AT&T Sells Xandr to Microsoft; Shares Up

Telecommunications and technology service provider AT&T Inc. (NYSE: T) has agreed to sell its Xandr advertising business to technology giant Microsoft Corporation (NASDAQ: MSFT). The financial terms of the deal are undisclosed and the transaction is subject to both closing and regulatory conditions.

Shares of AT&T closed up 1.2% at $24.47 on December 21. Meanwhile, Microsoft’s shares closed up 2.3%, partly due to EU’s antitrust approval for the company’s $16 billion Nuance deal.

Complementary Businesses

Introduced in 2018, Xandr is a digital advertising marketplace, which connects marketers and media owners through first-party, data-led advertising solutions across its network.

Meanwhile, Microsoft has advertising businesses, including its search engine Bing, MSN News, and LinkedIn. Investors can expect further clarity and outlook on the combined business in the second quarter of fiscal 2022 MSFT earnings, scheduled for January 27, 2022.

Microsoft and Xandr’s businesses complement each other based on principles such as privacy preferences, understanding the relationship between publishers and consumers, and helping advertisers meet their targets.

By adding Xandr to Microsoft’s consumer-centric global advertising technology, MSFT can boost its digital advertising solutions for the open web.

Management Comments

Xandr’s EVP and GM, Mike Welch, said, “Microsoft’s shared vision of empowering a free and open web and championing an open industry alternative via a global advertising marketplace makes it a great fit for Xandr.”

President of Web Experiences at Microsoft, Mikhail Parakhin, said, “With Xandr’s talent and technology, Microsoft can accelerate the delivery of its digital advertising and retail media solutions, shaping tomorrow’s digital ad marketplace into one that respects consumer privacy preferences, understands publishers’ relationships with consumers and helps advertisers meet their goals.”

Consensus View

Yesterday, UBS analyst John Hodulik lowered the price target on AT&T to $34 (39% upside potential) from $35, but maintained a Buy rating.  

Overall, the T stock has a Moderate Buy consensus rating based on 5 Buys, 3 Holds, and 1 Sell. The average AT&T price target of $29.63 implies 21.1% upside potential to current levels. Shares have lost 13.8% over the past year.

Website Traffic

TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into AT&T’s performance.

In November, AT&T website traffic recorded a 9.64% year-over-year decline in monthly visits. However, year-to-date website traffic growth increased by 11.36% compared to the same period last year.

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