New York -- Barry Diller's sales job on USA
Networks Inc. last week apparently went over well on Wall Street, although some analysts
were grumbling about the performance at the core Home Shopping Network.
Diller, chairman and CEO at USA, briefed analysts here last
Monday on his view of how the company's various assets will fit together. They now
include USA Network, Sci-Fi Channel and Ticketmaster Group Inc., as well as HSN and the
Silver King Communications Inc. TV stations.
Some analysts who were there said they didn't come
away with a much clearer idea of how the hybrid cable and broadcast network, with lots of
direct-sale merchandising, will work. But they seemed willing to give Diller the benefit
of his experience in boosting shareholder value.
Said NationsBanc Montgomery Securities Inc. analyst Mark
Todtfeld: "It's still quite complicated." But his firm is holding to its
"buy" rating, figuring that Diller will, among other things, keep making deals
that seem to add value. "We think that the stock will continue to be
deal-driven," he said.
USA's share price rose $1.25 on heavier-than-average
volume last Tuesday, or 5 percent, to $27.25, after Diller appeared at another venue,
"The Variety/Schroders Big Picture Media Conference." The stock had
dipped back to $26.63 per share last Thursday.
Clearly, some Wall Street analysts were disappointed with
HSN's performance and with a forecast that first-quarter cash flow will be down from
last year's results in the same period.
USA released its fourth-quarter results last Monday. HSN
revenue rose a slight 1 percent, to $284.7 million from $280.8 million a year ago,
although pro forma cash flow rose 17 percent, to $41.3 million from $35.3 million a year
ago, as the cost of goods declined.
Todtfeld said USA blamed a lack of new products, which
improved in March, but the company said quarterly cash-flow numbers at HSN will compare
negatively to last year's in the April-through-June quarter.
Credit Lyonnais Securities (USA) analyst Richard Read
echoed other analysts in noting the disparity between QVC Inc. -- which he projected to
deliver $370 million in cash flow this year, excluding start-up losses -- and HSN, which
projects to about $180 million this year from $164 million in 1997.
"People want the gap to close," Read said.
Overall, on a pro forma basis, USA Networks reported
revenue growth of 3.4 percent, to $390.3 million from $377.3 million in the fourth quarter
of 1996. Cash flow grew 16.4 percent, to $57.5 million from $49.4 million. The company
reported net income of $3.3 million, or 3 cents per share, versus a $5.4 million loss (5
cents per share) in the same period a year earlier.
USA didn't provide results for USA Network and Sci-Fi,
as the deal to buy them closed in February. But NationsBanc estimated that the
networks' revenue rose 13 percent in 1997, to $731 million, while cash flow rose 31
percent, to $165 million. Estimates for the networks in 1998 see revenue rising 14 percent
and cash flow rising 13 percent.