-share deal, which penciled out to a 63% premium over the April 22stock price, represents another big premium.

The arrangement would add to Gannett's expanding . The companyrecently scooped up Journal MediaGroup Inc. in a $300 million deal. But there is no guarantee thatTribune will sell, as CEO Justin Dearborn called Gannett's tactics"aggressive andhostile."

Tribune shares catapulted over 47% from the end of the priorweek through April 28, while Gannett got a boost over 8.5% for its efforts.

Even as earnings kept pouring in, the M&A chatter stayedat a fevered pitch. Most recently, Rovi Corp. on April 29 said it would scoop up in a $1.1 billioncash-and-stock deal.The company offered TiVo stockholders $10.70 per share, with $2.75 in cash andthe rest in shares of a new holding company that will own both Rovi and TiVo.Post-transaction, current Rovi stockholders will own between 66.8% and 72.9% ofthe pro forma shares outstanding in the new holding company, assuming thatRovi's stock price stays between $16 and $18.71.

Rovi shares gained about 1.56% on the day of the dealannouncement, to close at $17.62. Investors decided TiVo shareholders were thebig winners in the deal, bidding shares up 5.9% by the end of the day.

Some regulatory approvals also led to more M&A newsduring the week. The FCC and the U.S. Department of Justice moved closer toapproval of CharterCommunications Inc.'s megamerger with and tocreate a company currently known as New Charter, but regulators sought someunprecedentedconditions focused on digital video.

The conditions, which still must be approved by the fullFCC, seek to protect the burgeoning business of online streaming TV from beingmowed over by staid, multibillion-dollar cable companies. The combined companywould be prohibited from contractually limiting a programmer's ability todistribute content online. The conditions also bar New Charter from imposingdata caps, charging usage-based pricing on broadband users and charginginterconnection fees on online video providers. An independent monitor would beappointed to ensure compliance.

While some criticized FCC Chairman Tom Wheeler for puttingforth a proposal that would essentially make rules with industry implicationsoutside of the standard rulemaking process and others applauded the move as aflexible solution to a rapidly evolving market, investors seemed to decide thata deal was a deal.

Charter added 7.6% and Time Warner climbed 5.8% for fivetrading days ending April 29.

Turning to earnings, the headlines were dominated by newmedia companies, and mostly with dour commentary.

AppleInc. was weighing heavily on investors' minds through the week asthe company — which for many years managed to deliver both growth and maturity— took a definite turn toward maturity.

The first domino in the sell-off that occurred was thecompany's April 26 earnings release. For the first time in 13 years, Applereported a year-over-year earnings decline, showing negative growth figures forrevenue, profits and iPhone sales.

Then the downgrades began. Oppenheimer analyst Andrew Uerkwitzdropped his rating on the tech giant to "perform" from"outperform." A team of Goldman analysts also removed Apple from its"conviction buy" list, lowering the company's price target to $136from $155. Both firms pointed to a return to growth in 2017 or after the marketabsorbs the iPhone 7 cycle, but for now Apple is looking a little feeble.

Adding insult to injury, activist super-investor Carl Icahntold CNBC that he soldoff his Apple stake. He noted China in particular as a sore spotfor the company. Up to this point, Icahn represented one of Apple's most prominentcheerleaders, of which there were many.

Apple shares traded down over 10% for the week ending April29.

Tech giants Alphabet Inc., Inc., Facebook Inc. and Twitter Inc. also reported earnings during the week,with very mixed results.

Alphabet and Twitter were spanked on the markets afterreporting disappointing results.

Twitter continued to disappoint investors after a roughseveral quarters. Shares of the microblogging company were down about 65% forthe past 12 months, and the week ending April 29 did not help.

The company reported lower-than-expected first-quarter revenue, evenas it added 5 million monthly active users. Following the results, JPMorgananalyst Doug Anmuth downgraded the company to "neutral" from "overweight,"citing slower and uninspiring product changes as well as increased competition.

Twitter shares cratered during the week, losing over 15%through April 29.

Alphabet at the end of the prior week reported revenue andprofits below consensusas expenses and foreign exchange weighed on results.

Executives said that higher-than-expected trafficacquisition costs were associated with an advertising mix that was shiftingtoward programmatic and mobile, which are more expensive businesses than othertypes of advertising.

Alphabet shares dropped on the trading day following theApril 21 results, and continued to drop throughout the following week. By April29, shares had lost about 9.6% of their value.

On the bright side, Amazon and Facebook saw big jumps inmarket cap after delivering outsized earnings results.

Amazon on April 28 delivered a revenue beat, which trickled down to thebottom line as it expanded profit margins with unexpected aggression. Thecompany attributed the profitability largely to a vastly expanded margin in itscloud business.

Shares sprung upward after the earnings release, and endedthe week up over 7%.

Social media darling Facebook continued to woo investorswith another bigquarter. The company achieved double-digit growth at the top andbottom lines, as well as for monthly active users.

Revenue was up 52% and monthly active users popped up by15%, while its primary net income figure jumped by almost 200%.

Facebook shares levered up about 8% after the release andsettled to a five-day gain of more than 7%.