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Comcast drops Disney offer
No. 1 cable operator withdraws $48B merger bid, mulls possible offer for rival Adelphia.
April 28, 2004: 4:32 PM EDT

NEW YORK (CNN/Money) - Comcast Corp. dropped its $48 billion offer to acquire Walt Disney Co. Wednesday, citing no interest on the part of Disney's embattled management, but the nation's biggest cable company said it might bid for the assets of bankrupt rival Adelphia Communications instead.

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CNNfn's Jen Rogers reports on what's next for the cable giant after it dropped its $48 billion offer to acquire Walt Disney Co.

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Philadelphia-based Comcast also reported that it swung to a profit in the first quarter, though the results fell short of forecasts on Wall Street.

The dropping of the Disney bid, first announced in February, came as no surprise. Comcast's all-stock offer had been valued below Disney's current stock price for some time.

But it was enough to send Comcast (CMCSA: up $0.20 to $30.20, Research, Estimates) stock up about 2.3 percent in early New York Stock Exchange trading, while shares of Disney (DIS: down $0.23 to $23.95, Research, Estimates) fell 1.7 percent.

"We have always been disciplined in our approach to acquisitions," Comcast CEO Brian Roberts said in a statement. "Being disciplined means knowing when it is time to walk away. That time is now."

Roberts put the reason for the dropped offer at the feet of Disney's management, including embattled CEO Michael Eisner, who received the backing of Disney's board of directors Tuesday.

"It has become clear that there is no interest on the part of Disney's management and board in putting Comcast and Disney together," Roberts added.

Happy with the numbers

Comcast executives said they were pleased with the first-quarter results, despite missing analysts' average forecasts.

They pointed to improved revenue and subscriber numbers for premium products such as digital cable and high-speed Internet service. They said the company is as healthy as it has ever been.

"We told you from the outset we would be disciplined and we wouldn't bid against ourselves," Roberts told investors on a conference call. "Consummating a transaction would have required us to give up substantially more Comcast shares than we originally proposed. That didn't make good financial sense, particularly given these results."

Brian Roberts
Disney, Walt, Co

Comcast also said it will move forward with a previously announced $1 billion stock buyback program now that it has dropped the Disney bid. Roberts said some investors had believed Comcast was signaling it wanted to move away from cable when it made the Disney bid, and he said that was not the case.

"We love the cable business. We've never been more bullish," he said. "We know no way to make clearer our confidence (than with the share repurchase)."

And Roberts signaled that the company, which became the largest cable company with its 2002 purchase of AT&T cable, is not done with acquisitions, even though it's dropping its bid for Disney. He expressed interest in possibly bidding for the assets of bankrupt cable operator Adelphia, which were put on the block last week.

"I think as a matter of course we are going to look at new opportunities for growth," said Roberts. "The Adelphia situation did not factor into today's (Disney) announcement. The reality is the world keeps moving forward. We always look at cable systems. I'm sure we'll look at those."

Earnings below forecast

Separately, Comcast reported a net profit of $65 million, or 3 cents a share, compared with a loss of $297 million, or 13 cents, a year earlier. Analysts surveyed by earnings tracker First Call had forecast earnings of 7 cents a share. Revenue rose 9.8 percent to $4.91 billion.

Profits were driven by adding lucrative high-speed Internet customers -- 394,000 subscribers in the first quarter -- and 192,000 digital video customers. The company also reaffirmed its earlier earnings guidance for the rest of the year.

"We continue to make each of our services even more compelling by adding more features and applications that provide more value to our customers," Roberts said in a separate statement.

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Merrill Lynch analyst Amy Dickenson upgraded Comcast to a "buy" Wednesday from a "neutral" rating and reinstituted a 12-month price target of $46 for the stock, compared with its current level of about $31.

"In our view, Comcast's action is yet another testimony to the management's financial discipline and we would expect the company to exercise similar discipline should it pursue other opportunities in the future," she wrote in a note to clients.

But Marquis Investment Research analyst Greg Gorbatenko kept his "hold" recommendation in place, saying Comcast is not seeing the growth he had hoped in some products.

"Comcast is finding believers in its cable model. High-speed Internet sales look like they are slowing, largely due to Comcast not really price-cutting to match (phone companies') DSL. Lastly, we continue to wait for them to turn around their telephony biz, which continues to have subscriber loss," he wrote to clients.  Top of page

-- Reuters contributed to this story.

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