Cable Stocks Climb Amid Market Rally


Cable stocks surged Monday, led by investor confidence
in Comcast Corp.’s recent sale of its QVC Inc. stake and an overall market lift
as investors anticipated strong second-quarter earnings results.

The Dow Jones Industrial Average was up more than 160 points early Monday, as
second-quarter earnings season nears.

That optimism was shared by cable investors, who drove up the MSO sector by
4.1% in 4 p.m. trading.

The Dow closed at 9,216.79 at 4 p.m. Monday, up 146.58 points, or 1.62%.
The NASDAQ rose 3.5% (57.79 points) to close at 1,721.25.

In the cable sector, Comcast led the pack, up 5.67% ($1.69 per share) to
$31.52; followed by Cox Communications Inc., up 4.76% ($1.52 each) to $33.47 per

Other gainers included Cablevision Systems Corp. (up 94 cents to $22.94),
Insight Communications Co. Inc. (up 59 cents to $14.30), AOL Time Warner Inc. (up 45
cents to $16.75), and Mediacom Communications Corp. (up 13 cents to $9.93).

Charter Communications Inc. finished the day down 2 cents per share to $3.57
and Adelphia Communications Corp. was unchanged at 29 cents.

SunTrust Robinson Humphrey cable analyst Gary Farber said the rise in the
sector was mainly due to two factors: Comcast’s decision to sell its interest in
QVC for $7.9 billion and the overall market improvement.

Farber said that as the largest MSO in the country by far, Comcast drives the
sector. And the decision to sell its 57.5% interest in QVC sent a signal to

“[The QVC sale] was very shareholder-friendly,” Farber said. “It was an asset
they had been developing for the past 15 or 20 years, did a terrific job and it
was probably difficult to let go. But when the price was there,
[Comcast] showed investors that they are going to do right by them.”

The QVC deal allows Comcast to further delever its balance sheet, and even
though it will lose out on what has been a significant generator of cash –- cash
flow at QVC was $858 million in 2002 and is expected to grow to $961 million in
2003 –- Comcast made the right decision in selling out, Farber said.

“There are two ways to look at it,” Farber said. “QVC was a cash cow, but the
benefit of that is it’s being extracted today. Do they pay down debt over the
next couple of years through QVC’s free cash flow, or do they pay it down today
without the operating risk?”

Farber added that QVC, which has been generating significant returns for
years, may be in the midst of shifting gears, concentrating more on its
international assets instead of its domestic business.

“Internationally they’ve had some successes, but there have been some
disappointments, like the United Kingdom,” Farber said.

“Relative to their company, unlike three or four years ago when QVC was
growing at 16%-plus and cable was growing 11%, it’s kind of
reversed.  Now cable is growing close to 20% and QVC is growing closer to
14% or 15%," he said.

“If they could have kept it, they certainly would have taken advantage of
it,” Farber added. “They made the next-best decision -- cashing out, getting the
present value of the money without any of the challenges of navigating what was
looking to be an increased focus overseas. Even though QVC has done a great job
managing the business, at the end of the day, Comcast, like much of the cable
industry, is a U.S. company.”