Rocket Lab Shakes Up Satellite Communications

Motley Fool Hidden Gems Investing - The Motley Fool

Rocket Lab acquires Iridium for $8B, aiming to become a full-service satellite provider. The move signals a strategic shift from launch-only operations to end-to-end global connectivity services.

Key takeaways

• Iridium's profitable, recurring revenue stream provides financial stability for Rocket Lab.

Transcript preview

Breakups, buyouts, and selling stocks, all this and more on today's Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm John Koss and I'm joined today by Foolish contributors, Matt Frankel and Rachel Warren. Today we're talking about a shakeup in outer space as well as taking a listener question about selling stocks, but first we got to talk about Comcast because it's breaking up. Now, now in January, it's breaking up. Now, now, in January, it's breaking up. Now, now, in January, already spun off its TV channels and some internet properties, uh, CNBC, golf rotten tomatoes. It spun those off into Versent Media Group, ticker symbol V-S-N-N-T. But now Comcast is coming back here for round two, announcing it will spin off NBC Universal, which contains a lot more than just, you know, the channel NBC. Now as I zoom out here, Comcast stocked down about 30% over the past year prior. to this announcement and one announcement here sending the stock up 20% pre-market up about 10% now so the market is giving it roughly 10 to 15 billion dollars more in market cap just for announcing this move and that is an absolutely massive swing were investors really punishing this stock so much because it was a conglomerate? Well yes the new company will include you know all the entertainment and broadcasting out assets including the NBC network as you mentioned that still part of it. Telemoondo, the Peacock service. It also includes the Universal Film and TV studios, the Universal Theme Parks, and the Sky European business. So the remaining Comcast will really just be the broadband and wireless services, which is a pretty big business. It is 65 million subscribers. So there are a few reasons why investors might be cheering the news. As you correctly said, the stock was down about 30% over the past year going into this. And with the so called conglomerate discount hurting it, but the reasons that you might think. So NBC Universal could be a lot more valuable as an entertainment content play, especially when it comes to being an acquisition target. And that's really the environment we're in right now. So I remember when Warner Brothers Discovery, you plan to spin off its cable TV and studios business and announced that and then it became like the trigger for a bidding war between Netflix Paramount which eventually got it and a few others. Today's surge represents investors pricing in a similar outcome here. It remains to be seen if it actually happens, but this could really be the next big consolidation play for the industry. I mean, Amazon and Apple are two examples of companies that could be interested, just a name of, you know, a couple speculative names off the top of my head, but there are definitely others. Yeah, I mean, the primary driver of any shareholder value moving forward is the creation of two pure play entities that can be valued independently on their own merits, right? I mean, the remaining Comcast could potentially transform into a, you know, leaner, more profitable telecom giant on broadband infrastructure and wireless connectivity. That's sort of the bullish thesis there. And obviously, without the financial drag of funding expensive streaming content, then you could see how this new Comcast could redirect free cash flow directly towards share-by-backs, dividend hikes, paying down corporate debt. I'll note this is a tax-free spin-off. So current Comcast shareholders will receive shares of the new NBC Universal Company without triggering an immediate tax liability. Comcast, for their part, they're keeping a 19.9% massive stake. the new media company and they intend to monetize that over the first year. So still a notable presence for that's concerned. Matt I want to circle back to you here because it does sound like you're saying that a bigger player might want to acquire NBC Universal once it is spun out and you mentioned Amazon and Apple specifically. Are you being serious here or are you just daydreaming? Well I feel I think that's fair to say there are a lot of these content providers who are leaning into live content. They would love you know expand the intellectual property in their streaming services and so on and so on now there are some companies that would be unable to acquire NBC Universal most likely like Disney is an example there's a lot of complimentary parts of the business but they would run into a theme park monopoly problem I think they might as well just buy Orlando if that was the case you know but for a company like Amazon it would make a lot of sense like think what they would be getting they'd be getting the rights to things like NBC's Olympic coverage and NFL Sunday night football pushing into live content. And the fact that they already own the MGM studios, it could be a nice smart addition to compete with other big streaming providers. Apple has been lagging in the content wars and has the cash to acquire something like this rather than focusing too much of their attention on building it from scratch. So Matt's kind of giving