2nd UPDATE: Liberty Media Operating Income Rises As QVC Improves
August 07 2009 - 1:18PM
Dow Jones News
Liberty Media Corp. showed improved second-quarter operating
results across its three portfolios of media and ecommerce
businesses on Friday, with results at its struggling home-shopping
network, QVC, posting a smaller drop in revenue than it did the
past few quarters.
Its Starz Entertainment business continued to post strong
results, but its subscriber count fell 3% from the first quarter in
a sign that pay-TV subscribers may be dropping access to premium
movie channels in the economic downturn.
Starz President Bill Myers said on a conference call with
analysts following the release that given uncertainty about the
economy, he couldn't predict whether Starz would see further
erosion in its subscribers.
Liberty, which is controlled by media mogul John Malone, didn't
repurchase shares in any of its three business units, each with
their own tracking stock.
Shares of Liberty Interactive (LINTA LINTB), which track QVC,
rose 13% to $8.38 on hopes that the home shopping network is
feeling the beginning of an economic recover, while the other
tracking stocks had lesser gains.
Liberty doesn't report consolidated net earnings for the entire
company, but the company said its overall operating income,
excluding depreciation and amortization, rose 17% to $505
million.
By that same measure, Liberty Interactive - which also tracks
Backcountry.com, Bodybuilding.com and its holdings in
IAC/InterActive Corp. (IACI), Ticketmaster Entertainment Inc.
(TKTM) and Expedia Inc. (EXPE) - posted a slight increase to $412
million. Revenue decreased 1% to $1.9 billion.
Liberty Entertainment (LMDIA LMDIB) - which tracks Starz
Entertainment, Liberty Sports Group and its majority holdings in
DirecTV Group Inc. (DTV) - posted a 54% in operating income before
depreciation and amortization to $105 million. Revenue gained 8% to
$296 million.
Shares of Liberty Entertainment added 14 cents to $27.47.
Liberty Capital (LCAPA LCAPB) - which tracks Starz Media,
TruePosition, the Atlanta Braves baseball team and holdings in
Sirius XM Radio Inc. (SIRI), Time Warner Inc. (TWX), Time Warner
Cable Inc. (TWC) and Sprint Nextel Corp. (S) - posted operating
income before depreciation and amortization of $44 million,
reversing a loss in the year-ago period. Revenue rose 14% to $199
million.
Shares of Liberty Capital added 5.9% to $17.06.
President and Chief Executive Greg Maffei said QVC, Liberty's
largest business, which has been struggling with a slowdown in
consumer spending, posted an "improved financial performance." Its
second-quarter revenue fell 4.4% to $1.68 billion, including a 2%
drop in the U.S. Excluding items, operating income before
depreciation and amortization fell 3.6%.
The home-shopping company has been moving to cut inventory
levels and limit extending credit to help lower bad-debt costs.
Facing a cash shortage after the financial crisis, QVC renegotiated
agreements with creditors on its $4.5 billion debt load in June. It
retired $750 million in near-term maturities, using $250 million in
cash from QVC and $500 million that it borrowed from Liberty's two
other business units.
QVC President and CEO Mike George noted the U.S. results were an
improvement over the last few quarters, when revenue had been down
between 9% and 12%.
At Starz Entertainment, earnings before depreciation and
amortization jumped 54% as revenue grew 7.6% on subscription
growth.
Fitch Ratings said in June that Liberty Media will be weaker
when it splits off Liberty Entertainment, which also owns 56% of
DirecTV, in the fourth quarter. DirecTV has said it will merge with
majority shareholder Liberty Entertainment in a move that some
analysts view as paving the way for a sale of the satellite TV
provider.
In February, Liberty lent Sirius XM Radio Inc. (SIRI) $530
million for a 40% stake to keep the satellite radio company run by
Mel Karmazin from falling into bankruptcy. Maffei said Friday that
bankruptcy is no longer a prospect for Sirius, which reported a
wider quarterly loss and a subscriber decline on Thursday even as
it raised its earnings outlook for the year.
"We're convinced [the company has hit bottom] - the
[second-quarter] results seem to demonstrate that," Maffei
said.
-By Nat Worden, Dow Jones Newswires; 212-416-2472;
nat.worden@dowjones.com
(Kerry Grace Benn contributed to this story)