24/7 Wall St. » DTV

True Convergence: Taking Speech To TV (NUAN, AAPL, MSFT, CMCSA, TWC, T, DTV, DISH)

Administrator — Mon, 09 Jan 2012 17:54:11 +0000

Nuance Communications, Inc. (NASDAQ: NUAN) is getting a much less of a reception than you might expect following on news that it is taking its Dragon speech recognition to the television. Most of the people at the Consumer Electronics Show might be hard-wired into their PCs (or Macs) for all forms of media, but what about their parents and their older relatives and friends?

Nuance has been thought of as a potential takeover name for Microsoft Corporation (NASDAQ: MSFT) and for Apple Inc. (NASDAQ: AAPL) on and off for some time. This may not change the speculation status much. But what this does accomplish is a new platform to “easily find content by speaking channel numbers, station names, show and movie names.” This would allow for searching by content, actor, and genre. The notion that this allows for staying connected through Twitter, Facebook and Skype may just be gravy.

Dragon TV was unveiled as a voice and natural language understanding platform for TV, device and set-top box OEMs and service operators geared toward making it easy to find and access the TV show that a subscriber wants to watch.

If Nuance can open this up to cable outfits Comcast Corporation (NASDAQ: CMCSA) and Time Warner Cable Inc. (NYSE: TWC), and to AT&T INc. (NYSE: T) for its uVerse, let alone DIRECTV, Inc. (NASDAQ: DTV) and Dish Network Corporation (NASDAQ: DISH) for satellite, then Nuance may get a much wider footprint.

How this gets monetized is up for anyone’s guess. Nuance projected that about 1.6 billion TVs should be connected to the web by 2014 according to Strategy Analytics. It even notes the difficulty in finding what is on television. How many times have you been looking for a televised game or show and have no idea what channel it is on?

This will allow OEMs and service operators to deliver TVs, set-top boxes and applications that let consumers find and experience content with Nuance’s leading voice technologies.

Again, the trick is on the monetization. If it can get a piece of a upcharge for the service then this may open up millions and millions more in revenues per month. If it is a promotional feature, then this may just be a another brand building effort.

JON C. OGG

Filed under: Consumer Electronics, Internet, Media, Mergers and Buy Outs, PC Companies, Rumors, Satellite, Software Tagged: AAPL, CMCSA, DISH, DTV, MSFT, NUAN, T, TWC

Cablevision Remains Too Oversold and a Bargain (CVC, TWC, CMCSA, DTV, CHTR, MSG, AMCX)

Administrator — Wed, 16 Nov 2011 13:11:24 +0000

Cablevision Systems Corp. (NYSE: CVC) is still trading just above the $15.00 mark and its 52-week range is $14.18 to $38.08. The long-term stock chart is a bit misleading because of spin-offs, but the shares remain oversold. Because of its sell-off, Cablevision currently looks cheaper on many metrics compared to Time Warner Cable Inc. (NYSE: TWC), Comcast Corporation (NASDAQ: CMCSA), DIRECTV (NASDAQ: DTV) and Charter Communications Inc. (NASDAQ: CHTR).

If you just watched the Cablevision stock chart, it would seem as though cable was dying. It is not. Cablevision has been cleaning its books up and it has parted ways with Madison Square Garden and AMC Networks for the most part. Again, those changes skew the stock charts.

We no longer have any serious hope of takeover ambitions resurfacing, but the Dolan family did try to buy it before at much higher prices and that deal was rejected. The current market cap is only $4.3 billion and that does make it capable of a deal if another player wanted to make an offer. A sum-of-the-parts analysis remains “oversold” and this value is solely on the merits of the company on a standalone basis. This one can still slide if the market softens, but this remains underpriced and we think higher prices will be reflected when things normalize.

Dividend and income investors now have an accidentally high-yield of almost 4%. Even after the AMC spin-off, shares fell from $25 to under $15 and the selling was just too harsh for a company that trades at close to 11.5-times 2012 earnings estimates.
Our take is that Cablevision should easily be a $20.00 stock after the dust settles, and that opinion has nothing to do with what Barron’s touted as being worth $30.00 per share in a buyout.

The current $15.00 share price compares to a Thomson Reuters consensus price target of $22.14. Our projection calls for close to 33% gains due to mispricing right now, and our projection is even less than the consensus target and far less than what Barron’s recently published.

This was one of seven oversold picks poised for a comeback which was offered recently to our readers who sign up for our free daily newsletter service. Each morning’s free newsletter is sent by email and includes the top news headlines, shows the top 15 or so analyst upgrades and downgrades, covers activist investor and insider trading, and offer key trading alerts for investors. Sign up in the box below.

JON C. OGG

Filed under: Cable Companies, Media, Value Investing Tagged: AMCX, CHTR, CMCSA, CVC, DTV, MSG, TWC

What’s Important in the Financial World (11/15/2011) Buffett Holdings, Un-Occupy Wall St.

247wallst — Tue, 15 Nov 2011 11:46:36 +0000

Germany’s mixed bag. Two key economic figures out of Germany offset one another. GDP grew 0.5% in the third quarter. The number was up 2.6% from the same quarter last year. The advance was a relief. Germany’s economic health is still the cornerstone of the eurozone’s financial prospects. However, the ZEW Center for European Economic Research reported that investor confidence in Germany fell to a three-year low in November. That would put it back to recession level numbers. Clearly, the financial community is concerned the sovereign debt crisis will swamp the financial strength of even Germany. Since confidence is often a self-fulfilling prophecy, the forward-looking number is more important that the Q3 economic success.

LinkedIn executives to sell shares. LinkedIn (NYSE: LNKD) executives want to sell a relatively large portion of their shares. This adds to the pressure on the stock . The company has already said it will offer more shares to the public. It also is clear that venture capitalists who invested in the LinkedIn over the years would like to make money on their positions too. Bain says it plans to sell a portion of its position along with LinkedIn executives. It is only natural that management would act similarly in its self-interest. That will not keep other investors from concern about dilution. And, why would executives sell shares now, if LinkedIn’s prospects are so bright? Expect LinkedIn’s stock to suffer because of the announcement.

The headline news about Warren Buffett was that he bought $10.6 billion in IBM (NYSE: IBM) shares. Just as important were other additions and dilutions he made to his portfolio. These became public as Berkshire Hathaway (NYSE: BRK.A, BRK.B), the company Buffett runs, released at list of its third-quarter holdings. Buffett increased his holdings in Wells Fargo (NYSE: WFC), a sign he is not as concerned about a new banking crisis as many bank analysts are. He moved even further into the financial sector with a new investment in Visa (NYSE: V). He also took new positions in military hardware provider General Dynamics (NYSE: GD), DirecTV (NYSE: DTV) and Intel (NYSE: INTC). All of these seem very conservative. Yet, Buffett has usually invested that way.

Occupy Wall Street forced out. For some reason, the financial headlines were dominated by the decision of New York City to use police to remove Occupy Wall Street protestors from the city’s Zuccotti Park. The story was the top headline in the Wall Street Journal and the New York Times. There is a great deal of evidence that the mass of people in their tents had disrupted that sales of businesses in the area. The large number of people in the park presented a public health hazard. Perhaps most important, the protestors were not successful enough for their removal by police to cause a ground swell of support. “Occupy” protestors are being moved out of their quarters by police in other cities. The movement ended almost before it began.

Douglas A. McIntyre

Filed under: Market Open Tagged: BRK-A, BRK-B, DTV, GD, IBM, INTC, LNKD, V, WFC

Dish Network Stumbles (DISH, DTV, VZ, T, NFLX, AMZN, SATS, CMCSA)

Paul Ausick — Mon, 07 Nov 2011 14:16:10 +0000

Dish Network Corp. (NASDAQ: DISH) came close to meeting consensus estimates on earnings and revenues, and in this case, close may be good enough. The company lost 111,000 subscribers in the third quarter, compared with a loss of just 29,000 in the same period a year ago. Dish added 656,000 gross new subscribers during the quarter, compared with 819,000 a year ago.

The company blamed the subscriber losses on more intense competition and a weak economy. The company’s main competitor, DirecTV (NASDAQ: DTV) offered subscribers free access to all NFL games, an offer that led to subscriber growth of 327,000 in the third quarter. Dish has no comparable deal with the NFL. The weak economy also hits Dish’s generally lower-income subscribers harder, causing them to cancel subscriptions more quickly when pennies need to be pinched. The company’s churn rate fell, from 1.98% a year ago to 1.83% in the third quarter, but the competitive punch from DirecTV and the “quality of subscribers acquired in past quarters” remain significant threats to subscriber retention.

Dish is also trying to position itself in the streaming market, where Verizon Communications Inc. (NYSE: VZ), AT&T (NYSE: T) are also competing for customers of their high-value broadband services. Then there are Netflix Inc. (NASDAQ: NFLX) and Amazon.com (NASDAQ: AMZN) which also offer subscription packages for streaming video.

Dish is still trying to finalize its acquisitions of DBSD North America and TerreStar, which the company plans to use to integrate wireless and wireline services in a single offering. FCC approval is pending for both acquisitions, but even if it comes, there are still a lot of questions about whether or not Dish can make the offering work.

The company is also working to integrate its acquisition of Blockbuster. The introduction of its ‘Blockbuster Movie Pass’ during the quarter didn’t exactly bring a rush of new subscribers. Current subscribers have to pay $10/month, more than either Netflix or Amazon charges for streaming content. Dish is hedging its plan to keep the 1,500 bricks-and-mortar stores it acquired with the Blockbuster purchase, saying it has negotiated “flexible termination” leases on 900 of the stores in the event that revenue growth doesn’t materialize as planned.

Dish reported diluted EPS of $0.71 on revenue of $3.6 billion. The consensus estimates called for EPS of $0.73 on revenue of $3.63 billion. Subscriber losses were forecast at 81,000, considerably below the actual loss of 111,000. To soften the blow, the company announced that it would pay a one-time dividend of $2/share

EchoStar Corp. (NASDAQ: SATS), the satellite spin-off from Dish, also reported third-quarter earnings today. The company posted revenue of $863 million and an EPS loss of -$0.22. Analysts were expecting revenue of $755 million and EPS of $0.38. Because Dish buys its set-top boxes from EchoStar, and because Dish had fewer gross additions, EchoStar felt the pain.

Dish carries a market cap of around $10.5 billion, about a third of DirecTV’s and a sixth of Comcast Corp.’s (NASDAQ: CMCSA) and a tenth of Verizon’s. What Dish is trying to integrate — wireless spectrum, wireline broadband, video rental stores, video streaming, satellite subscriptions — could be a huge success or not. If the company appears to be making it happen, a buyout by a telecom compay — say, Verizon — could make a lot of sense. We’ll know the integration is not working, if Dish ends up selling its spectrum licenses. Those are the key to its grand plan.

Dish is trading down more than -3% in the pre-market this morning, at $22.70, in a 52-week range of $17.95-$32.56.

Paul Ausick

Filed under: Cable Companies, Earnings, Entertainment, Telecom, Wireless Tagged: AMZN, CMCSA, DISH, DTV, NFLX, SATS, T, VZ

Expected Price Gains for Network and Cable TV Operators (CBS, DIS, CMCSA, TWC, DISH, DTV, VIA, LSTZA, DISCA, CHTR)

Paul Ausick — Mon, 31 Oct 2011 18:12:27 +0000

There are plenty of challenges facing the network and cable TV industry these day, not the least of which is the growth in streaming video. The well-known troubles of Netflix Inc. (NASDAQ: NFLX) to one side for a moment, the market for streaming is growing, while some cable operators are losing subscribers. Broadcast networks with content to license are better placed to profit, while cable operators with their own spectrum might be in the best position of all, at least in the near term.We’re looking today at 10 companies with broadcast or satellite/cable businesses (or both): CBS Corp. (NYSE: CBS), Walt Disney Co. (NYSE: DIS), Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), Dish Network Corp. (NASDAQ: DISH), DIRECTV (NASDAQ: DTV), Viacom, Inc. (NYSE: VIA), Liberty Starz Group (NASDAQ: LSTZA), Discovery Communications Inc. (NASDAQ: DISCA), and Charter Communications Inc. (NASDAQ: CHTR).

All data from Yahoo! Finance and current stock prices were gathered about noon today.

CBS Corp. (NYSE: CBS) has a median target price of $31.00 from 22 brokers. Shares are trading today at $25.66, for an implied gain of $5.34, or 21%. CBS’s forward P/E is 11.62 and the company pays a dividend yield of 1.6%. The stock’s 52-week trading range is $15.99-$29.68, and at today’s price that’s about 60% above its 52-week low, posted earlier this morning, and 14% below the 52-week high. CBS is scheduled to release third-quarter earnings on Thursday. The consensus EPS estimate is $0.46 on revenue of $3.43 billion. A year ago the company posted sales of about $3.3 billion and last quarter revenue totaled nearly $3.6 billion. There’s room for the share price to rise, but neither the 52-week high nor the target price are endangered in the near term.

Walt Disney Co. (NYSE: DIS) has a median target price of $40.00 from 24 brokers. Shares are trading today at $35.34, for an implied gain of $4.66, or 13%. Disney’s forward P/E is 12.28 and the company pays a dividend yield of 1.1%. The stock’s 52-week trading range is $28.19-$44.34, and at today’s price that’s about 25% above its 52-week low, posted earlier this morning, and 20% below the 52-week high. Disney is much more than a distribution channel. Its ability to create compelling content and then license it for further distribution is practically equal to a license to print money. Analysts expect EPS of $0.54 on revenue of $10.36 billion when Disney reports third-quarter earnings next week.

Comcast Corp. (NASDAQ: CMCSA) has a median target price of $30.00 from 24 brokers. Shares are trading today at $23.60, for an implied gain of $6.40, or 27%. Comcast’s forward P/E is 12.35 and the company pays a dividend yield of 1.9%. The stock’s 52-week trading range is $19.19-$27.16, and at today’s price that’s about 23% above its 52-week low, posted earlier this morning, and 13% below the 52-week high. Comcast owns both content and the fat pipes to distribute that content. Because distribution of streaming content is fast becoming a commodity, it’s Comcast’s NBCUniversal media business that will carry Comcast forward. The $30 target price is probably safe for a while, but the company’s 52-week high could be in the sights.

Time Warner Cable Inc. (NYSE: TWC) has a median target price of $85.00 from 22 brokers. Shares are trading today at $62.91, for an implied gain of $22.09, or 35%. Time Warner’s forward P/E is 11.25 and the company pays a dividend yield of 3.1%. The stock’s 52-week trading range is $47.89-$79.21, and at today’s price that’s about 31% above its 52-week low, posted earlier this morning, and 21% below the 52-week high. In its last quarter, Time Warner lost subscribers and posted lower profits. The company believes it will make its forecast annual profit, but warned that advertising was falling. It’s easy for subscribers to drop cable subscriptions in a tight economy, and as the holidays come round, dropping cable service to have a few more bucks to spend on gifts will occur to a lot of viewers.

Filed under: Analyst Calls, Cable Companies, Entertainment Tagged: CBS, CHTR, CMCSA, DIS, DISCA, DISH, DTV, LSTZA, TWC, VIA

Top Analyst Upgrades & Downgrades (AAPL, CAT, CHTR, CL, CMCSA, CMA, DE, DTV, IFT, KMB, LRCX, MW, NVLS, NTRI, RL, TEVA, PAY, WCRX)

Administrator — Wed, 28 Sep 2011 12:17:59 +0000

These are some of this Wednesday’s top analyst upgrades, downgrades, and initiations seen having an impact from Wall Street research calls.

Apple Inc. (NASDAQ: AAPL) Started as Buy with $495 target at Janney.
Caterpillar Inc. (NYSE: CAT) Started as Overweight at Barclays.
Charter Communications Inc. (NASDAQ: CHTR) Started as Overweight at JPMorgan.
Colgate-Palmolive Co. (NYSE: CL) Cut to Hold at Citigroup.
Comcast Corporation (NASDAQ: CMCSA) Started as Overweight at JPMorgan.
Comerica Incorporated (NYSE: CMA) Raised to Market Perform at Wells Fargo.
Deere & Co. (NYSE: DE) Started as Overweight at Barclays.
DIRECTV (NASDAQ: DTV) Started as Overweight at JPMorgan.
Imperial Holdings, LLC (NYSE: IFT) Cut to Market Perform at FBR.
Kimberly-Clark Corporation (NYSE: KMB) Cut to Hold at Citigroup.
Lam Research Corporation (NASDAQ: LRCX) Started as Overweight at JPMorgan.
Men’s Wearhouse Inc. (NYSE: MW) named value stock of the day at Zacks.
Novellus Systems, Inc. (NASDAQ: NVLS) Started as Overweight at JPMorgan.
NutriSystem Inc. (NASDAQ: NTRI) Started as Buy at Auriga.
Polo Ralph Lauren Corp. (NYSE: RL) Cut to Hold at Citigroup.
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) Started as Buy at Canaccord Genuity.
VeriFone Systems, Inc (NYSE: PAY) Started as Buy at Argus.
Warner Chilcott plc (NASDAQ: WCRX) Started as Buy at Canaccord Genuity.

JON C. OGG

Filed under: Analyst Calls Tagged: AAPL, CAT, CHTR, CL, CMA, CMCSA, DE, DTV, IFT, KMB, LRCX, MW, NTRI, NVLS, PAY, RL, TEVA, WCRX

How Much Is Hulu Really Worth? (CMCSA, NWS-A, DIS, AMZN, DTV, GOOG, YHOO, SKM, NFLX)

Administrator — Thu, 25 Aug 2011 19:00:08 +0000

The bidding process for the online television service Hulu has taken a strange path. The bidding has been delayed to the end of this week. It sure seems as though there is a discrepancy over what this is worth, but that might not be a bad thing actually.

Hulu is owned by Comcast Corporation (NASDAQ: CMCSA) via NBC, News Corp. (NASDAQ: NWS-A), Walt Disney Co. (NYSE: DIS), private equity firm Providence Equity Partners, and the Hulu team. The bidders are said to include Amazon.com Inc. (NASDAQ: AMZN), DirecTV (NYSE: DTV), Google Inc. (NASDAQ: GOOG), and Yahoo! INc. (NASDAQ: YHOO). What is interesting is that some have included SK Telecom Co. Ltd. (NYSE: SKM) of South Korea as a bidder. Others say that is not the case in more recent news.

The fight over values is somewhat confusing and it brings up the idea that the process could either be delayed further or could be cancelled. The Wall Street Journal said earlier in the week that bids might be as low as $500 million, but Reuters said sellers are looking for $2 billion or so.

Hulu was originally going to raise $200 to $300 million in an initial public offering, which would have come close to the $2 billion value. Then it changed its IPO plan to focus on subscription models.

Here is what is interesting, and something we have toiled with for valuing Hulu… Do you value it on subscribers or on ads? Huffington Post showed something that Hulu online advertising was twice as effective as TV.

It seems a bit surprising that Netflix, Inc. (NASDAQ: NFLX) is not considering this. The company has not really wanted to have an ad-model, and maybe it fears that it would have to bundle the service for free rather than as an upsell.

Hulu Plus is an ad-supported subscription service with current and back season shows from ABC, Comedy Central, FOX, NBC, and MTV to connected devices for $7.99 monthly. The free Hulu service aggregates some 260 content companies and the company claims some 625 top advertisers.

This sounds a lot like a situation that is not going to end with a mere press release, but we aren’t implying more than what we have seen at face value. As I am about as anxious as one can be to get away from a PC after work, I am not the person to value Hulu.

JON C. OGG

Filed under: Internet, Media, Mergers and Buy Outs, Private Equity Tagged: AMZN, CMCSA, DIS, DTV, GOOG, NFLX, NWS-A, SKM, YHOO

Media Digest (8/25/2011) Reuters, WSJ, NYTimes

247wallst — Thu, 25 Aug 2011 10:15:04 +0000

Steve Jobs resigns as CEO of Apple (NASDAQ: AAPL) and will be chairman. Tim Cook to take over as CEO. (Reuters)

Gold falls sharply and may be hurt by CME (NASDAQ: CME) margin requirements. (Reuters)

Hulu has interest from Yahoo! (NASDAQ: YHOO), Google (NASDAQ: GOOG), Amazon.com (NASDAQ: AMZN) and DirecTV (NASDAQ: DTV). (Reuters)

The FCC asks AT&T (NYSE: T) for more information on its bid for T-Mobile. (Reuters)

Demand for junk bonds nearly disappears. (WSJ)

The CBO says the real estate market makes economic forecasts difficult. (WSJ)

European banks face difficulty getting new funds to bolster balance sheets. (WSJ)

France offers new budget cuts and plans to accelerate growth to close budget gaps. (WSJ)

The SEC wants more information about fracking from companies that employ the practice. (WSJ)

Google settles drug ad violation with Canada for $500 million. (WSJ)

A Dutch court bans some Samsung phones due to violations of Apple patents. (WSJ)

Applied Materials (NASDAQ: AMAT) says there is a tech demand slowdown. (WSJ)

Carriers work with outside tech firms to expand broadband mobile capacity. (WSJ)

Nokia (NYSE: NOK) upgrades its smartphones. (WSJ)

Japan continues to work to bring down the yen. (WSJ)

Obama may push to allow people to refinance mortgages at current low rates. (NYT)

Companies move production of rare earths to China, which has over 90% of the world’s capacity. (NYT)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AAPL, AMAT, AMZN, CME, DTV, GOOG, NOK, T, YHOO

Top Analyst Upgrades & Downgrades (ARO, AGU, AGN, AIG, CI, DTV, DISH, DWA, GLGL, MMI, RIMM, RVBD, MOBI, S, RIG, VMW, DIS)

Administrator — Tue, 16 Aug 2011 12:38:52 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Tuesday morning.

Aeropostale, Inc. (NYSE: ARO) Raised to Hold at Jefferies.
Agrium Inc. (NYSE: AGU) Reiterated Buy as Value at Zacks.
Allergan Inc. (NYSE: AGN) Raised to Outperform at Credit Suisse.
American International Group, Inc. (NYSE: AIG) Cut to Underperform as Bear of the Day at Zacks.
CIGNA Corporation (NYSE: CI) Maintained Outperform as Bull of the Day at Zacks.
DIRECTV (NASDAQ: DTV) Cut to Neutral at BofA/ML.
Dish Network Corp. (NASDAQ: DISH) Cut to Underperform at BofA/ML.
DreamWorks Animation SKG Inc. (NASDAQ: DWA) Cut to Neutral at BofA/ML.
GLG Life Tech Corporation (NASDAQ: GLGL) maintained Buy but cut estimates and target to $7.50 at Canaccord Genuity.
Motorola Mobility Holdings Inc. (NYSE: MMI) Cut to Sell at Argus; Cut to Underperform at Raymond James; Cut to Neutral at Goldman Sachs; Raised to Market Perform at BMO.
Research-in-Motion Ltd. (NASDAQ: RIMM) Cut to Sell at Societe Generale.
Riverbed Technology, Inc. (NASDAQ: RVBD) Raised to Buy at SunTrust Robinson Humphrey.
Sky-mobi Limited (NASDAQ: MOBI) Cut to Hold at Citigroup.
Sprint Nextel Corporation (NYSE: S) Raised to Buy at Collins Stewart.
Transocean Ltd. (RIG : NYSE) maintained HOLD but raised target to $69 at Canaccord Genuity.
VMware Inc. (NYSE: VMW) Raised to Overweight at Barclays.
Walt Disney Co. (NYSE: DIS) Cut to Neutral at BofA/ML.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: AGN, AGU, AIG, ARO, CI, DIS, DISH, DTV, DWA, GLGL, MMI, MOBI, RIG, RIMM, RVBD, S, VMW

An Unexpected Blockbuster Resurrection

David J. Phillips — Tue, 09 Aug 2011 10:21:06 +0000

Blockbuster Inc. (BLOAQ.PK) is trading at price levels not seen since early spring, as traders responded enthusiastically to a published report that new owner, Dish Network Corp. (NASDAQ: DISH), has no plans to shutter most of the moribund video rental chain’s storefronts.

While Blockbuster has traded at a recent 8 to 10 cents a share, some investors are speculating that the satellite broadcaster’s plan to keep some 1,500 of the 1,700 brick-and-mortar outlets open must mean there’s some profit still to be mined from retaining stock ownership in the fallen king of traditional, direct-to-consumer DVD rentals. Don’t bet on it.

In a recent interview with the LA Times, Dish Network’s chief executive Joe Clayton articulated that the $320 million purchase of Blockbuster last April was integral to transforming the second-largest U.S. satellite TV provider (after DirecTV) from a pay-television service (with about 14 million subscribers) into a bigger player in wireless, broadband and an emerging competitor of streaming, online entertainment content and DVD-by-mail services to industry bellwether Netflix Inc. (NASDAQ: NFLX).

“I Believe!”

That the Blockbuster name still had–and has–value isn’t a new revelation. When Dish Network beat out other bidders in a bankruptcy auction for assets of Blockbuster last April–including merchandise inventories, online demand, by-mail (1.6 million subscribers), and brick-and-mortar customer lists–it was recognized at the time that the acquisition would complement existing video offerings while presenting cross-marketing and expanded service opportunities.

When Blockbuster filed for reorganization in September 2010, it was generally understood that after selling assets and paying down secured debt there would unlikely be any liquid assets left over for the subordinated claims of either preferred or common stockholders.

As of July 12, 2011, out of $1.14 billion owed to bondholders and other creditors, a review of regulatory filings suggests that after liquidation efforts are completed, (at-most) $124.6 will be repaid, principally to holders of $675 million (face value) in senior notes (due September 2014), leaving nothing in proceeds for stockholders.

“Make It a Blockbuster Night”

In active trading, however, investors recently assigned a market capitalization of more than $14 million in value to Blockbuster common stock. Most likely, driven by an unfounded belief there is tangible value to the real estate–those 1,700 brick-and-mortar stores–Dish Networks plans to continue operating.

Unfortunately, the purchase by Dish Networks didn’t include much real estate–just $118 million in fixtures and related-store equipment, according to Blockbuster’s 2010 annual report. Though some franchisees owned underlying properties, the bulk of Blockbuster locations were leased–from landlords (owed in the aggregate) more than one-billion dollars in long-term, noncancelable rental obligations!

When debt settlements and court-supervised liquidation sales are completed in the next few months, common stockholders will find out that it won’t be a “Blockbuster Night.”

David J Phillips

Filed under: Bankruptcy, Entertainment Tagged: BLOAQ.PK, DISH, DTV, NFLX