Cable Holds Own in Big Stock Slide

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Cable stocks got caught in the same downdraft as other
stocks last week, but they generally weren't hit as hard, and they recovered well.

Analysts said cable stocks should have held their own,
considering that they have relatively little exposure to international markets, and that
they are relatively immune to downturns in the economy -- the two biggest factors driving
stocks down. Interest rates are at historic lows, which helps companies that carry a lot
of debt.

Based on multiples of expected cash flow, most stocks in
the group held up relatively well even during last Monday's 10 percent plunge in NASDAQ
stocks.

"In general, excluding Comcast [Corp.], the bulk of
them stayed above 10 times next year's cash flow," SG Cowen Securities Corp. analyst
Gary Farber said, after raising his Comcast stock rating to "strong buy," based
on price.

Double-digit cash-flow multiples generally mean that the
market expects those companies' cash flow to grow at double-digits, Farber said, so the
stock prices indicated that investors think that cable will continue to flourish.

Wall Street analysts noted a gap between
Tele-Communications Inc.'s share price and its theoretical value relative to AT&T
Corp.'s stock. Both stocks are trading below their evels in June, before the merger of the
two companies was announced. At last Thursday's close, AT&T was at $51.81, down from a
preannouncement $65, and TCI was at $33.75.

If TCI were trading at 77.5 percent of AT&T, using the
merger-exchange ratio, it should be at around $40 per share. That gap seems to indicate
that stock arbitrageurs think that there's a reasonable chance that the AT&T merger
won't go through, but most cable analysts still think that the deal will close.

Even if it doesn't, TCI could walk away with a $1.75
billion breakup fee -- enough to pay its capital expenditures for three years, Salomon
Smith Barney Inc. high-yield analyst Stevyn Schutzman noted.

While most cable stocks were down from their 52-week highs,
they still showed solid gains this year. Cablevision Systems Corp. closed at $36.14 last
Thursday -- down from a high of $45.93, but up from a 52-week low of $12.81.

Aside from Cablevision, MSO stocks have not fallen as hard
as the Standard & Poor's 500 index has since the mid-July market peak.

"It doesn't surprise me that the cable guys are
hanging in there," said analyst Murray

Arenson of Hoak Breedlove Wesneski & Co. "I think
that it makes sense."

Cable-equipment and direct-broadcast satellite stocks, with
more international exposure, didn't fare as well as MSO and cable-programmer stocks.

Stock buybacks seemed to help. Viacom Inc. announced a
$1.75 billion repurchase program last Monday, cushioning its fall and adding to a 16
percent rise last Tuesday. Viacom stood at $56.75 last Thursday, up 5 percent from the
previous Friday's close.

Comcast announced a buyback plan of up to $500 million last
Tuesday, but it got back just 50 cents of Monday's $4.63 (11 percent) drop. At Thursday's
close, Comcast Class A shares sold for $39.13, down 7 percent from the prior Friday's
$42.13.

There was huge volume in Comcast trading last Tuesday -- 13
million shares changed hands, even more than AT&T trades that day -- and Comcast said
it thought that there might have been one big institutional seller outweighing buyers.

"We look at these levels and think that there's great
value to be had here," Comcast treasurer John Alchin said last Tuesday.

Some cable stocks recovered better than others. Cox
Communications Inc., for example, actually ended the week higher than it began, after a
$2.50-per-share dip last Monday. MediaOne Group fell to $41 last Monday, down from $45.38
the prior Friday. Salomon Smith Barney analyst Spencer Grimes had MediaOne rated as the
cheapest in the group at that price, and investors seemed to agree: By last Tuesday's
close, it was back up to $45.06.

Published reports last week picked up on Wall Street rumors
that one of the MediaOne buyers was Paul Allen, the billionaire entrepreneur who's bought
two MSOs this year and who is openly shopping for more. One trader said he had heard that
Allen now owns about 20 million MediaOne shares, or approximately 3 percent of the 609
million outstanding shares -- below the 5 percent level at which he would have to publicly
report his stake. MediaOne would not comment.

Stock prices at four cable-hardware manufacturers fared
poorly during last week's dive. At press time, the stocks of Antec Corp., General
Instrument Corp., Harmonic Lightwaves Inc. and Scientific-Atlanta Inc. were still down
from the week before. Antec closed at $17.50 per share last Thursday, versus $18.06 the
prior Friday. And GI fell sharply, to $19 last Thursday from $22.38 at the end of the week
before.

Harmonic took the hardest hit, plunging to $9.50 from a
52-week high of $20. S-A bumped to the low-$17 range last Tuesday, but by Thursday, it had
recovered slightly, to $19.50.

Analysts had little opinion on the hardware stocks, except
to point out that Forstmann Little & Co.'s decision to register for the sale its 12.5
percent stake in GI two weeks ago couldn't have happened at a worse time.

"[Forstmann Little] filed on a downturn, and that's
put a lid on the stock," said one analyst, who asked that his name not be used.

Among programmers, while Viacom rose on the week, USA
Networks Inc. fell sharply last Monday, but it gained back most of that $4 loss Tuesday
and closed Thursday at $22.31, down 5 percent from the previous Friday's $23.63. Time
Warner Inc., both an MSO and a programmer, dropped nearly $6 on Monday, to $80.38, but it
was back up to $85 at Thursday's close. Shares in Liberty Media Group, TCI's programming
arm, were down 4 percent between the end of the prior week and last Thursday.

Ted Henderson, cable analyst with Denver-based Janco
Partners, said Monday's carnage represented an across-the-board market bloodbath, rather
than a reflection on the overall value of cable stocks.

"When the market goes down 500 points, everything
goes. People run for cover," Henderson added.

However, based on current prices, Henderson said he
wouldn't hesitate to recommend cable to "long-term value players," even if it
meant absorbing a few more days of pain in order to get in on the upside when the market
finally settles.

"With the new services that are being introduced, it's
hard to say that the value isn't there for cable," he said.

Other investors will try to "time" the bottom of
the market before jumping on the bandwagon, he said. "The question is: Where is the
bottom?"

Joe Estrella and Leslie Ellis contributed to this report.

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