The Clouds Are Parting


Federal Reserve Board chairman Alan Greenspan has declared that the recession's end is on the horizon. Days after that utterance, the Fed decided not to cut interest rates again.

Then an odd thing happened.

The bulls came stampeding out of the gate a day later, last Thursday, and shored up some of the most dismal business sectors, most notably technology.

Indeed, in the still-stormy media sector, a few glimmers of hope that the worst might be over were shining through. The Walt Disney Co. posted surprisingly better than expected fourth-quarter numbers. The Mouse House delivered a profit of 15 cents a share, compared to an expected 10 cents. On top of that, the company delivered $7 million in revenue, versus the anticipated $6.6 billion.

That's a very important ray of sunshine because Disney — a company cursed with the double whammy of dependence on both theme-park attendance and advertising — made a surprisingly decent showing during this period of recession and the ongoing war on terrorism.

Viacom Inc. also appeared to be on more stable footing. Its board of directors was able to hose down the company's two top alpha dogs: chairman and CEO Sumner Redstone and chief operating officer Mel Karmazin. The media world — and Wall Street — can now rest knowing that Karmazin will remain in the fold, at least for now.

But for other media companies, it was another one of those dog-eat-dog weeks. Again, AOL Time Warner Inc. disappointed, posting a $1.8 billion net loss in its fourth-quarter earnings, largely because of the ongoing slump in ad sales. Everything in the media giant's portfolio — from magazines to ad-supported cable networks — again gave testimony that the nation's advertisers still believe the country is in the vice of a recession.

Then there was AT&T Broadband, which was on the mend but took a fourth-quarter dip due to added costs from moving its Excite@Home Corp. cable-modem customers to its own high-speed data network. Hopefully, that's a one-time hit for the beleaguered MSO, which still has the worst cash-flow margins in the industry.

Cash-flow margins at AT&T Broadband were down 2.2 percentage points in the fourth quarter to 22.9 percent, compared with 25.1 percent in the third quarter. But considering the MSO had to migrate a whopping 900,000 users to its own platform in a speedy and timely fashion, that's nothing to sneeze at. The MSO actually added 568,000 new revenue-generating units that quarter in data, digital video and cable telephony — a good sign in these times.

And in other good news for MSOs, albeit a development that has nothing to do with the economy, Charlie Ergen's proposed merger of EchoStar Communications Corp. and DirecTV Inc. and DirecTV has hit some unusual speed bumps.

The wagons have circled around this deal, as foes like Rupert Murdoch and the Rev. Al Sharpton attempt to stop Ergen dead in his tracks. Murdoch's News Corp. — the losing bidder in the prolonged DirecTV sale — is rallying its formidable lobbying troops to crater the transaction.

Sharpton, the self-appointed champion from New York, is also making noises, though he's not trying to block the deal. Rather, he's fighting to get EchoStar to carry some obscure network.

And 30 state attorneys general are also sniffing around a merger that no longer seems to be the slam dunk it was thought to be one month ago.

So, most things considered, it wasn't a bad week at all. What is needed now is for the nation's advertisers to realize that the sky is not falling and that consumers still need to be prodded to go out and buy their favorite brands.