Zayo Group sold for $35 per share

Zayo Group to be acquired by Digital Colony, EQT in deal valued at $14.3B

Zayo Group Holdings (ZAYO) announced that it has signed a definitive merger agreement to be acquired by affiliates of Digital Colony Partners and the EQT Infrastructure IV fund.

Zayo sold for $14.3 billion, Stockwinners

The transaction would result in Zayo transitioning from a public company to a private company.

Zayo Group Holdings, Inc. provides bandwidth infrastructure solutions for the communications industry in the United States, Canada, and Europe.

Under the new ownership, the Zayo team would continue to execute the Company’s strategy and remain headquartered in Boulder, Colorado.

Under the terms of the agreement, which was unanimously approved by Zayo’s Board of Directors, shareholders will receive $35.00 in cash per share of Zayo’s common stock in a transaction valued at $14.3 billion, including the assumption of $5.9 billion of Zayo’s net debt obligations.

The offer price represents a 32% premium to the volume-weighted price average of the last six months of $26.44. Dan Caruso, Zayo’s Chairman and CEO, said, “Digital Colony and EQT share our vision that Zayo’s Fiber Fuels Global Innovation.

Both are experienced global investors in the communications infrastructure space, and they appreciate our extraordinary fiber infrastructure assets, our highly talented team and our strong customer base. I am confident this partnership with EQT and Digital Colony will empower Zayo to accelerate its growth and strengthen its industry leadership.”

“Following a comprehensive review of strategic alternatives, the Zayo Board of Directors concluded that the sale of Zayo to Digital Colony and EQT Infrastructure is in the best interest of Zayo and all its stakeholders,” said Yancey Spruill, Zayo’s Lead Independent Director. “

The transaction delivers immediate and substantial value to shareholders and will strengthen Zayo’s financial flexibility, enabling the company to increase investments and better position itself for long-term growth and profitability.”

The closing of the deal is subject to customary conditions, including regulatory clearance and Zayo shareholder approvals.

The transaction is expected to close in the first half of calendar 2020.

Goldman Sachs and J.P. Morgan are serving as financial advisors to Zayo Group in connection with the transaction and Skadden Arps is serving as legal counsel.

Morgan Stanley and Deutsche Bank are acting as financial advisors to Digital Colony and EQT Infrastructure, and Simpson Thacher is serving as legal advisor.

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Alliance Data sells Epsilon for $4.4 billion

Publicis to acquire Epsilon for $4.40B in cash

Publicis (PUBGY) announced it has entered into an agreement with Alliance Data Systems (ADS) under which Publicis will acquire Alliance Data’s Epsilon business for a net purchase price of $3.95B after tax step-up – total cash consideration of $4.40B – and build a strategic partnership with Alliance Data remaining business.


Publicis to acquire Epsilon for $4.40B in cash , Stockwinners

The acquisition gives Publicis access to Epsilon’s data capabilities. The company says, for example, it has more than 250 million unique consumers identified in the U.S. The company says it can build on top of a client’s first-party data with its own assets, like behavioral and transactional data.

The Directoire, or Management Board, and the Conseil de Surveillance, or Supervisory Board, of Publicis have unanimously approved this transaction.

Alliance Data sells Epsilon for $4.4 billion, Stockwinners

Arthur Sadoun, Chairman and CEO of Publicis, said that, “Our clients are facing increasing pressure from the rise in consumer expectations, the mainstreaming of direct-to-consumer brands and new data regulations. The only response is to deliver personalized experiences at scale. They have to transform to meet this new market imperative.”

Edward Heffernan, Alliance Data Systems’ President and CEO, added that, “I’m pleased to say today’s announcement represents a trifecta win for Alliance Data, Epsilon and Publicis Groupe.

The announcement of this transaction represents the culmination of an extensive assessment of strategic options for our Epsilon business.

With this transaction, we have found what we believe to be the right home for Epsilon’s technology, data assets and associates.

Publicis Groupe will be the ideal cultural and strategic fit for Epsilon and its Conversant business, and will help drive Publicis Groupe’s own transformation in today’s data-driven digital world.

Furthermore, the unique relationships that have been cultivated between Epsilon and our other Alliance Data businesses will remain intact, and we look forward to working with Publicis Groupe to develop an even broader relationship promoting mutual and sustainable growth going forward.”

Under the terms of the agreed transaction, Publicis will acquire Epsilon for a cash consideration of $4.40B, representing a net purchase price of $3.95B after deducting the benefit of acquisition-related tax step-up.

This implies an 8.2-times multiple, based on a 2018 Adjusted EBITDA of $485M.

According to Publicis, the transaction will be double digit accretive to its headline EPS and free Cash Flow per share from year one.

Publicis also said that it “remains committed” to its 45% dividend payout ratio and will put on hold its share repurchase program in the context of this acquisition.

The transaction remains subject to customary approvals and is expected to close in Q3 2019.

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Online retailers fall on Amazon concerns

Online retailers slide as Amazon reportedly testing recommendation service

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Online retailers fall on Amazon concerns

 

Shares of several retailers and online personal shopping services are slipping in afternoon trading after CNBC reported that Amazon (AMZN) is testing a new on-site recommendation service known as Scout.


WHAT’S NEW:

 

CNBC reported that Amazon is testing a new service called Scout, a shopping site for consumers who don’t know specifically what they want to buy but are willing to take some automated recommendations.

 

Scout asks shoppers to like or dislike a product and responds by showing other products based on user responses, according to CNBC.

 

Scout is currently available for home furniture, kitchen and dining products, women’s shoes, home decor, patio furniture, lighting and bedding, with more categories coming soon.
“This is a new way to shop, allowing customers to browse millions of items and quickly refine the selection based solely on visual attributes,” an Amazon spokesperson said in an emailed statement. “
Amazon uses imagery from across its robust selection to extract thousands of visual attributes for showing customers a variety of items so they can select their preferences as they go.”

WHAT’S NOTABLE

The CNBC report noted that Amazon is utilizing machine learning technology to address one of the major criticisms of its service, namely that it’s a great place to buy things but not a great place to browse.
While Amazon is easily the biggest U.S. e-commerce company, e-retailers such as Stitch Fix (SFIX) and Walmart’s (WMT) Bonobos provide a more personalized experience and have given social media services such as Instagram (FB) and Pinterest more room to use their large collections of data in turning their networks into fledgling commerce sites, CNBC said.

PRICE ACTION

Following the news, Wayfair (W) slipped 4.3%, Williams-Sonoma (WSM) fell 1.9%, Stitch Fix dropped nearly 9%, and Steven Madden (SHOO) slid 1.3%. Meanwhile, Amazon (AMZN) shares are 1.5% lower in Wednesday afternoon trading.


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Dropbox drops as Facebook mulls switch to Google

Dropbox drops as Facebook mulls switch to Google for cloud storage

Dropbox drops as Facebook mulls switch to Google, Stockwinners
Dropbox drops as Facebook mulls switch to Google, Stockwinners

Shares of Dropbox (DBX) fell in morning trading following a report that said Facebook (FB) is considering moving its cloud storage away from the file hosting service.

FACEBOOK CONSIDERING SWITCH

Facebook is considering switching to Google (GOOG, GOOGL) for email and productivity applications, The Information reported earlier, citing two people with knowledge of the discussions.

The move would be a setback for Microsoft (MSFT), whose applications Facebook currently uses. Facebook, which has about 27,000 employees, stopped using Google apps inside the company several years ago. Additionally, Facebook is also considering moving its cloud storage to Google from Dropbox, according to The Information.

WHAT’S NOTABLE

Last month, Dropbox announced a new chapter in the evolution of Magic Pocket, its custom-built storage infrastructure, saying it is deploying Shingled Magnetic Recording, or SMR, drive technology to increase overall storage density, reduce the company’s physical data center footprint and provide significant cost savings without sacrificing performance or reliability.

Dropbox said at the time that it expects to have a quarter of its Magic Pocket infrastructure on SMR drive capacity by 2019. In its debut earnings report, Dropbox reported revenue of $316.3M, up 28% from the year-ago period.

PRICE ACTION

Shares of Dropbox are down about 4% to $31.03 in morning trading following the report.


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Oracle lower after losing business to Amazon, Microsoft

Oracle slides as JPMorgan cuts rating on business lost to Amazon, Microsoft

Oracle slides as JPMorgan cuts rating on business lost to Amazon, Microsoft , Stockwinners
Oracle slides as JPMorgan cuts rating on business lost to Amazon, Microsoft ,

Shares of Oracle (ORCL) are sliding after JPMorgan analyst Mark Murphy downgraded the stock to Neutral, citing negative results from a survey of Chief Information Officers about their spending.

The analyst noted that the survey showed spending contraction ahead as Oracle’s databases are being unplugged in favor of Microsoft (MSFT) and Amazon (AMZN) databases.

SURVEY SAYS

In a research note this morning, JPMorgan’s Murphy downgraded Oracle to Neutral from Overweight as specific metrics in the firm’s large-scale CIO survey have arced over into negative territory.

The analyst told investors that while Oracle’s shares have risen from the $30s into the high $40s in the last 2 years, the company’s fundamental performance has remained inconsistent. Citing his survey of 154 CIOs, Murphy noted that Oracle received the largest number of indications for planned spending contraction this year, materially more than the second-worst company, which was IBM (IBM) with 25 indications of spending contraction.

Further, while ranking the top 8 or 9 mega-vendors in terms of who will be most critical and indispensable to CIOs’ IT environment in the future, Oracle only received 6.5% of votes, down from 11% in previous surveys, the analyst highlighted.

At the same time, Murphy pointed out that Amazon AWS improved from 9.5% of votes last year to 14.9% of votes this year, creating the appearance of a “sucking sound” out of Oracle and into AWS.

The company also ranked number 8 in terms of association with Digital Transformation projects, disappointing relative to its scale and lagging behind the likes of SAP (SAP), IBM, and Cisco (CSCO), he added, noting that despite Oracle’s efforts to build a Cloud presence, it rated no better than SAP in terms of association with Cloud Computing plans, and is nowhere close to the leaders Microsoft, Amazon, and Google (GOOGL; GOOG) in this respect. Oracle was mentioned by only 2% of the CIOs as the platform that will be “most integral” to their cloud computing plans, Murphy said.

Overall, the analyst questions where Oracle’s business and stock are heading in the next couple of years if the largest-scale CIO survey shows Oracle now has negative spending intentions, is lagging in Digital Transformation projects, is trailing in Cloud Computing plans, its databases are being unplugged in favor of Microsoft and Amazon databases, its applications are being unplugged in favor of Salesforce (CRM) and Workday (WDAY) applications, and customers are weary of its unpopular commercial tactics.

Murphy also lowered his price target on Oracle’s shares to $53 from $55.

WHAT’S NOTABLE

In a research note of his own, Nomura Instinet analyst Christopher Eberle lowered his price target for Oracle to $60 from $64 ahead of the company’s fourth quarter results on June 19.

The analyst trimmed his estimates to account for currency and expectations for more modest revenue acceleration in fiscal 2019. He remains optimistic, however, on Oracle’s transition and model growth reacceleration as the year progresses. Eberle reiterated a Buy rating on the shares.

PRICE ACTION

In Wednesday’s trading, shares of Oracle dropped almost 5% to $46.14.


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Barron’s is bullish on GM and Delta

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

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Stockwinners offers Barron’s review of stocks to buy

BULLISH   MENTIONS:

Delta, GM look cheap, with growth potential – While a solid start to earnings season helped push share prices higher earlier this week, some remain deeply discounted, Jack Hough writes in this week’s edition of Barron’s. Despite Delta Air Lines’ (DAL) pessimistic valuation, consolidation has left only a handful of key players and the company faces less competition in key markets than some of its peers, the report adds. Additionally, Goodyear Tire (GT), General Motors (GM) and Lincoln National (LNC) also made the valuation cutoff, Hough says.

General Mills shares fall to ‘bargain territory.’  – General Mills (GIS) has fallen 27% so far this year and while the drop seems deserved because earnings growth has stalled, a closer look suggests sales trends are improving, thanks in part to new-product launches, Jack Hough writes in this week’s edition of Barron’s.

Cruise operators can offer ‘nice’ yields, solid dividend growth – Cruise operators, like Carnival (CCL), Royal Caribbean (RCL) and Norwegian Cruise Line (NCLH), can offer nice yields and solid dividend growth, but economic downturns can pressure payouts, Lawrence Strauss writes in this week’s edition of Barron’s. Another option for investors looking for yield among cruise operators is Walt Disney (DIS), the report added. The entertainment company has a wide variety of holdings, and while its cruise business did not account for a large portion of its $55B of sales last year, it is not insignificant either.

Tech giants may make own custom chips to get edge on one another. – There has been a tension between the world’s largest tech companies- Alphabet (GOOG; GOOGL), Amazon (AMZN), Facebook (FB), Apple (AAPL), Microsoft (MSFT), Baidu (BIDU), and Alibaba (BABA)-and the chip companies they rely on, especially Intel (INTC) and Nvidia (NVDA), Tiernan Ray writes in this week’s edition of Barron’s. While the giants buy massive quantities of Intel’s microprocessors, and Nvidia’s graphics chips, or GPUs, to power their data centers, they are also in an arms race to have the best artificial-intelligence-based machine-learning functions, the report noted, adding that there was always the possibility they may decide to buy fewer off-the-shelf parts and make their own custom chips to get an edge on one another.

 MPL valuations look cheap – Master limited partnerships’ valuations appear cheap, and U.S. energy production is thriving, lifting cash flows for pipeline firms, Darren Fonda writes in this week’s edition of Barron’s. MLP, such as Enterprise Products Partners (EPD), Magellan Midstream Partners (MMP), MPLX (MPLX), Plains All American Pipeline (PAA), could reward investors with higher yields as cash flows rise, Fonda adds.

OTHER MENTIONS

Trump’s tweets politicize U.S. markets, Barron’s says – With President Donald Trump, both politics and business appear personal as he continues his tweets aimed at individual companies, Vito Racanelli writes in this week’s edition of Barron’s. Before and after the election, he consistently aimed arrows at Amazon.com (AMZN) and at the proposed acquisition of Time Warner (TWX) by AT&T (T), the report noted. The President is not alone in singling out companies, Racanelli points out, adding that Democratic candidate Hillary Clinton also took issue with Mylan’s (MYL) price increases for its EpiPen. Maybe it is a sign of the times, but the rise of powerful social-media platforms is the key enabling factor, the report said.


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Barron’s is bullish on Google

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch, 

BULLISH   MENTIONS:

Alphabet a ‘bargain’ in big tech – Alphabet (GOOG; GOOGL) has the world’s dominant search engine in Google, as well as valuable businesses like YouTube, the Android cellphone operating system, and Waymo autonomous vehicles, but investor are not giving the company enough credit partly because of worries that it, like Facebook (FB), will soon face greater government regulation, Andrew Bary writes in this week’s edition of Barron’s. Alphabet trades for almost 25 times projected 2018 earnings, but its effective P/E is lower because of nearly $100B in net cash and losses in its “other bets” businesses, he adds.

AI done right may give managers ‘an edge.’  – BlackRock (BLK), Vanguard, Fidelity, and T. Rowe Price (TROW), among others, have all invested time and money setting up tech centers in major cities, apart from their headquarters, as they compete for cost savings, Crystal Kim writes in this week’s edition of Barron’s. Artificial Intelligence, done right, could also give portfolio managers an edge, and better serve investors with a wider array of financial planning tools, the report adds.

 IAC/InterActiveCorp sells at discount of assets value – Over the past two decades, Barry Diller’s IAC/InterActiveCorp (IAC) has generated a higher return than Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B), Jack Hough writes in this week’s edition of Barron’s. But the shares of IAC/InterActiveCop sell at a discount to the value of its assets, he notes.

Spotify stock could rise to five times sales. – Spotify Technology  (SPOT) made its market debut las week and while its stock price could remain volatile in the months ahead, shares could “reasonably” rise to five times sales, Avi Salzman writes in this week’s edition of Barron’s.

BEARISH  MENTIONS

Facebook bracing for Capitol Hill grilling – In a follow-up story, Barron’s notes that this week Facebook’s (FB) CEO Mark Zuckerberg will come to Washington to testify before an eager group of lawmakers. Congress has a chance to remind citizens of its watchdog role, the report noted, adding that while this week’s optics will no doubt be bad, the stock’s valuation already reflects much of the pain.

Smartphone growth sags as new models not compelling enough – People are holding onto their phones longer, on average, because what they are being offered in the new models just is not compelling enough, Tiernan Ray writes in this week’s edition of Barron’s. This does not bode well for traditional makers of chips for smartphones, including Skyworks (SWKS), Qorvo (QRVO), Qualcomm (QCOM), and Synaptics (SYNA), the report adds.


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Trump targets Amazon

Amazon slides as president said to take aim at tax treatment 

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Trump targets Amazon

Shares of Amazon (AMZN) are slipping this morning after Axios reported that President Donald Trump may want to go after the e-commerce giant rather than Facebook (FB) and has discussed changing the former’s tax treatment.

AFTER AMAZON, NOT FACEBOOK

According to a report by Axios, President Trump wants to go after tech giant Amazon rather than Facebook and has discussed changing the company’s tax treatment due to concerns about small retailers being put out of business.

Citing five sources familiar with the matter, the publication added that Trump has wondered if there is any way to go after Amazon with antitrust or competition law as he thinks the e-commerce giant has gotten a free ride from taxpayers and the Postal service and agrees the company is killing shopping malls and brick-and-mortar retailers.

“The whole post office thing, that’s very much a perception he has,” a source said. “It’s been explained to him in multiple meetings that his perception is inaccurate and that the post office actually makes a ton of money from Amazon.”

VICE-PRESIDENT CONCERNED OVER FACEBOOK, GOOGLE

Nonetheless, the same Axios’ article pointed out that Vice-President Mike Pence is concerned about Facebook and Google (GOOG; GOOGL).

While Pence is not yet pushing internally for any specific regulations, he views these companies as dangerously powerful and worries about their influence on media coverage as well as their control of the advertising industry and users’ personal info, a source told the publication.

FACEBOOK POLICY CHANGE

Facebook, embroiled recently in a scandal over the way it has handled users’ personal data, has announced a privacy policy change.

According to Erin Egan, VP and Chief Privacy Officer, Policy and Ashlie Beringer, VP and Deputy General Counsel at Facebook:

“We’ve heard loud and clear that privacy settings and other important tools are too hard to find and that we must do more to keep people informed. […] We’ve redesigned our entire settings menu on mobile devices from top to bottom to make things easier to find. […] We’re introducing Access Your Information – a secure way for people to access and manage their information, such as posts, reactions, comments, and things you’ve searched for.

You can go here to delete anything from your timeline or profile that you no longer want on Facebook. It’s also our responsibility to tell you how we collect and use your data in language that’s detailed, but also easy to understand. In the coming weeks, we’ll be proposing updates to Facebook’s terms of service that include our commitments to people.”

PRICE ACTION

In Wednesday’s trading, shares of Amazon have dropped nearly 5% to $1,426, while Facebook’s stock has gained over 1% to $153.99.


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Barron’s in bullish on Citi, bearish on GE

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS: 

Hovnanian (HOV) stock too cheap to ignore- Hovnanian Enterprises offers an interesting speculative bet, because more than a decade’s worth of problems are reflected in the price, Brett Arends writes in this week’s edition of Barron’s. A successful resolution of its legal issues, a corporate turnaround, a takeover, or a continued recovery in the U.S. real estate market are all potential catalysts, he adds.

JPMorgan, Walmart cash flow yields exceed dividend yields – The cash flow yields of JPMorgan (JPM), Johnson & Johnson (JNJ), Walmart (WMT), Pfizer (PFE), Cisco (CSCO), AbbVie (ABBV), PepsiCo (PEP), 3M (MMM), Bristol-Myers (BMY), United Technologies (UTX), Texas Instruments (TXN) and Abbott Laboratories (ABT) exceed their dividend yields, a good signal for dividend coverage and growth, Lawrence Strauss writes in this week’s edition of Barron’s.

Alphabet, Citi well positioned for later stages of market rally – It is time for investors to think about how and when bull markets end, Jack Hough writes in this week’s edition of Barron’s. Groups to favor now include financials, which benefit from rising interest rates, and industrials, he notes, adding that technology still looks attractive. Alphabet (GOOG; GOOGL), Lam Research (LRCX), Citigroup (C), and Cummins (CMI) are all well positioned for the later stages of a long market rally, Hough contends.

Bears, bulls battle over Under Armour – In a follow-up story, Barron’s says that Under Armour (UA) reported fourth quarter revenue that beat Wall Street’s estimate, but is difficult to tell whether the revenue upside represents a turning point for the business. Bulls and bears both found something to support their arguments, as revenue increased but gross margin declined while inventories swelled and store count rose 22%, the report notes.

BEARISH  MENTION:

General Electric stock could drop another 10% – General Electric (GE) lost $6B in 2017 after a series of charges and impairments, cut its dividend by 50%, and its accounting is under investigation by the Securities and Exchange Commission, but lately it has been attracting fresh attention from value-oriented investors, Andrew Bary writes in this week’s edition of Barron’s. Nonetheless, the stock is not a bargain and could drop another 10% or more, he contends


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Android spyware Skygofree called very dangerous

Kapersky Lab says finds Android spying app called ‘Skygofree’

Android spying app called 'Skygofree' is widely distributed. Stockwinners.com
Android spying app called ‘Skygofree’ is widely distributed 

According to Kapersky Lab, “At the beginning of October 2017, we discovered new Android spyware with several features previously unseen in the wild.

In the course of further research, we found a number of related samples that point to a long-term development process. We believe the initial versions of this malware were created at least three years ago – at the end of 2014.

Since then, the implant’s functionality has been improving and remarkable new features implemented, such as the ability to record audio surroundings via the microphone when an infected device is in a specified location; the stealing of WhatsApp messages via Accessibility Services; and the ability to connect an infected device to Wi-Fi networks controlled by cybercriminals.

We observed many web landing pages that mimic the sites of mobile operators and which are used to spread the Android implants. These domains have been registered by the attackers since 2015.

According to our telemetry, that was the year the distribution campaign was at its most active.

The activities continue: the most recently observed domain was registered on October 31, 2017.

Based on our KSN statistics, there are several infected individuals, exclusively in Italy.

Moreover, as we dived deeper into the investigation, we discovered several spyware tools for Windows that form an implant for exfiltrating sensitive data on a targeted machine.

The version we found was built at the beginning of 2017, and at the moment we are not sure whether this implant has been used in the wild.

We named the malware Skygofree, because we found the word in one of the domains.”

According to researchers, the Skygofree Android implant is ” one of the most powerful spyware tools that we have ever seen for this platform.

As a result of the long-term development process, there are multiple, exceptional capabilities: usage of multiple exploits for gaining root privileges, a complex payload structure, never-before-seen surveillance features such as recording surrounding audio in specified locations.

Given the many artifacts we discovered in the malware code, as well as infrastructure analysis, we are pretty confident that the developer of the Skygofree implants is an Italian IT company that works on surveillance solutions, just like HackingTeam.”

GOOG closed at $1121.76.


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