Liberty Takes a Beating

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Liberty Media’s two tracking stocks—Liberty Interactive and Liberty Entertainment—tumbled Thursday after the parent company said it would no longer provide earnings guidance and told analysts that the economic downturn has impacted its flagship QVC shopping channel.

Liberty Interactive—which includes QVC—fell 23% ($1.48 per share) to $4.90 each on Thursday after the company released third quarter earnings. Liberty Entertainment dipped nearly 8% ($1.38 each) to $15.94 per share

In a statement, Liberty said that in light of current financial conditions, the company would withdraw Liberty Interactive’s guidance provided in 2006 and “will not be providing new guidance for the foreseeable future.”

QVC reported a 3% dip in revenue in the quarter, to $1.64 billion. Domestic revenue was down 9% to $1.1 billion and adjusted operating income before depreciation and amortization fell 21% to $221 million in the quarter.

On a conference call with analysts, QVC CEO Michael George (pictured) said that while customers are not leaving the home shopping giant, they aren’t buying as much as they used to.

Adding to Liberty Interactive’s problems was the revelation that QVC had drawn down the remaining capacity of its bank credit lines. As a result, Liberty Entertainment will transfer about $551 million in exchangeable debt and $380 million in cash to Liberty Interactive, to help shore up its credit position. 

Liberty Entertainment, which includes Starz Entertainment and Liberty’s 50% interest in DirecTV Group, reported a 21% rise in revenue. In September, Liberty said it planned a “hard spin” of the Liberty Entertainment tracking stock, basically converting it into an asset-based security.

At the time, some analysts believed that was a precursor to taking in 100% of DirecTV Group. However, the company cast doubt as to when that “hard spin” may occur.

On the conference call, Liberty CEO Greg Maffei said that the company continues to evaluate the timing of the Liberty Entertainment spin “given market conditions.”

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