Verizon Communications Inc.

Traditional telephone companies like the three below continue to lose customers to cable companies, Internet-based phone services and other tech stocks. However, they are offsetting their telephone-business losses by entering the world of tech stocks. They’ve been offering faster-growing services, like wireless and high-speed Internet access. Essentially, they are fighting competition from tech stocks by becoming more like tech stocks themselves. Future revenues from these new services will also help them keep paying above-average dividends. VERIZON COMMUNICATIONS INC. $31 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $89.9 billion; WSSF Rating: Average) provides telephone services to over 140 million customers in 28 states. Through 55%-owned Verizon Wireless, a joint venture with UK-based Vodafone, it also has 59 million wireless subscribers in 50 states....

H&R BLOCK INC. $24.24, New York symbol HRB, has agreed to acquire the operator of its franchises in Texas, Oklahoma and Arkansas for approximately $278 million. Under the original franchise agreement in 1957, these offices pay just 6% of their revenues to H&R Block instead of the usual 30% that newer franchisees pay. This purchase gives H&R Block the opportunity to re-franchise these properties at the higher rate. H&R Block lost $129.4 million or $0.40 a share in its first fiscal quarter ended July 31, 2008. However, the company typically loses money in the quarter after the April 15 tax filing deadline. The latest results also included a $20.4 million increase in loss reserves and asset writedowns at its banking division. In the year-earlier quarter, it lost $109.8 million or $0.34 a share. Revenue fell 10.9%, to $339.6 million from $381.2 million. Lower revenues at its accounting and consumer finance operations offset a 7.7% gain at its tax services division. H&R Block is a buy....

VERIZON COMMUNICATIONS INC. $38.23, New York symbol VZ, owns 55% of Verizon Wireless, a joint venture with UK-based Vodafone. Verizon Wireless has now agreed to buy privately held Alltel Corp., which provides wireless services to 13 million customers in mainly rural areas of 34 states. Verizon Wireless will pay $5.9 billion in cash and assume Alltel’s debt of $22.2 billion, for a total price of $28.1 billion. Verizon’s share works out to $15.5 billion, which is equal to 2.2 times the $6.9 billion or $2.37 a share it earned in 2007. After the merger, Verizon Wireless will be the largest wireless company in the United States, with over 80 million customers. The company aims to complete the takeover by the end of this year. Alltel and Verizon use similar cellular technologies, so Verizon should have few integration problems. Verizon feels the merger will generate annual cost savings of $1 billion in the second year after closing....

VERIZON COMMUNICATIONS INC. $36 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $104.4 billion; WSSF Rating: Average) has over 140 million traditional phone customers in 28 states. It also has 59 million wireless service customers in 50 states. Subsidiary Verizon Wireless paid $9.4 billion for its 700-MHz spectrum licenses. Verizon owns 55% of this business, so its share of the purchase works out to $5.2 billion. That’s equal to 75% of its 2007 earnings of $6.9 billion or $2.37 a share. Verizon is starting to enjoy the benefits of its FiOS (Fiber-Optic Service) project, which gives customers a bundle of TV signals and other services. FiOS now has over one million subscribers, which makes it the 10th-largest cable provider in the United States....

AT&T and Verizon are investing huge sums in wireless frequencies (called ‘spectrum’ in the industry) and high-speed Internet networks. These outlays will help them compete in leading-edge technologies, and offset shrinking revenue from traditional telephone services. AT&T INC. $39 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 6.0 billion; Market cap: $234.0 billion; WSSF Rating: Average) provides traditional local and long-distance services to over 61 million customers in 22 states. It also has 70 million wireless subscribers nationwide, and 14.2 million high-speed Internet customers. AT&T recently paid $6.6 billion for 700-MHz wireless spectrum licenses in a government auction. That’s equal to 39% of the $17.0 billion or $2.76 a share it earned in 2007. These airwaves can travel longer distances and penetrate thicker walls than regular 1,900-MHz cellular frequencies. That means AT&T needs fewer towers to cover the same area....

FORD MOTOR CO. $8.27, New York symbol F, gained 10% this week after billionaire investor Kirk Kerkorian offered to buy up to 20 million common shares (1% of the total outstanding) at $8.50 a share. If successful, Kerkorian would own roughly 5.7% of Ford. The Ford family still controls about 40% of the company through special class B shares, so a full takeover seems unlikely. However, Kerkorian’s involvement is a plus, as it should put pressure on the company to continue to improve results. Meanwhile, Ford is starting to see some of the benefits of its latest restructuring. In the first quarter of 2008, the company earned $0.20 a share before unusual items, compared with a loss of $0.09 a year earlier. Revenue fell 8.4%, to $39.4 billion from $43.0 billion. If you exclude the recent sale of the Rover and Jaguar divisions, revenue would have grown slightly....

VERIZON COMMUNICATIONS INC. $36 (New York symbol VZ) will merge its local telephone operations in Maine, New Hampshire and Vermont with FairPoint Communications Inc. on March 31, 2008. Verizon stockholders will receive about 0.0188 shares of FairPoint common stock as a special dividend for each share of Verizon they hold. This is a tax-deferred distribution, so investors will only be liable for capital gains taxes on their new shares when they sell. Best Buy. INTEL CORP. $22 (NASDAQ symbol INTC) has raised its quarterly dividend twice in the past six months. The new annual rate of $0.56 yields 2.5%. Buy. ANHEUSER-BUSCH COMPANIES INC. $48 (New York symbol BUD) plans to build up to four amusement parks near Dubai in the United Arab Emirates. These are its first parks outside of the United States. The new parks will be part of the world’s largest man-made island, which will also include shopping districts, resort hotels and restaurants. The first phase should be ready by 2012. Buy.

MICROSOFT CORP. $30.45, Nasdaq symbol MSFT, has launched an unsolicited offer to buy Internet search provider Yahoo! Inc. for $44.6 billion in cash and stock. Microsoft will limit the cash portion to 50% of the total payout. To put the price in perspective, Microsoft earned $4.7 billion or $0.50 a share in its second fiscal quarter ended December 31, 2007. The company holds cash of $21.1 billion or $2.26 a share. The offer represents a 62% premium for Yahoo’s stockholders, so a competing bid seems unlikely. Yahoo may try to find other bidders. However, recent writedowns of subprime mortgages have limited the willingness of banks to provide financing for big takeovers like this. Microsoft feels it can save $1 billion in costs a year by combining Yahoo with its MSN online search business. The Internet advertising market is growing fast, and the combination will help Microsoft compete more effectively with market leader Google. The deal would also give Microsoft access to Yahoo’s fast-growing search businesses in Asia....

NEWELL RUBBERMAID INC. $26.66, New York symbol NWL, fell 8% this week after it warned that its fourth-quarter sales would be unchanged from a year earlier. That’s mainly due to slowing sales of office products such as pens and desktop accessories. Despite the lower sales, Newell still expects to earn $1.80 a share in 2007 thanks to its cost-cutting plan. The stock trades at just 14.8 times that estimate. Newell Rubbermaid is a buy. SONY CORP. ADRs $55.00, New York symbol SNE, gained over 10% this week after state-owned Dubai International Capital announced that it had acquired a “substantial” stake in the company. The stake is likely under 5%, because Japanese securities law requires a full public disclosure from Sony on any holding over 5%....

VERIZON COMMUNICATIONS INC. $44.38, New York symbol VZ, is starting to enjoy the benefits of its massive FiOS (Fiber-Optic Service) project, which will eventually replace the copper wires in its network with fiber optic cable lines all the way to its customers’ homes. This lets Verizon offer customers a wider variety of services, such as digital TV, and helps it compete with cable companies. Thanks to strong demand for FiOS and wireless services, Verizon’s third quarter earnings before unusual items rose 14.5%, to $0.63 a share from $0.55 a year earlier. Revenue grew 5.8%, to $23.8 billion from $22.5 billion. Besides the improving earnings, the stock moved up this week on speculation that 55%-owned Verizon Wireless plans to launch a new mobile phone that uses software from Internet search company Google Inc. That would help Verizon expand revenues from the wireless advertising market, which is still in its infancy. It would also help it compete with Apple’s iPhone....