QVC Boosts Liberty in 2Q


Liberty Media reported strong second-quarter results at its Liberty Interactive unit, with revenue up 16% and operating cash flow gains of 19%, fueled mainly by the performance of its QVC home shopping channel.

In was Liberty’s first full quarter since issuing two tracking stocks -- Liberty Interactive, including QVC and its online assets; and Liberty Capital, including Starz Entertainment Group and several public investments -- May 9.

On a conference call with analysts, Liberty CEO Greg Maffei said the quarter was highlighted by strong results at QVC.

Revenue at the home shopping channel rose 10% to $1.6 billion and operating cash flow increased 17% to $368 million. On the call, Maffei said strong sales in two of QVC’s largest categories -- accessories and jewelry -- drove total units shipped up by 8% and average selling price up by 3%, fueling the growth.

At Liberty Capital, Starz Entertainment had 2% revenue growth to $264 million and operating cash flow rose 6% to $50 million, mainly due to a rise in subscriptions and the elimination of certain marketing-support agreements tied to its new affiliation deal with Comcast.

Subscriptions rose 6% in the quarter at Starz and 8% at Encore, Maffei said on the call. “Starz continues to show strides toward improved financial performance,” he added.

But 2006 performance at the premium channels is expected to be substantially similar to last year -- when revenue was $1.004 billion and operating cash flow $171 million -- mainly due to continuing investments in its new online offering, Vongo.

Vongo -- which allows subscribers to download movies from the Internet for a monthly fee -- recently reached a deal with AT&T where the phone giant will offer Vongo to its high-speed-Internet customers.

“We will continue to spend behind Vongo to increase the content offering, raise awareness of the service and drive consumer uptake,” Maffei said on the call. “For the remainder of 2006, these expenses, as well as marketing costs associated with Starz’s traditional services, may outpace the reduction in other marketing commitment. As such, our guidance remains unchanged.”

Maffei also confirmed that the company was in discussions with News Corp. about possibly selling its 19% voting stake in the media giant. On Tuesday, News Corp. chairman Rupert Murdoch said the two companies were in active discussions about the voting stake.

“We have ongoing dialogue with them about a host of options,” Maffei said on the call. “I think the dialogue is productive and headed in the right direction, but there can be no assurances whether we’ll be able to achieve a deal or for what assets we’ll likely end up with.”

Shares of Liberty Interactive were up more than 5% (91 cents per share) on the robust financial results to $17.50 each in afternoon trading Wednesday, while Liberty Capital shares were down 88 cents each to $82 per share.