Well I really don't know, but I am interested in how Liberty Media puts it all together. They own at least 25% of IATV as well as many others, including about 5 bill worth of TVGIA, Being bought by GMST, now GMST will be aligned with lmg.A.
Industry Analysis
Dec 15, 1999
Internet: Liberty Media: Spinning a World Wide Web
Senior analyst: Adam Lowensteiner (12/15/99)
Think of it as the CMGI (NASDAQ:CMGI - news) of media companies, and you may suddenly view Liberty Media (NYSE:LMG - news) /A) in a whole new light. And perhaps you should.
As Liberty ? an AT&T (NYSE:T - news) tracking stock ? positions itself for the future convergence of television and the web, it could emerge as the next hot Internet play.
With CEO John Malone at the helm, Liberty has quietly been building an interest in various media companies in an effort to capture the emerging interactive media market. And as AT&T and others work to increase bandwidth, Liberty aims to unite these media companies to produce superior content.
While it?s probable that Liberty will flourish as various media converge, what?s trickier to evaluate is just how much its stock is worth.
On a simple level, you can calculate Liberty's net asset value by adding up its holdings. Using recent valuations, Liberty?s public holdings carry about a $50.4 billion value. With shares recently trading close to a $57 billion market cap, its private holdings are then worth roughly $7 billion.
As its larger holdings mature, investors can expect Liberty to increase its positions in Internet media companies.
Liberty?s Vast Holdings
But the bulk of its investments are still heavily weighted in big publicly traded companies. These include a $12.6 billion stake in Liberty Digital (NASDAQ:LDIG - news) , a $10 billion stake in Sprint PCS (NYSE:PCS - news) , a $7.5 billion investment in Time Warner (NYSE:TWX - news) , and a $3 billion stake in News Corp. (NYSE:NWS - news) .
Other notable investments include a $3.8 billion stake in General Instrument (NYSE:GIC - news) , soon to be acquired by Motorola (NYSE:MOT - news) , and a $5 billion stake in TV Guide (NASDAQ:TVGIA - news) which is being bought by GemStar (NASDAQ:GMST - news) , the maker of VCR Plus.
Among its private holdings, Liberty has taken interest in cable channels including Encore, Discovery, Court TV, E! Entertainment, BET Holdings, QVC, MacNeil/Lehrer Productions, and Odyssey. And to complement some of these cable holdings, Liberty also retains shares in qvc.com, BET.com, and Discovery Channel Online.
But as far as other Internet investments are concerned, Liberty Media has been fairly selective. Its current web holdings include Priceline.com (NASDAQ:PCLN - news) , CarsDirect.com, Drugstore.com (NASDAQ:DSCM - news) , TicketMaster CitySearch (NASDAQ:TMCS - news) , MTVN Online, and iVillage (NASDAQ:IVIL - news) .
Some of Liberty?s more interesting holdings include Interactive Pictures (NASDAQ:IPIX - news) , an interactive photographic technology for the Internet, netLibrary, an electronic library, and pogo.com, an online game service targeting family Internet game players.
Taking its media/web investment strategy even further, Liberty has also been rolling up post-production movie houses, which do video and audio editing for TV and big-screen movies. Liberty hopes to apply these post-production houses? capabilities to holdings like Encore Media, Discovery, and QVC.
But more importantly, Liberty has the Internet in mind. Web audio and video content will need post-production work, and by having post-production services internally, it hopes to attract other content providers.
In the post-production arena, Liberty has taken a 57% stake in Todd-AO (NASDAQ:TODDA - news) , and a controlling stake in closely held Soundelux Entertainment, which provides audio post-production.
Earlier this month, Liberty bought Four Media (NASDAQ:FOUR - news) for $263 million. Laser Pacific Media (NASDAQ:LPAC - news) , a small post-production house with HDTV (high-definition television) capabilities, could be Liberty Media's next 'victim.'
For the short-term, Liberty shares appear undervalued. Analyst Christopher Dixon of PaineWebber, valued Liberty Media's private assets at about $12 billion and other assets (like cash and net loss carry-forwards) at $4 billion as of mid-November.
Following Dixon?s model, the combined value of public and private assets would yield a $66 billion net asset value, or a stock price of $55 a share.
At a recent $47.63, Liberty would then be trading at about a 16% discount to its net asset value. Applying Dixon's 15% secular growth rate to that $66 billion net asset value, shares could reach $63 a share in a year's time, assuming the share count remains about the same.
Bottom Line:
Still, investors in Liberty Media should not just be playing for the net asset value play. In the long run, the key word with Liberty is convergence. When the Internet and television catch up to each other and can be viewed from one source, Liberty Media hopes to emerge as a dominant player.
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