Mixed Results Hit Cablevision, Comcast Shares

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Shares of Cablevision Systems Corp. and Comcast Corp. took hits last week after both operators reported mixed first-quarter results.

Cablevision stock dropped more than 7 percent last Tuesday, after the company reported 8 percent cash-flow growth for the quarter at its cable operations — below the industry's 10 percent benchmark — and increased capital expenditures by as much as $600 million for next year.

Comcast's stock price fell less dramatically. It was down $1.05, or 2.3 percent, to $44.45 on May 8, mainly due to larger-than-expected cash flow losses at its business telephony unit, analysts speculated. Comcast closed at $43.71 on May 9.

Cablevision said it would spend between $1.5 billion and $1.7 billion in 2002, mainly for its planned rollout of digital service. That's up from the $1.1 billion it will spend in 2001.

That news, coupled with the announcement that Cablevision would seek to raise cash through an equity offering — which could dilute the value of current investors' holdings — sent the shares downward.

Cablevision stock dropped 7.3 percent May 8, or $4.70, to close at $59.80. The stock was down another 40 cents per share May 9, closing at $59.40.

"It's not a very liquid stock," one Wall Street analyst said. "The combination of liquidity, iffy numbers, cap ex (capital expenditures) going up and telegraphing that they might do an equity offering hurt the stock."

Overall, revenue was up 13 percent in the quarter, to $1 billion, but cash flow rose just 2 percent, to $213.6 million.

At the cable operation, revenue increased 5 percent, to $474.2 million. Cablevision added 65,000 high-speed data customers during the quarter, ending with 304,000 subscribers, and restated its plan to deploy 100,000 digital set-top boxes in September, the start of a full-scale digital rollout.

Cablevision gave no details with respect to its future equity offering. But the company said it would not move on AT&T Corp.'s request to register about $2 billion in Cablevision shares owned by the telephony giant, which have limited voting rights.

On April 5 AT&T requested that Cablevision register 30 million of its 49 million shares in the MSO for possible future sale. There could still be a private sale of the shares, possibly to AOL Time Warner Inc., metropolitan New York City's other big cable operator.

Cablevision vice chairman William Bell would not speculate on what AT&T would do with the shares, but added during a conference call with analysts that AT&T does have the right to sell the stake to another company.

"They have the ability to sell, but it is a minority stake with little or no voice," Bell said.

Under a previous agreement, Cablevision can block the registration for up to 145 days. After that, the MSO must go ahead with the registration or come to another agreement with AT&T.

Meanwhile, Comcast upped its financial guidance for the year.

President Brian Roberts told analysts in a conference call that 2001 operating cash flow should rise from the previously announced 10-percent to 11-percent range to an advance of 12 percent to 13 percent, boosted by digital cable.

For the quarter, cable revenue was up 8.7 and operating cash flow rose 11.1 percent.

But investors appeared to focus on higher-than-expected cash-flow losses at the business telephony unit: $35 million for the period, versus an estimated loss of $15 million.

Still, Comcast is moving ahead with its rebuild plan and expects 95 percent of its systems to be at 550-megahertz capacity by year-end.

Comcast wants to rebuild rapidly, to promptly deliver new services like high-speed data, as competitors' digital subscriber line services have not lived up to expectations, Roberts said.

"This is the time to step on the pedal," he said.

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