January 23, 2005 -- The rift between Cablevision founder Chuck Dolan and his son, Jimmy, the Cablevision CEO, over the future of the company's Voom satellite venture got so heated last week that the father wanted his son fired, according to a source close to the company.
The elder Dolan never followed through on his threat, and Jimmy stood up publicly to his father and won — selling Voom to EchoStar for $200 million.
Investors immediately cheered the decision: the stock is up more than 30 percent since a December announcement that the board - on an 8-6 vote - was halting plans to spin-off the satellite unit into a separate publicly traded company. And following Thursday's announcement of the EchoStar deal, two analysts raised their rating on Cablevison and nine investment firms upped their price target on the stock.
The family feud could lead to a breakup of the company, analysts said, including the selling of Cablevision's cable assets to Time Warner or another buyer.
Debates over Voom, a pet project of Chuck Dolan, escalated to the point that father and son, who live next to each other in Long Island, stopped talking to each other, according to the source.
Though Chuck Dolan pleaded with the board to keep the money-losing, high-definition satellite business, the board stood solidy on Jimmy's side, voting 10-3 in favor of selling, according to a source.
Adding insult to injury, once Jimmy and a majority of the board voted to sell Voom, they resisted overtures from Chuck to buy the operation himself. In an internal company memo made public last week, Chuck called the board's decision "startling" and said that potential bidders "include members of the Dolan family."
In the memo, he blamed the board's decision on "today's post-Enron regulatory climate, which places great emphasis on the potential legal liability of directors who sit on the boards of corporations involved with new enterprises such as [Voom]."
It was also that same reasoning that the board opted not to negotiate a sale to Chuck Dolan. According to a source close to the elder Dolan, the board was hesitant to deal with Chuck because of the added scrutiny that would come from entering into such a high-profile, related-party transaction.
Ultimately, the decision to sell Voom indicated Jimmy chose Wall Street over his father.
Analysts and investors had been clamoring for more than a year for the company to shut down the venture, which was eating up an estimated $80 million in cash per quarter.
The service has just 26,000 customers, and Chuck's plan to build a third national satellite service to compete with EchoStar and DirecTV never won fans on Wall Street.
The high drama at the Long Island-based cable operator — owner of Madison Square Garden, Radio City Music Hall and the Knicks and Rangers — could set the stage for the company's dissolution.
Cablevision's three big cable networks — American Movie Classics, the Independent Film Channel and WE: Women's Entertainment — are rumored to be on the block. The networks had been lumped with Voom as part of the Rainbow Media unit, and the cash flow from the channels funded the satellite losses. And the crown jewel among the company's assets — its cable systems that serve 3 million area homes — finally appears ripe for a sale.
"Charles Dolan's fight to the end over Voom would appear to indicate he is far less interested in the cable business than ever before," said Richard Greenfield, an analyst at Fulcrum Global Partners.
Time Warner is viewed as the most likely buyer of Cablevision's systems.
This would leave the New York City sports assets — the Garden, the Knicks and the Rangers — for Jimmy to run.
The elder Dolan never followed through on his threat, and Jimmy stood up publicly to his father and won — selling Voom to EchoStar for $200 million.
Investors immediately cheered the decision: the stock is up more than 30 percent since a December announcement that the board - on an 8-6 vote - was halting plans to spin-off the satellite unit into a separate publicly traded company. And following Thursday's announcement of the EchoStar deal, two analysts raised their rating on Cablevison and nine investment firms upped their price target on the stock.
The family feud could lead to a breakup of the company, analysts said, including the selling of Cablevision's cable assets to Time Warner or another buyer.
Debates over Voom, a pet project of Chuck Dolan, escalated to the point that father and son, who live next to each other in Long Island, stopped talking to each other, according to the source.
Though Chuck Dolan pleaded with the board to keep the money-losing, high-definition satellite business, the board stood solidy on Jimmy's side, voting 10-3 in favor of selling, according to a source.
Adding insult to injury, once Jimmy and a majority of the board voted to sell Voom, they resisted overtures from Chuck to buy the operation himself. In an internal company memo made public last week, Chuck called the board's decision "startling" and said that potential bidders "include members of the Dolan family."
In the memo, he blamed the board's decision on "today's post-Enron regulatory climate, which places great emphasis on the potential legal liability of directors who sit on the boards of corporations involved with new enterprises such as [Voom]."
It was also that same reasoning that the board opted not to negotiate a sale to Chuck Dolan. According to a source close to the elder Dolan, the board was hesitant to deal with Chuck because of the added scrutiny that would come from entering into such a high-profile, related-party transaction.
Ultimately, the decision to sell Voom indicated Jimmy chose Wall Street over his father.
Analysts and investors had been clamoring for more than a year for the company to shut down the venture, which was eating up an estimated $80 million in cash per quarter.
The service has just 26,000 customers, and Chuck's plan to build a third national satellite service to compete with EchoStar and DirecTV never won fans on Wall Street.
The high drama at the Long Island-based cable operator — owner of Madison Square Garden, Radio City Music Hall and the Knicks and Rangers — could set the stage for the company's dissolution.
Cablevision's three big cable networks — American Movie Classics, the Independent Film Channel and WE: Women's Entertainment — are rumored to be on the block. The networks had been lumped with Voom as part of the Rainbow Media unit, and the cash flow from the channels funded the satellite losses. And the crown jewel among the company's assets — its cable systems that serve 3 million area homes — finally appears ripe for a sale.
"Charles Dolan's fight to the end over Voom would appear to indicate he is far less interested in the cable business than ever before," said Richard Greenfield, an analyst at Fulcrum Global Partners.
Time Warner is viewed as the most likely buyer of Cablevision's systems.
This would leave the New York City sports assets — the Garden, the Knicks and the Rangers — for Jimmy to run.
