There was an interesting read over at Slashdot.org today. In a story last night from the Associated Press, it looks like Time Warner Cable Inc. (NYSE: TWC) may be testing out a web metering service for its internet access.
The company is testing a service with new Time Warner Cable Internet subscribers in Beaumont, Texas where customers will have a monthly allowance for the amount of data with a $1.00 charge per gigabyte. The company had already warned back in January that it was going to test rates and test some metered and tiered internet access services, so this isn't likely to be a bomb dropping into the school yard.
Slower services of 768 kbps with a 5-gigabyte monthly allowance are going to run $29.95, while their fastest and larger service with fast downloads at up to 15 megabits per second and a 40-gigabyte cap will run $54.90 per month.
Time Warner (NYSE: TWX) declared a one-time dividend of $10.9 billion to its stockholders, payable just prior to separation of Time Warner Cable (NYSE: TWC); TWX will receive $9.25 billion of Time Warner Cable's dividend.
TWX overall option implied volatility of 29 is below its 26-week average of 32 according to Track Data, suggesting decreasing price risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
According to people familiar with the matter, Robert Verrone, one of the most zealous commercial real-estate lenders during the industry's boom, will leave Wachovia Corporation (NYSE: WB) within the next week, the Wall Street Journal reported.
WEB SITES:
Bloomberg reported that the Department of Justice is probing whether UBS AG (NYSE: UBS) helped clients evade American taxes. In an e-mailed statement, the firm said one senior bank employee was "briefly detained" by authorities.
Bloomberg also reported that Vallejo, California's city council voted to go into bankruptcy. Officials said that after talks with labor unions failed to win salary concessions from police and fire fighters, the city does not have enough money to pay its bills.
According to a rumor, TechCrunch reported that the Yahoo Inc (NASDAQ: YHOO) board of directors yesterday authorized Yahoo chairman Roy Bostock, rather than CEO Jerry Yang, to call Microsoft Corporation (NASDAQ: MSFT) CEO Steve Ballmer about re-starting negotiations.
On Wednesday morning pre-market, we'll get to see earnings out of Time Warner Cable Inc. (NYSE: TWC). The estimates for the cable giant from First Call are $0.22 EPS on $4.15 billion in revenues. Next quarter estimates are $0.34 EPS on $4.31 billion in revenues. Estimates for fiscal Dec-2008 are $1.27 EPS on $17.25 billion in revenues.
Analysts have an average price target north of $34.00. In late January, UBS initiated to a neutral rating and in early February, Cowen & Co. initiated with a neutral rating as well.
After trading in the upper thirties and low forties early last summer, the stock has been consistently trading in the mid-twenties over the last six months. Time Warner Cable's 52-week trading range is $21.95 to $42.11.
Last Wednesday, Time Warner Cable was among one of four cable companies to pull out of a joint venture with Sprint Nextel (NYSE: S), called Pivot. Pivot was an attempt for telephone and cable companies to compete with multiple providers, such as AT&T Inc. (NYSE: T) uVerse and the service from Verizon Communications (NYSE: VZ). Verizon's strong earnings this morning were driven partially by its fiber-optic TV service. FiOS drove the revenue growth, with customer additions to reach a total of 1.2 million customers.
There was an interesting announcement that came out this week. It seems that the triple-play package of cable, high-speed internet, and telephony are coming to America's largest retailer.
The store offerings will be in the electronics department or "Connection Center" locations inside the stores. These locations will explain and offer the packages, possibly with a joint purchase of a new high-definition television.
Time Warner believes this will give customers convenient and easy access to its broadband, high-definition cable, and digital phone services. After seeing VoIP offerings in the past, this might not be all that unexpected. But the triple- play package isn't exactly a bare-bones pricing, even if it ultimately does save money for consumers who use all three services under one provider.
For the former "Always Low Prices" retailer, it seems that the old dial-up or low-priced DSL internet access would have been the highest priced offering. Either times are a changing, or US web access markets are saturated.
We are still awaiting the final verdict from Time Warner Inc. (NYSE: TWX) and Jeff Bewkes regarding its majority stake in the cable operator.
Comcast Corp. (NASDAQ: CMCSA) stock is falling on reports that the company is in talks with Time Warner Cable (NYSE: TWC) to fund a new wireless Internet program. CMCSA would invest up to $1 billion in the project, a nationwide network using WiMax technology that would be operated by Sprint Nextel (NYSE: S) and Clearwire Corp. (NASDAQ: CLWR). Judging by this morning's action, investors do not seem very enthusiastic about the plan. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CMCSA.
After hitting a one-year high of $29.41 in July, the stock hit a one-year low of $16.11 in January. This morning, CMCSA opened at $20.07. So far today the stock has hit a low of $19.30 and a high of $20.14. As of 12:15, CMCSA is trading at $19.59, down 0.95 (-4.6%). The chart for CMCSA looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $22.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in 4 months as long as CMCSA is below $22.50 at July expiration. Comcast would have to rise by more than 15% before we would start to lose money.
Time Warner Inc. (NYSE: TWX) hit a new 52-week low on Friday and again this morning. Shares traded as low as $13.65 today right after the open. This afternoon, shares are back up around $13.90, but that is just the level of last Friday's low. Since last Monday, shares have dropped from $14.84. At the beginning of the year, share price sat at $16.51. The high in 2007 was $21.97.
If you look at the current situation at Time Warner compared to other media stocks and other cable stocks, the one-third loss in share price from last year looks systemic to the industry rather than symptomatic of problems at TWX.
In other words, the market and economic trends seem more of the problem plaguing the shares than the actual strategy -- at least in recent weeks. If you look at the last decade, you get a different picture. But here I'm writing about the recent weakness in the stock.
For one thing -- the company is no longer spending billions to repurchase stock. In this environment it shouldn't. Media is being affected by a slowdown in spending and Time Warner will need the cash and the stock for strategic moves.
Ultimately, the value of TWX is going to boil down to two issues: What will the parent do with its stake in Time Warner Cable, Inc. (NYSE: TWC)? It looks like Bewkes is going to unlock more of the underlying value in cable. What is going to happen to AOL? So far, it looks like the content side and advertising side are both going to stay with the parent and the dial-up and access side of the business will be sold off.
I studied a longer-term chart and this last drop to under $15 has progressed to where shares are at four-year lows. Back in 2002 to 2003, shares traded under $11.
Today's economy is still weakening and the current corporate desire to unload billions of dollars in assets is far different than we were seeing in early 2007 and 2006. Time Warner shareholders saw past gains from cost cuts and new efficiencies. But the rest will have to come from solid business decisions and strong leadership.
Carl Icahn's ICAHN CAPITAL, LP has released its total holdings for the period ending December 31, 2007. What is most interesting is that, despite the many other positions, Mr. Icahn still has a sizable stake in both Time Warner stocks -- the parent company and the cable subsidiary.
As of December 31, 2007, Mr. Icahn lists the following positions:
This is much less than his prior investments in Time Warner Inc. and it is not a big enough stake to give him a great deal of influence behind the scenes at the company. But combined, these investments still represent some $333 million dollars. That's serious money.
As of 12:15 p.m. today, TWX is at $16.44, down 14 cents today and still battling back from a 52-week low of $14.64 reached on Jan. 23.
Suntrust is positive on FPIC Insurance Group Inc's (NASDAQ: FPIC) valuation and book value growth. The firm initiated shares with a Buy rating and $50 target.
Battling Baidu.com Inc (NASDAQ: BIDU) in China with little success, Google Inc (NASDAQ: GOOG) is working with a Chinese company to offer free licensed music downloads, the Wall Street Journal reported. The new service is expected to be launched in several weeks.
OTHER PAPERS:
BHP Billiton Limited (NYSE: BHP) raised its bid for mining company Rio Tinto Plc (NYSE: RTP) to more than GBP70B. Meanwhile, the UK Times reported that Rio's new Chinese shareholder was preparing a counter bid for Rio.
The Washington Post reported that Time Warner Inc (NYSE: TWX) CEO Jeffrey Bewkes is expected to announce a plan today to sell or spin off Time Warner Cable Inc (NYSE: TWC). Bewkes also is likely to signal plans to break up AOL in the coming year.
Jeff Bewkes faced a tough market day yesterday on his official first day as CEO of Time Warner (NYSE: TWX), although this was systematic in the stock market. This wasn't his fault since the stock market was so crummy, and it looks like the Street has already braced for much of the worst. Time Warner shares fell 1.3% to $16.29, less than 1% above the 52-week low of $16.17. The DJIA fell 1.6% to 13,043.96, and the S&P 500 fell 1.44% to 1,447.16. Shares were actually up after the open Monday, so you can blame just about all this on the stock market.
What is interesting here is that Wall Street is talking positively about a turnaround at Time Warner, or at least they aren't just panning it. Maybe that indicates that investors are willing to at least give Bewkes a chance.
It is still unknown if Bewkes is going to offer a partial share exchange for Time Warner Cable (NYSE: TWC) to create a further distance between the media giant and the cable operator, or if Bewkes is going to keep or jettison the current relationship.
There are still several publishing properties that are likely review candidates. And of course there is the matter with AOL, and Wall Street has mixed expectations of what Bewkes will change there.
Time Warner Inc. shares only traded 20.5 million shares (under the 22 million share average volume) so you can directly point the finger at the stock market rather than the new leadership. The only real issue is that if this market continues to slide further and drag TWX under the $16.17 52-week low, then Bewkes will have to address issues that weren't even directly under his leadership.
It's been a while since we've seen sharp gains on shares of cable companies. UBS is holding its Global Media Week and Communications Conference today in New York. Earlier today, Time Warner Cable (NYSE: TWC) surprised the markets today during a CNBC video interview when CEO Glenn Britt said that Time Warner wouldn't be in the bidding for more wireless spectrum in the FCC auction. The company had been a bidder before.
Comcast Inc. (NASDAQ: CMCSA) is also opting out of a wireless spectrum bidding. The truth is that both cable companies already have access to spectrum if needed, and there is still more spectrum available on existing infrastructure that can be used if needed.
One interesting development was when Glenn Britt described the demand for a cable company to need wireless as a quadruple play against the telecoms, who now offer video solutions that compete against cable. The old triple- play is still very under-penetrated on a nationwide basis.
Maybe it pays to be patient rather than spending a few hundred million here and a couple billion there. Sooner or later it adds up to real money. Google (NASDAQ: GOOG) has said it would be participating in the spectrum auction in January for the new, more powerful 700-MHz spectrum. If the Googlesaurs want to be rewarded similarly, maybe they'd determine it is cheaper and easier to partner for spectrum openly rather than the spend-spend-spend model.
Time Warner Cable shares are up nearly 4% to $27.05 today, and Comcast shares are up some 2.5% at $21.05. Google shares are down almost 1% at $687.15.
I've written about BigBand Networks (NASDAQ: BBND) before on BloggingStocks here. While I don't own the company, it remains on my watchlist because I do think that the technology provider for the cable industry has the makings of influencing the future of content and advertising delivery for the cable industry. As I wrote previously, the company has some operational issues to sort out as it matures as a publicly-traded firm.
Yesterday, BigBand announced it has sold its multi-media router technology to five more Chinese cable operators. The company said that it landed new customers Tibet Cable, Tiacang Cable, Jiayuguan Cable, Nanchang Cable and Luan Cable. BigBand says that with these customers it serves more than 40 service providers in China.
Recently, the company announced that Comcast (NASDAQ: CMCSA) has chosen BigBand as its switched digital video vendor. This is another feather in the hat for a company that is the arms dealer in the arms race between telcos and cable companies to offer video services and applications. With the most widely deployed switched video solution (SDV), BigBand has seven of the top ten largest service providers in the U.S., selling to companies like Time Warner Cable (NYSE: TWC) and Verizon (NYSE: VZ). The company is also positioned to benefit from what analysts call TelcoTV (video delivered over DSL).
BigBand is down over 65% this year. It's possible that the stock is bottoming out,here but it's worth losing some points to the upside and waiting to see if management regains credibility by smoothing out its earnings performance.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Miller holds no position in stocks mentioned above.
Time Warner Cable Inc. (NYSE:TWC) has posted earnings. Revenues for the third quarter rose 25% ($792 million) over the third quarter of 2006 to $4.0 billion, and earnings were listed as $0.25 on basic and diluted earnings. First Call shows estimates at $0.27 EPS and $4.06 billion revenues.
The stock is up at the open. As of 9:45 am, it is at $27.88, a gain of 33 cents or 1.2%.
The company still reports on an OIBDA basis: Operating Income Before Depreciation and Amortization ("OIBDA") climbed 28% and operating income grew 24% over Q3 2006; OIBDA rose 12% and operating income grew 14% over Pro Forma Q3 2006.
This was a record quarterly net gain of 275,000 Digital Phone Subscribers that fueled the largest ever quarterly net increase of 220,000 Triple Play Subscribers. If you want to break it down by net additions, this is a total of revenue generating units having reached 522,000 net additions in the quarter.
Subscription revenues increased 25% ($749 million) to $3.8 billion; video revenues grew 21% ($440 million) to $2.5 billion, reflecting continued penetration of digital video services and video price increases; High-speed data revenues rose 26% ($197 million) to $942 million; Advertising revenues increased 24% ($43 million) to $221 million.
Unfortunately, these numbers are all skewed due to a large Kansas City pool of customers being transferred in the quarter.
Time Warner Inc. (NYSE: TWX) posted earnings per share of 29 cents after items, but on a normalized basis the company's earnings were 24 cents. Revenue was $11.68 billion. First Call estimates were for earnings of 24 cents on revenue of $11.36 billion.
As far as how this compares, it really seems like the results were better than expected. Adjusted Operating Income before Depreciation and Amortization climbed 15% to $3.2 billion, reflecting double-digit increases in the Cable, Filmed Entertainment and Publishing segments, as well as a gain at the Networks segment. This growth was offset partly by a decline at AOL. Operating Income was up 29% to $2.1 billion.
Time Warner continued its aggressive share buyback. As of November 6, 2007, the company has repurchased approximately 119 million shares for approximately $2.2 billion since its $5 billion program was announced on August 1. At existing prices, the company expects to complete at least half of the program by the time the time it reports its 2007 full-year and fourth-quarter results.
Time Warner
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Jeff Bewkes faced a tough market day yesterday on his official first day as CEO of 
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