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Setbacks Mount at Cablevision
By George Mannes
Senior Writer
9/28/2004 2:22 PM EDT
URL: http://www.thestreet.com/tech/georgemannes/10185118.html

Cablevision (CVC:NYSE) said Tuesday that it would miss the deadline it had previously set for spinning off its satellite TV service.


But Cablevision CEO Jim Dolan said Tuesday that the spinoff was still on track. "Yes, it is going to happen," Dolan told the audience at Merrill Lynch's Media & Entertainment conference. "We believe we are very close to actually achieving the spin."

Cablevision's shares rose 33 cents Tuesday to $19.78. On Monday, shares in the Long Island-based cable operator fell $1.42, or 6.8%, in the wake of a Friday night disclosure that three executives, including the company's acting principal accounting officer, had resigned their posts.

In a filing at the Securities and Exchange Commission Tuesday, Cablevision said it expected to complete the spinoff for its Rainbow Media Enterprises division in the fourth quarter. Previously, the company had said it expected that the deal turning Rainbow into a separate, publicly held company would be completed in the third quarter, which ends Thursday.

Rainbow includes not only Voom, Cablevision's fledgling satellite service focusing on high-definition television, but also the American Movie Classics, The Independent Film Channel and WE: Women's Entertainment programming services and the Clearview Cinemas movie theater chain.

As Cablevision noted in its filing, the company has already received a ruling from the Internal Revenue Service indicating that the spinoff will qualify as a tax-free transaction, and has completed the financing plan for Rainbow. As Cablevision has pointed out before, the company said the spinoff still requires the SEC to declare the relevant paperwork effective, as well as final approval from Cablevision's board.

Wall Street has generally been pessimistic about the outlook for Voom's success, with analysts such as Sanford C. Bernstein's Craig Moffett arguing that the faster Voom goes out of business, the better it will be for Cablevision shareholders.

With Cablevision giving no reason last week for the executive resignations, outsiders filled in the blank with explanations ranging from innocent to ominous. One theory was that incoming CFO Michael Huseby was engaging in the run-of-the-mill guard-changing that is common among incoming corporate executives, while another linked the resignations to an SEC inquiry that followed Cablevision's disclosure in June 2003 of accounting irregularities in its programming unit.

After talking with Cablevision personnel, UBS analyst Aryeh Bourkoff reported Monday that the resignations were unrelated to the impending Rainbow spinoff. "Also, while CVC remains under a formal SEC investigation, the SEC did not require that these resignations occur, according to the company," reported Bourkoff, who has a buy rating on Cablevision's stock.

Bourkoff noted that at Huseby's previous employer, Charter (CHTR:Nasdaq) , he helped navigate the company through its "clearance" by the SEC. "We believe Huseby may be following a similar strategy at Cablevision, in order to work diligently toward an SEC clearance of CVC," wrote Bourkoff.

A Cablevision spokesman declined to comment Tuesday.

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