That's a point I've made with quite a few private enquiries. Instead of asking me or debating the points I made in my comments on Monday, various people launched an attack on me. They were effectively attacking themselves. This is the nature of what a bull market top does to you.
FWIW:
To: +ahhaha (6302 )
From: +Michael P. Michaud Monday, Mar 22 1999 3:52AM ET Reply # of 6643
ahhaha, Interesting news: Can you comment on possible
conflicts as I believe UMG has an equity stake in
Roadrunner???
To: +Michael P. Michaud (6432 )
From: +ahhaha Monday, Mar 22 1999 1:07PM ET Reply # of 6643
I really can't. Too complex for immediate readout. The prime
question is whether the deal pulls Comcast out of the ATHM
group or whether Road Runner is pulled into ATHM. It
remains to be seen what TWX does.
If Comcast leaves, the deal is exceedingly bearish, and
ATHM is a house of cards. It is necessary to determine
whether the exclusive contract holds with respect to the
merged entity if a cable partner merges. Usually such
contracts are binding over the merged entity, but the merger
wouldn't have been attempted if that was a sticking point.
The bearish aspect comes from the creation of a viable
broadband alternative. AOL was never ATHM's competition,
but this new entity would be.
A further splintering of the market through the formation of
an intermediate speed range is also troublesome. QWST is
quietly putting in place an impressive long-to-local DSL
distribution system and AOL will be jumping on that.
Someone else may attempt to outbid Comcast now that
Comcast has demonstrated that UMG is clearly available. If
QWST did that, then you have an interesting development.
Given that UMG's board likes the deal, the deal will
probably hold, but another suitor may make a horse race of
it and that would make UMG an interesting option
speculation.
To: +Jing Qian (6455 )
From: +ahhaha Monday, Mar 22 1999 4:14PM ET Reply # of 6644
Is such a merger desirable? It is definitely getting into
regulatory issues. Is it in Comcast's bigger interest to
present a better content under the auspices of TWX or
under the auspices of ATT's ever increasing control over
ATHM? Comcast and others partners may jump as the FCC
phone drag implications hit cable company bottom lines.
Co-carry telephony and broadband has negative effects for
cable companies even though they're getting a cut of the thin
margin telephoney action. T forces ATHM to co-carry, but it
remains an option for Comcast if they bust loose. It is better
to wait and let telephony become established since
providing it after the fact is not an issue.
The right action is to rush in and grab as much of the
broadband market now as possible. T/TCI has the lion's
share and so there is plenty of incentive to jump so your
broadband growth isn't inhibited by subservience under the
cable partner agreement. If I were Comcast I would jump
even if it meant breach of contract and in this case, that's a
very big deal. The thing is that jumping and grabbing UMG
has so much potential that it is worth it. That's why I have
stated repeatedly that RBOCs would be buying cable
companies.
Comcast may have a concept where they see themselves
as providing both services and giving the consumer choice.
It is a good question whether that can be done under the
cable partners "exclusivity" clauses, but the deal may not
close until after the clauses expire. ATHM has been bid up
on expectations, but a development like that would be a
negative expectation because it dilutes what they would
have gotten from Comcast anyway. Comcast has a small
stock stake in ATHM and ATHM is not largely impacted by
the loss of some market under such a scenario, but it sets
up a precedent and shows that there isn't anything
necessarily unique about the ATHM arrangement. Rogers
has already moved somewhat in a similar direction.
The cable companies have to look at it as if they were TCI,
but independent of ATT and not a recipient of what ATT
might do as far as capital expenditures go. They have to
fend for themselves. Accordingly, the bigger cable
companies should be looking for the possibility of doing a
deal with other large interests like RBOCs.
To: +Jing Qian (6455 )
From: +ahhaha Monday, Mar 22 1999 8:10PM ET Reply # of 6644
ATHM was informed, not consulted.
You had better read my earlier posts very closely.
Comcast can push but TWX holds the cards and TWX ain't
interested. They shouldn't be either.
You'll never know why a stock moves. Associating price
movement with news is a fool's brew. This is another
universal error made on Wall Street.
To: +E. Davies (6467 )
From: +ahhaha Monday, Mar 22 1999 8:37PM ET Reply # of 6644
You're right. You're out of your league. So is everyone else
including Jermoluk. This move was quite a surprise among
all direct or indirect participants.
What are the pro's & cons for Comcast picking one vs the
other?
Comcast has effectively already decided to go with RR.
Is the AT&T connection a positive or negative?
It always had its good points and bad. Now we are seeing
the bad.
How many @home subscribers does Comcast have?
About 50,000, but that isn't the point. ATHM is priced on
great expectations for the future. The shares can't take any
reduction in expectations. The number of current subscribers
is irrelevant.
How many RR subscribers does UMG have?
That is private information, but I'd guess 80k. Again, that
tells you nothing even if it is right.
What are the relative sizes of the financial commitments?
Which ones? None are relevant just as in the above.
How strong are the exclusivity contracts in the face of a
merger?
Comcast has an option to buy out, however, as I mentioned
earlier it wouldn't be cheap. More importantly, they don't
need to take that route. They can just nominally support
both systems until the 2002 expiration, and then go their
own way. They would be providing "consumer choice" and
that plays well at the FCC.
etc...
Ah, there's the rub, ha ha.
I strongly suggest studying my post #6461 closely and then
try to figure out what you want to do. Before you do it get
back to me.
I want to inform anyone reading this that ATHM is going to
gap open down say 20 points tomorrow. The reason is this:
I recently made a valuation of ATHM and posted the results
here. Since we are in a bear market, it is critical to start
looking at valuations. That's what a bear market is all about,
discovering what is fair. The public loves fairness, so now
they are going to get it. I said ATHM could make $2.00 in
two years if they put together 2M subscribers. They could
also hold a 50 multiple. Read $100/shr. These are generous
figures. The stock has been evaluated at a premium to this
generosity. With todays news you can't expect my
projection to hold and now there is a reason for adjustment.
You would have to reduce my projection by 1/3 ceteris
paribus, so now the stock is fair at 66.
To: +ahhaha (6491 )
From: +ahhaha Monday, Mar 22 1999 9:09PM ET Reply # of 6644
Since today's news is going to get the traders jumping I
thought I'd mention before the flood of comments come in,
that over the short run this news is not going to be well
received. The problem lies in the stock market. The game is
over. The rest is falling stocks. Especially Internet ones.
I have read in this thread so many saying that they are long
term holders. We'll see what happens when the market
takes your conviction away. If Comcast ends up trisecting
the market, it is bearish for the intermediate run, but it is
bullish for the long run. With three main competitors you
have a viable competitive market defined as cable
broadband according to the Bork Rule. It is separate and
distinct from DSL and the low end.
That means AOL won't be playing in broadband land unless
they attempt to supersede the Comcast move with a hostile
bid for UMG. If I were Case, that's what I'd be doing, but I
believe AOL is hanging their hat on the low end. This isn't a
bad strategy, but will have significant long term negative
effects once broadband is pervasive and cheap just like the
low end is now. To a certain extent AOL is gambling that
technology can find a way to come over copper
competitively against cable over fiber. This has been the
true test over the years and I hope I've persuasively
convinced everyone that it can't be done. Unless AOL
moves now they are threatened with what got them where
they are now, technological obsolescence.
The creation of a viable market in broadband chases the
FCC away permanently which is what the FCC would
prefer. ATHM-RR merger wouldn't accomplish a competitive
market. It would accomplish a monopoly and would
guarantee FCC interference.
It is funny to watch the public state how bad monopoly is (it
isn't), yet prefer a monopoly if it is on their side. They are
under the mistaken view that monopoly maximizes profit. It
doesn't. It minimizes it. This has been the historical
experience, but the majority believe to the contrary. Their
motive is simple: Your money is evil and I'm going to take it
away and give it to the needy, but my money is good so if
you try to take it away, I'll have you killed. A monopoly
would hurt ATHM in the long run, so the long term holders
have the most to lose to see an ATHM-RR merger. ATHM
would kill them.
To: +RocketMan (6497 )
From: +ahhaha Monday, Mar 22 1999 9:37PM ET Reply # of 6645
CS FB has been absolutely terrible in their judgements
about many stocks.
ATHM doesn't have the infrastructure that RR needs. Most
on this thread know that. ATHM doesn't have the
infrastructure that ATHM needs. To make this claim
assumes that ATT was willing or able to contribute to
Comcast's build-out. Neither was true. It was critical for
Comcast to bust away from the cable partner group
because they were in a position to get encroachment from
say, TCI. The cable tv gerrymandering has no effect on the
cable broadband world, so no one is protected. That
underlines another concern: how about the other partners?
ATT had better start going out and doing some fast
footwork damage control to prevent their grip from slipping,
because ATHM is not sitting pretty right now.
"Road Runner has cable access rights to 17 million homes
to expand At Home's geographic footprint." This sounds
good, but think about it. What is ATHM's geographical
footprint? Let's say they just mean ATHM will get more
subscribers. If TWX wasn't willing to merge before, what is
changed so that they will now? If anything, the Comcast
deal makes such a merger less likely.
"said At Home and Road Runner, a partnership between
Time Warner Inc. TWX and MediaOne, should be one step
closer to reaching a commercial agreement since Time
Warner already has a cable telephony joint venture with
AT&T Corp." As I've stated many times before there is no
connection between ATT's telephony deal with TWX and
RR. It was firewalled to be so in order that the FCC
wouldn't interfere with the T-TCI merger. CS FB is stating
that is desirable to invite the FCC back in. Quite the
contrary. In order for Comcast to pull this one off, they have
to distance themselves from ATHM and that is tantamount
to TWX following suit with which TWX has no problem. Why
would TWX give up an ocean of money to get less?
Comcast could lose $400 million to sell. That's nothing.
They're going to scotch an $80 billion deal that will be worth
$800 billion over $400 million? That sounds like public greed
bound thinking.
CS FB sounds like they are penny wise, pound foolish. The
pound is yours and they are throwing it and your penny into
the market.
|
