Until recently, I believed that shares of Comcast Corp. (NASDAQ: CMCSA) had been unfairly punished by investors who were too skeptical about the company's prospects. Now, I am changing my tune because I have come to realize that the future of the company will be filled with endless pricing battles, which will force the Philadelphia-based cable giant to sacrifice the needs of shareholder to retain customers. To be fair, Comcast reported a decent quarter Wednesday and was able to hold the line on capital expenditures. Net income was $632 million, or 21 cents a share, versus $588 million, or 19 cents, a year earlier. Sales jumped 11% to $8.55 billion. Results were short of the 23-cent forecast of analysts surveyed by Bloomberg but beat the $8.57 billion sales forecast.
Now, ordinarily missing the profit forecast would cause the shares to tank. Instead, they are trading up slightly because investors found much about the earnings report to like. For one thing, Comcast's free cash flow was $1.17 billion, more than triple from a year earlier. This beat the forecast of veteran cable industry watchers such as Craig Moffett of Sanford C. Bernstein. It also reaffirmed its earnings guidance for the year, countering worries that it would be hurt by cash-strapped customers falling behind in their bills.
Even so, Comcast has plenty of problems. Advertising sales fell 2% to $399 million amid softness in the economy. Average monthly revenue per customer fell in the phone and high-speed Internet businesses, though the overall rate rose slightly. The company also is embroiled in a dispute with the FCC over its policy of slowing some Internet traffic of people using BitTorrent and other file-sharing sites. It continues to bleed basic cable subscribers, losing 138,000 in the quarter. That rate has increased from 101,000 a year earlier.
Moreover, Comcast will continue to face tough sledding for years to come as customers – including me – will show the company little brand loyalty and base decisions on regarding telecom services on price alone. Verizon (NYSE: VZ) added 187,00 new FiOS Internet customers and 176,000 FiOS TV ones, while AT&T (NYSE: T) gained 170,000 clients for its U-Verse TV service. That's a recipe for great deals for Comcast consumers and lousy ones for shareholders.
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Reader Comments (Page 1 of 1)
7-30-2008 @ 4:26PM
CrossProfit said...
Basically agree that trend is lower.
See:
http://www.crossprofit.com/view_symbol.asp?id=25624
The fly in the ointment is lower margins ahead due to competition or maintaining margins with a shrinking client base.
7-30-2008 @ 7:03PM
gumbo koontz said...
Directv and Dish will try to merge again and will probably succeed this time around after Sirius and that X radio ? passed muster to merge. Comcast just refused to lay cables out to the rural areas and it is not Directv or Dish fault about monopolistc stances over the rural areas. Nobody is stopping Comcast or Verizon or ATT from offer triple play service to the rural areasa. Rural areas are fortunate to have Directv and Dish TV service or they would still be stuck with over the air antennas.... Directv and Dish will benefit metropolitian areas if allowed to merge by becoming stronger competitors against Comcast and others. The regulators were wrongheaded the last time they turned down merger request on behalf of Directv and Dish. Comcast is not going to Wizard of Oz on gold paved road at all..
7-30-2008 @ 6:49PM
Rootbuyer said...
We were forced into comcast when Insight left. Absolutely nothing good has happened since. Very Very poor customer service company and their product is no where near what Insight had to offer. Will soon be switching to DISH as soon as decent Internet service is available.
COMCAST is NOT Comcastic!!!
7-30-2008 @ 8:03PM
Ira Marks said...
Hard to believe advertising sales fell in the quarter..the digital cable service is filled up with an endless stream of commercials..seems even worse than network TV.
8-02-2008 @ 12:57PM
Jerry said...
beeee very very careful about choosing COMCAST...
when you decide to disconnect, they will do EVERYTHING in their power to bill you an additional month.. and when you try and call and get it cleared up..the supervisor who is supposed to call... mmm maybe took an extended vacation!!
'it's not comcastic, it's comCRAPstic...
U VERSE ROCKS!