Cablevision's Voom Pact Seen As Slightly Positive
03.09.05, 11:54 AM ET
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Bear Stearns reiterated an "underperform" rating on Cablevision Systems (nyse: CVC - news - people ), saying uncertainty still exists around the company's decision to avoid shutting down its Voom satellite-TV joint venture with Rainbow DBS. Cablevision recently reached an agreement with its own chairman and chief executive under which the company will keep Rainbow DBS afloat while finalizing the unit's separation from the company. Bear Stearns said Chairman Charles Dolan has agreed to fund costs incurred by Rainbow DBS above costs potentially incurred under a shutdown scenario. "We believe it is doubtful that he will be required to pay anything as Voom's operating costs over a 24-day period are unlikely to exceed potential shutdown costs, in our view," Bear Stearns said. The research firm believes the interim agreement has mixed implications for Cablevision investors, leaning towards the positive. "Although we believe language regarding 'final separation' of Rainbow DBS is positive, we do not yet see definitive language of 'complete and total' separation." Bear Stearns said shares of Cablevision have the potential to make back much of what they lost following the board member replacements on March 2. "However, unbridled optimism is not yet called for," the research firm added.
03.09.05, 11:54 AM ET
Tear Sheet | Chart | News
Bear Stearns reiterated an "underperform" rating on Cablevision Systems (nyse: CVC - news - people ), saying uncertainty still exists around the company's decision to avoid shutting down its Voom satellite-TV joint venture with Rainbow DBS. Cablevision recently reached an agreement with its own chairman and chief executive under which the company will keep Rainbow DBS afloat while finalizing the unit's separation from the company. Bear Stearns said Chairman Charles Dolan has agreed to fund costs incurred by Rainbow DBS above costs potentially incurred under a shutdown scenario. "We believe it is doubtful that he will be required to pay anything as Voom's operating costs over a 24-day period are unlikely to exceed potential shutdown costs, in our view," Bear Stearns said. The research firm believes the interim agreement has mixed implications for Cablevision investors, leaning towards the positive. "Although we believe language regarding 'final separation' of Rainbow DBS is positive, we do not yet see definitive language of 'complete and total' separation." Bear Stearns said shares of Cablevision have the potential to make back much of what they lost following the board member replacements on March 2. "However, unbridled optimism is not yet called for," the research firm added.
