Cablevision Shares Plunge

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Cablevision Systems stock was hammered in early trading Tuesday after CEO James Dolan unveiled a plan to bring the Bethpage, N.Y.-Based MSO back to basic subscriber stability that will result in flat cash flow growth and higher capital expenditures for 2012.
Cablevision shares plunged as much as 11% ($1.72 each) to $13.92 per share in early trading Tuesday. The stock improved slightly later in the day, closing at $14.13 per share, down 9.6% ($1.51 each) on Feb. 28.
The declines came even as Cablevision reported a stronger than expected quarter - basic video customer losses of 14,000 were less than analysts' consensus estimates of 18,000 and high speed data (20,300) and phone customer additions (30,500) came in ahead of expectations. Revenue rose about 1.2% in the period and adjust operating cash flow declined by 1.8% in the period.
Cablevision has weathered a few tough quarters in the past, with subscriber losses heavier than expected and in December suffered its biggest blow in December when Rutledge abruptly resigned and announced he would become CEO of Charter Communications.
When Rutledge announced his resignation on Dec. 15, Cablevision said that already had experienced management in place overseeing cable and it had commenced a search for an executive with responsibility for oversight of the cable operations.
"...as far as a succession plan goes, I am currently running the operations ... and will continue to do so for the foreseeable future while we work on improving our operations," Dolans said on the call.
In a research note prior to Cablevision's earnings conference call, ISI Group media analyst wrote that he considered the lack of a new COO "a negative and a continued overhang on the stock."
Dolan will have his hands full. The CEO noted that the company is taking steps to maintain or increase its video subscriber base in the future - he said Cablevision is working on 18 separate initiatives to improve its products and the overall customer experience. While he didn't go into detail, he did say that Cablevision will not increase its subscriber rates this year, will roll out a next day install program for new customers by the end of the first quarter, is hoping to launch a new electronic program guide in the third quarter and is expanding the launch of its remote server digital video recorder.
"At its core, our business is strong," Dolan said on the call. "Our suite of products is in high demand and we will work to continue to grow these products to meet our customers' evolving needs. This means that 2012 will be a year of investment, both in capital spending and in operating execution. We expect to accelerate certain 2013 projects into this current year, resulting in higher capital expenditures in 2012. We will be smart and efficient in this process, which should set us on a path toward a stronger 2013 and beyond. We will also remain focused on pricing, packaging and the overall quality of our service."
Cablevision also will eliminate deep discounting for new customers, which should ease the financial impact on the company.

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