Liberty takes On Command reins
Hotel-room movie firm may be merged with rival
By Jennifer Beauprez
Denver Post Business Writer
Wednesday, May 02, 2001 - John Malone's Liberty Media appears to be dreaming up new plans for On Command Corp., sending in its top executives to take over operations at the Denver company.
Last week, Jerome Kern resigned as chief executive of On Command, which provides in-room movies to hotels. Carl Vogel, a senior vice president at Liberty, is now vice chairman of the company. Chris Sophinos, who is with Liberty Satellite & Technology, moved into the job of president.
Analysts say Liberty, which owns 56 percent of On Command, may be preparing the company to merge with its biggest rival, LodgeNet Corp. Or it could be planning to fold the company into its satellite and technology division - a move that could let On Command leverage satellite technologies and reduce the cost it takes to hook up hotel rooms with its service.
"(The management shakeup) is a clear sign that something is happening," said Stacy Bingler-Forbes, an analyst who follows On Command for Denver-based Janco Partners. "It makes sense for LodgeNet and On Command to come together, and the (top) management position is now open if the two companies would be combined."
Liberty Media, which is run by former TCI cable chief Malone, will be spun off from AT&T Corp. this summer. With a market value of $41.3 billion, Liberty owns stakes in more than 100 TV channels as well as a number of cable, satellite and digital media companies. On Command, which employs 950 people nationwide and 300 locally, provides in-room movies and Internet service to 1 million hotel rooms.
Its biggest rival is LodgeNet, a company in Sioux Falls, S.D., that provides service to 830,000 hotel rooms. LodgeNet scored a victory against On Command last year when it signed former On Command heavyweight customer Hilton Hotels.
Bingler-Forbes said the two companies together might gain more clout in attracting advertisers with their combined base of nearly 2 million hotel rooms.
In March, On Command's Kern said a merger with LodgeNet made economic sense, but the two companies weren't in merger talks. LodgeNet officials declined to comment for this story, and On Command and Liberty officials didn't return phone calls Tuesday.
Whether LodgeNet and On Command unite, it's likely that Liberty will make On Command a part of its satellite division, industry observers predict.
Vogel, who is now On Command's chairman, is also chairman and CEO of Liberty Satellite, and Sophinos, who took over as president, spent six years at the Liberty division. Kern will retain his position as chairman of the On Command board.
Liberty Satellite owns stakes in 10 satellite companies, including Sprint PCS and Aerocast.com Inc., which develops satellite technology to distribute streaming media.
On Command could leverage Liberty's relationships with wireless companies to cut the costs to set up service in each individual hotel room.
Right now, On Command spends about $500 per room and is striving to reduce that amount to $250 by the end of next year.
"It could make sense so they don't have to wire the whole country," said David Joyce, an analyst who follows Liberty Media for Guzman & Co., an investment bank in Miami.
Joyce said Liberty may have even bigger plans for On Command, since the company is in the business of providing on-demand movies - a service that lets people choose any of 50 movies with the click of a remote control and watch them any time they want.
"That's the direction that all the cable companies are headed for home users," Joyce said. "There could be more cooperation between On Command and Liberty's other cable assets down the road, because these cable companies will house the servers that will store all these movies."
Murray Arenson, an analyst with Dallas brokerage firm Morgan Keegan, last week downgraded his rating on On Command's stock to a "hold" from a "buy" because he was disappointed by the company's first-quarter results. But he was encouraged by Liberty's increased interest in the company.
On Command lost $19.1 million, or 63 cents a share, on sales of $62.2 million. During the same period last year, the company lost $4.5 million, or 15 cents a share, on sales of $60.8 million.
"Liberty is clearly trying to clean this thing up from an operational standpoint," Arenson said. "And I think it's a positive move for the company."
On Command's stock closed up 15 cents Tuesday to $6.96 a share.
A year ago, its stock traded as high as $21 a share. |
