Cablevision Stumbles in Q2

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Cablevision Systems stock plunged more than 10% ($2.04 per share) to $17.48 per share in early trading Tuesday, after the company reported disappointing second quarter results.
The Bethpage, N.Y., operator, usually one of the strongest performers in the sector, stumbled in the second quarter, losing 23,000 basic video customers and missing analysts' consensus on practically every growth metric in the period.
At the cable operations, revenue was up 1.3% and cash flow was flat, excluding its Bresnan Communications operations.
On a conference call with analysts, Cablevision chief operating officer Tom Rutledge said the subscriber losses in what is normally a seasonally strong period was impacted by more aggressive offers from competitors, non-existent housing growth and the generally weak economy. Rutledge added that the addition of Bresnan has also exposed Cablevision to a different seasonality pattern - its Eastern operations are generally stronger in the summer months because they include several resort communities. The Bresnan systems are located in Montana, Wyoming, Colorado and Utah.
Cablevision reported a gain of 5,000 high-speed Internet customers (compared to consensus estimates of a 23,000 customer gain) and phone subscribers were up by 27,000, in line with consensus.
In a research report, Sanford Bernstein cable and satellite analyst Craig Moffett questioned whether Cablevision's outstanding growth has finally caught up with it. While Moffett expressed some alarm at the sluggish high-speed Internet growth, he noted that margins remain strong and capital spending remains low, pushing free cash flow growth to a "jaw-dropping" $1.24 per share, up 97% from the prior year.
"But that may not be enough," Moffett wrote. "Investors have long pined for Cablevision to be a pure-play cable operator. Now that they've spun off AMC Networks, they are. Be careful what you wish for.
Rutledge said that there is still ample room for growth - Cablevision continues to roll out new products and enhancements to existing offerings that are attractive to customers. He noted that its Ultimate Triple Play package, a combination of HSI service at speeds up to 50 Megabits per second, voice and video for about $99.80 per month for the first year, or about $10 more per month than the traditional triple play, has a sell-in rate of more than 50% of newly acquired triple play customers. And the company also is rolling out its network digital video recorder service in Nassau County New York this fall and Suffolk County next year, launched an IPad, IPhone and IPod Touch apps that allow customers to watch live TV on the devices inside their home and is trialing with about 50,000 customers, an enhanced set-top user interface that will substantially increase the number of video on demand movie titles available to customers.
Rutledge added that Cablevision continues to talk with programmers about obtaining streaming rights to allow customers to watch live shows outside of the home and could have an offering in the not too distant future.
"We are acquiring rights to have an out-of-home service, we're putting those together into packages and we will make that available to our customers in the relatively near future," Rutledge said
Rutledge added that the out-of-home streaming rights are generally being negotiated as part of overall carriage renewal deals.