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johnnytv2004
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Original poster
By George Mannes - Senior Writer, The Street.com
Cablevision(CVC:NYSE)finally did something with its fledgling
satellite service that made investors happy: Put it on the block.
The Long Island-based cable operator said Tuesday that its board had
decided to suspend pursuing a spinoff of its Rainbow Media
Enterprises subsidiary. In place of the RME transaction, says
Cablevision, the company will "pursue strategic alternatives" for
its satellite TV service.
Cablevision's shares jumped $2.09 Tuesday morning, or 9.5%,to
$24.20.
The minimalist announcement of Cablevision's major change in plans
means that Cablevision won't be spinning off, as it has previously
insisted it would, a new publicly traded company comprising the Voom
satellite service and three Cablevision national programming
services: American Movie Classics, the Independent Film Channel and
WE: Women's Entertainment.
Rather, as it appears from the traditional "strategic alternatives"
code word, Cablevision will try to find a buyer for Voom or its
assets.
>From its inception, Voom has proved to be a head-scratcher for
Cablevision outsiders, who wondered how the startup -- which tried
to distinguish itself with high-definition television programming --
could hope to compete against well-established cable and satellite
competitors, all of which are laboring to increase their own menu of
HDTV programming.
At a time when the larger satellite operators, DirecTV (DTV:NYSE -
commentary - research) and EchoStar (DISH:Nasdaq - commentary -
research), have shown enormous subscriber growth, Voom's growth has
been anemic at best.
Cablevision has proven itself over the years to be a fine operator
of cable systems and cable programming services. For months, though,
the kindest thing that analysts could say about Voom was that it
appeared that Cablevision was cutting its losses on the venture by
spinning it off. And even that optimism was beginning to feel
unfounded, as Cablevision missed a self-imposed deadline for
spinning off RME by the end of the third quarter, and later
announced it would fail to meet its fallback forecast of spinning
off RME by the end of the fourth quarter.
With few mourning Cablevision's plans for Voom, analysts busied
themselves with calculating how much Cablevision might reap from a
possible sale of the satellite business.
Calling Voom's current operations "value-destructive" for
Cablevision, UBS analyst Aryeh Bourkoff suggested -- as have others
in the past -- that EchoStar could be a possible buyer for the RME
satellite assets, given EchoStar's need for additional capacity.
Based on assumptions such as a negative value of Voom of $300
million, Bourkoff suggests an $800 million swing in value for
Cablevision, or $2.67 per share, should the company be able to
unload Voom for free. Each additional $100 million Cablevision could
reap from a sale would be worth 33 cents per share, estimates
Bourkoff. The analyst has a buy rating and a $28 price target on
Cablevision, which he calls one of his top picks for 2005.
Oppenheimer analyst Tom Eagan, who has a buy rating and a $26.50
target on Cablevision, writes, "Without a spinoff, we like the
valuation of CVC even more because: the company is free of the
significant cash flow losses (which we estimate at between $125
million and $175 million, depending on the subscriber net adds) and
it clears away much of the ambiguity on the company's valuation."
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Cablevision(CVC:NYSE)finally did something with its fledgling
satellite service that made investors happy: Put it on the block.
The Long Island-based cable operator said Tuesday that its board had
decided to suspend pursuing a spinoff of its Rainbow Media
Enterprises subsidiary. In place of the RME transaction, says
Cablevision, the company will "pursue strategic alternatives" for
its satellite TV service.
Cablevision's shares jumped $2.09 Tuesday morning, or 9.5%,to
$24.20.
The minimalist announcement of Cablevision's major change in plans
means that Cablevision won't be spinning off, as it has previously
insisted it would, a new publicly traded company comprising the Voom
satellite service and three Cablevision national programming
services: American Movie Classics, the Independent Film Channel and
WE: Women's Entertainment.
Rather, as it appears from the traditional "strategic alternatives"
code word, Cablevision will try to find a buyer for Voom or its
assets.
>From its inception, Voom has proved to be a head-scratcher for
Cablevision outsiders, who wondered how the startup -- which tried
to distinguish itself with high-definition television programming --
could hope to compete against well-established cable and satellite
competitors, all of which are laboring to increase their own menu of
HDTV programming.
At a time when the larger satellite operators, DirecTV (DTV:NYSE -
commentary - research) and EchoStar (DISH:Nasdaq - commentary -
research), have shown enormous subscriber growth, Voom's growth has
been anemic at best.
Cablevision has proven itself over the years to be a fine operator
of cable systems and cable programming services. For months, though,
the kindest thing that analysts could say about Voom was that it
appeared that Cablevision was cutting its losses on the venture by
spinning it off. And even that optimism was beginning to feel
unfounded, as Cablevision missed a self-imposed deadline for
spinning off RME by the end of the third quarter, and later
announced it would fail to meet its fallback forecast of spinning
off RME by the end of the fourth quarter.
With few mourning Cablevision's plans for Voom, analysts busied
themselves with calculating how much Cablevision might reap from a
possible sale of the satellite business.
Calling Voom's current operations "value-destructive" for
Cablevision, UBS analyst Aryeh Bourkoff suggested -- as have others
in the past -- that EchoStar could be a possible buyer for the RME
satellite assets, given EchoStar's need for additional capacity.
Based on assumptions such as a negative value of Voom of $300
million, Bourkoff suggests an $800 million swing in value for
Cablevision, or $2.67 per share, should the company be able to
unload Voom for free. Each additional $100 million Cablevision could
reap from a sale would be worth 33 cents per share, estimates
Bourkoff. The analyst has a buy rating and a $28 price target on
Cablevision, which he calls one of his top picks for 2005.
Oppenheimer analyst Tom Eagan, who has a buy rating and a $26.50
target on Cablevision, writes, "Without a spinoff, we like the
valuation of CVC even more because: the company is free of the
significant cash flow losses (which we estimate at between $125
million and $175 million, depending on the subscriber net adds) and
it clears away much of the ambiguity on the company's valuation."
------------------------ Yahoo! Groups Sponsor --------------------~-->
$4.98 domain names from Yahoo!. Register anything.
http://us.click.yahoo.com/Q7_YsB/neXJAA/yQLSAA/EyMolB/TM
--------------------------------------------------------------------~->
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/VOOM/
<*> To unsubscribe from this group, send an email to:
VOOM-unsubscribe@yahoogroups.com
<*> Your use of Yahoo! Groups is subject to:
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