FROM WESTERN CABLE
“The future is huge.” That’s how Liberty Media Chairman John Malone explained Wall Street’s valuation of Internet and the rest of the information industrial complex.
But at the same time, the future is still, well, at least five years away, said Malone, who estimated it will take that long before a majority of American homes are passed by the full-blown digital cable that Wall Street is banking on.
Those digital offerings include super high-speed Internet access, telephone service that rivals the Baby bells and hundreds of television channels. Malone made the statement at the annual Western Cable Show, underway in Los Angeles this week.
AT&T is banking that those services will be so valuable to consumers that it will justify the $50 billion price tag that Malone got when he sold the former Tele-Communications Inc. to the long distance giant.
When Comedy Central’s Ben Stein, who served as moderator at the panel, asked pointed questions about the valuation, Malone pointed out that TCI didn’t turn a profit during the 27 years he worked at the company. Instead, revenues were reinvested in the company for annual growth rate of 37%, according to Malone. Essentially, said Malone, Wall Street is betting on explosive growth in the technology and information industries.
Red hot retailing
Stein asked Yahoo honcho Mark Cuban, founder of Broadcast.com, what his estimate was on the revenues from electronic retailing for the Christmas season. Cuban’s answer: “Take the highest estimate and double it.”
Cuban also defended Wall Street’s valuation of Yahoo’s stock which closed Thursday at $341, up $13.50 per share, on earnings of just 27¢ per share. Among its core assets, said Cuban, is the information it has about consumers, including the names, addresses and buying patterns of more than 10 million Americans. It is that kind of information that can prove invaluable over time, said Cuban.
Neither Malone or Cuban would deny that the bottom could drop out of the market. “There is a lot of stupid money out there,” said Cuban. But the challenge of a down market is being in a position to take advantage of the situation by buying up cheap property, said Malone.
“Great companies do better in downturns,” said Malone.
Should the bottom drop out of the stock market, both Malone and Cuban said they are well positioned to buy strong companies.