Roberts to Advertisers: Check Out VOD

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New York -- Touting its successful video-on-demand product -- 1.4 billion orders in 2005 and growing -- Comcast Corp. chairman and CEO Brian Roberts told an audience at an industry conference here that advertisers looking for targeted audiences should look closer at VOD.

Roberts, speaking at the BusinessWeek Media Summit Wednesday, compared the power of VOD for advertisers to that of Internet-search giant Google Inc. (www.google.com).

“Why is Google so valuable? Because it gives you, after a very targeted search, access to those of us who did the search,” Roberts said. “It’s an advertiser’s dream. If we can morph the television model into that targeted, just-what-people-want world and then deliver that to advertisers -- hello, cable is in the best position to do that.”

And because Comcast controls 22 of the top 25 cities in the country, it should be the first choice for advertisers looking to break into on-demand, he added.

“If you’re an advertiser, you want to be talking to our company,” Roberts said. “That’s why Google and others have called us and said, ‘We want to work together.’”

Earlier, Roberts lamented Comcast’s sagging stock price despite strong operating results. Comcast stock was down about 20% in 2005.

He said that if you judge Comcast solely on its stock price, 2005 was a bad year. But he added that the Philadelphia-based cable operator showed strong financial growth for the year -- revenue was up 10% and cash flow grew 13% -- which Wall Street has basically ignored.

“I have set a personal goal that we worry less about the stock and let the market figure it out as we run the business,” Roberts said.

He also wondered aloud about Comcast’s trading multiple -- about 6 times to 6.5 times cash flow -- when multiples normally mirror cash-flow growth.

“We’ve had five years -- 22 straight quarters -- of double-digit revenue and cash-flow growth, and yet we’ve gone from the perception that $1 of cash flow is worth 12 to 15 times to today, where it’s worth 6 to 6.5 times. So somebody’s crystal ball is predicting very bad things. There used to be an old saying that whatever your cash-flow growth was, that should be your multiple. We did 13.5% cash flow growth and we’re trading at half that multiple.”

Roberts added that investors should focus on Comcast’s growth in revenue-generating units (a combination of digital-cable, high-speed-data and telephony customers that are a benchmark in tallying the growth of new services), which rose by 2.5 million in 2005 and should grow by 3.5 million in 2006.

He also defended Comcast’s decision to ramp up capital spending in 2006 to more aggressively roll out digital telephony -- a move that the company said would cost about one percentage point in cash-flow growth for the year. That revelation -- first announced during Comcast’s fourth-quarter earnings call Feb. 2 -- forced its stock price down 3.3% (91 cents per share) that day.

Roberts said Comcast is signing on 15,000 digital-voice customers each week, and it expects to have at least 1 million subscribers by the end of the year.

“[The phone rollout] will trim cash-flow growth to around 10 [%] to 11 [%],” Roberts said. “But if we prioritize, of course, we’re going to accelerate our new products from 2.5 million in 2005 to 3.5 million in 2006.”

He continued, “I don’t know too many businesses that are fighting over how much growth they’re going to bring in. We’re going to have diversified revenues -- not just video, [but] high-speed data, digital and on-demand. But now you’re about to have a phone business, all on one network, and already, the capital has been deployed -- 75%-80% of all of our capital spending is success-based.”

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