Comcast's loss is less than expected

sales up 20.2%

3rd quarter is better than anticipated, a cable analyst says

November 01, 2001|By Paul Adams | Paul Adams,SUN STAFF

Philadelphia-based Comcast Corp., whose cable division serves 800,000 Maryland customers, reported yesterday a smaller-than-expected $106.8 million third-quarter loss and posted a 20.2 percent year-over-year increase in sales despite a slowing economy.

The loss amounts to 11 cents per share, compared with net income of $1.25 billion, or $1.29 per share, in last year's third quarter. The No. 3 U.S. cable provider, which is trying to take over AT&T Corp.'s broadband unit in a deal valued at more than $50 billion, had sales of $2.36 billion in the quarter. Analysts polled by First Call/Thomson Financial had forecast sales of $2.1 billion.

The loss is largely the result of acquisition costs and huge investments in infrastructure upgrades. Analysts tend to discount various noncash charges and focus attention on the cable operator's cash flow, which the company said rose 16.6 percent to $705.8 million from the year-earlier period.

The company's shares closed up 41 cents at $35.84 yesterday.

"I think across the board they came in better than where we had modeled them at," said Ray Schleinkofer, a cable analyst with Thomas Weisel Partners.

Given yesterday's results, analysts expect the cable company to weather the current slowdown better than many of its competitors despite an expected decline in advertising revenue in the fourth quarter.

"Historically, the cable industry has proven fairly recession-resistant, and so far, we're seeing only modest negative impact on cable operators in general and complete resilience from Comcast," said Fredrick W. Moran, an analyst with Jefferies & Company Inc.

Comcast executives said the company added 243,000 digital cable subscribers in the quarter and has seen demand for high-speed Internet service and other products climb despite the struggling economy.

"Despite all of the other things going on in the world, we have not lost our operational focus," Comcast President Brian Roberts said in a conference call.

Comcast's bid to buy AT&T's cable division was rejected by the company in July, but analysts contacted yesterday still give the deal a 50 percent or better chance of being consummated unless the nation's largest long-distance phone provider decides to hang on to the business. No other bidders have stepped forward.

"If there is a deal, it will likely come together in the next couple of months at some modestly sweetened price," Moran said.

Comcast's quarterly results coincided with news that the cable provider plans a two-week amnesty program for Baltimore-area residents who have been stealing cable service through illegal connections. Illegal users who turn themselves in between Nov. 1 and Nov. 15 will not face fines or penalties, which range from $500 to $1,500 and can include community service or jail time.

Once the amnesty period ends, the company said, it will begin a neighborhood-by-neighborhood search for unauthorized users who cost it millions in lost revenue. The problem is especially acute in Baltimore.

"We know who is stealing cable because we can detect that through various devices we have," said Kirstie Durr, a Comcast spokeswoman.

The amnesty program covers about 500,000 of the company's 800,000 Maryland customers, including those in Baltimore City.

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