Cablevision Open to Ideas to Bolster Stock Price

By Jon Lafayette

Cablevision Systems President-CEO James Dolan said the company is open to taking steps to close the gap between its operating performance and its share price.

Although it has been one of the most efficient operators in terms of generating revenue from its subscribers, Cablevision's stock has been hurt by what is perceived as the unpredictable nature of management, led by the Dolan family, who founded the company.

During the company’s second-quarter earnings conference call, Mr. Dolan said he and other Cablevision executives plan to be much more open and responsive to shareholder ideas.

“We have a strong desire to close the value gap between our operating performance and the market value of our debt and stock,” Mr. Dolan said. “We are considering and actively exploring alternatives that may close this gap and want to assure our investors that we will be open to listening to their thoughts. In this regard the company and I personally plan to spend more time communicating our compelling story to our investors and listening to their thoughts on our performance and prospects."

Cablevision announced earnings Tuesday. Analyst Craig Moffett of Sanford Bernstein praised the results, but said the company would be much more attractive if the Dolans returned cash flow to shareholders instead of making questionable acquisitions such as the Long Island newspaper Newsday.

Mr. Dolan called the Newsday acquisition a “good strategic fit” with Cablevision’s other interests in the subscriber, advertising and content businesses.

The Dolans, who have made repeated attempts to take the company private over the past few years, also recently acquired Sundance Channel.

Such activity makes Cablevision a high-risk stock “with potentially enormous upside should management elect to realize the huge upside of its portfolio,” said Mr. Moffett.

During the call, one analyst asked if the company is considering spinning off its content business, including Rainbow Media, which encompasses AMC, IFC and WE TV.

Mr. Dolan responded that the company "didn’t want to point to any one [option] as an indicator as to where we’re going.”

Other steps Cablevision could take to close the "value gap" include buying back stock and paying dividends.

Another analyst noted that tax laws regarding trusts are changing in ways that might affect the Dolan family's timing in changing its ownership of Cablevision.

“I want to assure everyone that the family’s interest and the rest of the shareholders’ interest are completely aligned on this,” Mr. Dolan replied.

For the second quarter, Cablevision’s net income fell to $98.3 million from $317.4 million a year ago, when the company realized a gain from the sale of its interest in some regional sports networks. Earnings per share fell to 34 cents from $1.10.

Revenue rose to $1.7 billion from $1.5 billion.

Mr. Moffett said the earnings numbers show that “Cablevision continues to write the playbook for the rest of the cable industry on how to compete with Verizon” and its FiOS fiber-optic service. Cablevision posted better numbers than expected, with growth in basic subscribers, high-speed data customers and digital phone.

Cablevision’s Rainbow unit also posted big gains, with revenues up 14.6% and cash flow rising 71.6% as ad prices and revenues rose on the strength of higher ratings generated by original programming headlined by the acclaimed AMC series “Mad Men.”

The announcement sent Cablevision shares up 12% at noon to $23.79 a share.