- Admin
- #1
The comments from Comcast Chief Financial Officer Michael Angelakis came a day after the company lowered its forecast for 2007 cable revenue growth to about 11 percent from a previous forecast of at least 12 percent, citing a "challenging economic and competitive environment." The cautious outlook took down other cable stocks, with Time Warner Cable Inc. falling 5 percent to $25.69 and Cablevision Systems Corp. losing 6 percent to $25.32.
Angelakis said Comcast's scale across the United States has meant that it has been hurt by the downturn in the housing market and a tougher macro-economic environment.
"When we see a little bit of a rise in both churn and bad debt, that indicates there's an economic issue," he told investors at a UBS media conference. Churn is the industry term for customer losses.
Angelakis said Comcast expected to lose more basic video customers in the current quarter and into 2008, hurt by competition from new video services from Verizon Communications Inc and AT&T Inc, as well as from longer-term competition from satellite TV operators DirecTV Group Inc and EchoStar Communications Corp. "We will fight in the streets and do everything we can for retention but I think the expectation that I have is we will lose some share in the video side," said Angelakis...
In the third quarter, Comcast posted a 54 percent drop in quarterly profit as it lost more basic video subscribers than expected.
Analysts at Goldman Sachs and Miller Tabak cut Comcast shares' rating to "neutral" from "buy" on Wednesday after Comcast lowered its outlook late on Tuesday.
"Our "extreme downside scenario" is playing out worse than we thought and are thus lowering our estimates again," Goldman's Anthony Noto said in a note to investors. Another analyst said competition from the likes of Verizon, which is offering free high-definition television sets to new customers of its FiOS video service, was more of a problem than the U.S. economy.
"We believe the vast majority of the reductions are due to competition," said Richard Greenfield, an analyst at Pali Research. "Comcast simply did not expect the level of competitive marketing spend that has occurred this year."
Comcast also raised its 2007 capital expenditure by 5 percent to about $6 billion due to an increased spending on advanced set-top boxes, network enhancement and an accelerated shift to digital technology.
Capital spending has traditionally been a sensitive issue for cable investors concerned with a poor return on investment.
"I think we need to be a bit more precise and a bit more transparent in how we spend capex," said Angelakis, who joined Comcast a year ago. Comcast shares fell $2.15 to $18.58 in morning trading on the Nasdaq. Before today's fall, the stock had already lost 25 percent of its value this year.