Cable Operators

Bennett: Liberty Thriving, Except for Stock Price

5/14/2004 6:27 AM Eastern

New York -- Liberty Media Corp. CEO Dob Bennett lamented the Denver-based media giant’s lagging stock price as he and several other Liberty executives spent four hours Thursday trying to convince a theater full of analysts that its growth story was real.

Liberty’s annual investor meeting at the Hudson Theater here was unlike last year’s in that Bennett didn’t have to explain the company’s poor performance in a bad economy. But despite having one of its best quarters ever during the period ended March 31, Liberty’s stock has waned.

The company’s stock has dropped 3.6% in the past 12 months, from $11.08 each May 13, 2003, to $10.68 May 13, 2004. The stock is down 64% from its highs of around $30 per share in 2000.

Last year Bennett said Liberty would strive to simplify its structure. Since then, the company has rolled up three smaller public subsidiaries and sold off nonstrategic stock holdings for $1.6 billion in cash.

He also said in 2003 that Liberty would better manage its balance sheet and take advantage of opportunities in the market. Since then, Liberty paid off $3 billion in debt (it plans to pay off another $1 billion this year), and the company has $2.2 billion of cash on hand and almost no debt.

As far as taking advantage of opportunities, Liberty made $11 billion of acquisitions in the past 12 months, including its $7.9 billion purchase of the rest of home shopping channel QVC Inc. that it didn’t own and a $625 million investment in UnitedGlobalCom Inc. that gave it 52% of the equity and 92% voting control of the European cable operator.

Further simplifying Liberty’s structure will be the planned spinoff of Liberty Media International, which includes its stake in UGC, a 45% interest in Japanese cable company J-Com Communications Inc. and a 50% interest in Japanese programmer JPC. That spinoff is slated for next month, Bennett said, and it will hopefully unlock the value of Liberty’s international cable assets.

Bennett added that an initial public offering of J-Com is also being considered -- a move that could allow Liberty to increase its stake even further.

Liberty’s biggest assets -- QVC and Discovery Communications Inc. -- have been performing well. In the first quarter, QVC’s revenue was up 21% and its operating cash flow rose 28%. At DCI, total revenue increased 23% and operating cash flow was up 37%.

While operations at its Starz Encore Group LLC movie channels were down in the first quarter -- revenue was flat and operating cash flow fell 36% -- Liberty said the premium services should meet previous full-year guidance of $940 million-$965 million in revenue and $185 million-$210 million in operating cash flow.

Bennett said Liberty would get involved in a bid for Adelphia Communications Corp., but only if it meant that the deal would allow it to get a bigger piece of DCI. Cox Communications Inc. and Advance/Newhouse Communications each own 25% interests in DCI.

It has been speculated that Liberty could assist Cox and Advance/Newhouse in a bid by paying cash for their interests in DCI and allowing the two MSOs to split up the cable assets.

“Our interest in Adelphia would be driven by our Discovery partners’ interest in Adelphia,” Bennett said.

September