Verizon Communications Inc.

HARTE-HANKS INC. $19.47, New York symbol HHS, has moved down in the past month, partly due to the cancellation of a takeover of a competitor by a private equity fund. Investors saw this as a sign of problems in the consumer data collection industry, in addition to the growing unwillingness of lenders to finance takeovers. Harte-Hanks’ earnings have also suffered recently. Slumping housing markets in California and Florida have hurt demand for real estate advertising at its shoppers newspaper business. Fears that the housing downturn will cut consumer spending have also hurt demand for its direct marketing services. But the company’s strong position in these niche markets, as well as its sound balance sheet, should help it rebound quickly. Harte-Hanks is still a buy for long-term gains....

APPLE INC. $131.77, Nasdaq symbol AAPL, aims to solidify its 70% share of the digital music player market with its new line of iPods, including a version that can wirelessly connect to the Internet. A new alliance with the Starbucks coffee chain will also make it easier for iPod users to wirelessly download music from Apple’s iTunes music store. However, the stock fell 10% on news Apple is cutting the price of its iPhone by a third. The company will soothe the feelings of customers who bought an iPhone prior to the price cut by giving them a $100 credit toward future purchases. Investors took the price cut as a sign that iPhone demand is already weakening, just two months after its heavily hyped launch. But Apple may hope to make up the lost revenue in bigger iPhone sales volumes, particularly in the Christmas selling season, and possibly from the benefit of introducing Apple products to a larger segment of the public....

DOW JONES & CO. INC. $55.00, New York symbol DJ, moved a step closer to selling itself to News Corp. after its directors advised stockholders to accept News Corp.’s $60-a-share cash offer. However, the deal requires the approval of the Bancroft family, which controls 64% of Dow Jones’ voting power through class B shares that carry 10 votes each. The family will probably make a final decision next week. So far, no other bidder for Dow Jones has emerged. If the family turns down the News Corp. offer, the stock will probably drop back to its pre-bid level of about $35. That would increase the likelihood of a class-action lawsuit, but that would probably be more an annoyance than an economic threat. The family isn’t obliged to sell simply because an offer came in above the market. We feel investors should hold....

VERIZON COMMUNICATIONS INC. $41 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $118.9 billion; WSSF Rating: Average) provides local and long distance telephone service to over 45 million customers in 28 states. It also provides communication systems to businesses, and owns 55% of Verizon Wireless, which has 60.6 million customers in 50 states. In 2004, the company began a major upgrade of its traditional phone networks. Called FiOS (Fiber- Optic Service), this project aims to eventually replace the copper wires with modern fiber optic lines all the way to its customers’ homes....

In the late 1990s, phone companies spent heavily upgrading their networks to handle Internet traffic. But they over-estimated the growth of the Internet, and these costs weighed on their earnings for several years. Despite the setbacks, these three well-managed telecoms kept paying above-average dividends. Their network investments are now starting to pay off. Online video and music content has spurred strong demand for high-speed Internet access. Demand for high-speed wireless access is also growing, and helping them compete with cable companies and other new Internet-based phone services. VERIZON COMMUNICATIONS INC. $41 (New York symbol VZ; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 2.9 billion; Market cap: $118.9 billion; WSSF Rating: Average) provides local and long distance telephone service to over 45 million customers in 28 states....

IDEARC INC. $36 (New York symbol IAR; Income Portfolio, Consumer sector; Shares outstanding: 146.8 million; Market cap: $5.3 billion; WSSF Rating: Average) publishes over 1,200 yellow and white pages phone directories in 35 states. The company was a wholly owned subsidiary of Verizon Communications Inc. until November 2006. That’s when Verizon handed out its Idearc shares to its own investors as a tax-deferred dividend. Directories are a slow-growing business, but they still generate plenty of steady cash flow. Growing revenue from Idearc’s online properties, including the popular SuperPages.com search site, is helping offset weakness in the print division....

CEDAR FAIR L.P. $29 (New York symbol FUN) has stayed in a narrow range for the past few months, partly due to concerns over the partnership’s high long-term debt (5.7 times equity) following last year’s purchase of five theme parks. But thanks to extra cash flow from these new assets, Cedar Fair recently increased its annual distribution rate from $1.88 a unit to $1.90 (6.6% yield). Best Buy. WINDSTREAM CORP. $15 (New York symbol WIN) has also made little progress since Alltel Corp. spun it off in July 2006. But most investors own Windstream for its $1.00 dividend, which yields 6.7%. Although the company is losing traditional telephone customers to cable companies, strong demand for high-speed Internet and digital TV services should give it enough cash to cover the dividend. Buy. IDEARC INC. $38 (New York symbol IAR) earned $0.82 a share in the first quarter of 2007, down 2.4% from $0.84 a year earlier. These are pro-forma figures that assume Verizon spun off the company at the start of 2006. Revenue crept up to $806 million from $801 million. Idearc aims to expand advertising revenue at its telephone directories, and the cost of new sales staff hurt its profit growth. But higher revenues should help it maintain its $1.37 dividend (3.6% yield). Buy.

FEDEX CORP. $91.71, New York symbol FDX, fell 9% after it warned that higher fuel costs would cut its earnings in the current quarter to $1.50 a share from earlier forecasts of $1.70 a share. However, in the past FedEx has successfully passed along its higher fuel charges to its customers, and will probably do so again. The stock now trades at just 14.0 times its likely fiscal 2008 earnings of $6.55 a share, which is cheap in light of FedEx’s leading market position and expanding international operations, particularly in Asia. FedEx is a buy....

DOW JONES & CO. INC. $55.80, New York symbol DJ, jumped 55% after News Corp. offered to buy the company for $60.00 a share, probably in some combination of cash and News Corp. stock. News Corp. owns several media properties, including Fox Broadcasting and the New York Post. It feels The Wall Street Journal and other Dow Jones publications and web sites will strengthen the new business-news cable channel it plans to launch later this year. The Bancroft family owns 82.4% of Dow Jones’ class B shares, which carry 10 votes each. This plus their regular common stock holdings gives them 64.2% of the total votes. Right now, roughly half of the family’s members oppose the News Corp. offer. However, a formal rejection could trigger a lawsuit accusing the company’s directors of breaching their fiduciary duty to act in the best interests of all stockholders....

ALLTEL CORP. $61.59, New York symbol AT, may soon decide to put itself up for sale, to take advantage of the consolidation trend in the telecommunications industry. However, likely buyers such as AT&T and Verizon would face huge anti-trust hurdles. Even without a takeover, Alltel still has plenty of long-term appeal. Its focus on smaller cities and rural areas lets it avoid direct competition with larger wireless providers. It’s also doing a good job of expanding its revenue by offering new services. Alltel is a buy....