Liberty Media’s top brass helped themselves to a slice of humble pie at an investors’ meeting Wednesday, setting out to explain the conglom’s labyrinth of business units in hopes of shoring up its flagging stock price.
Meeting, which packed Gotham’s Hudson Theater to the rafters with Wall Streeters, is the third such confab held by a media giant in recent weeks to explain lousy market performance and lay out plans for the future.
Jean-Marie Messier, head of Vivendi Universal, and AOL Time Warner chief Richard Parsons both went before shareholders over the past month for mea culpas.
Liberty chairman John C. Malone — long revered among investors for his savvy and intricate dealmaking — acknowledged that even he may have gotten a little ahead of himself during the boom times of the past decade.
Two years ago, “every asset we had was at an all-time high,” Malone said. “There was so much air in the market during those days that we were even embarrassed at the market capitalizations that some of our investments had achieved.”
Since then, many of those investments have fallen back to Earth — along with Liberty’s stock price. Shares tumbled to a recent low of $9.75 after trading around $18 last summer. But they rebounded some Wednesday during the afternoon presentation, closing up 4.5% at $11.92.
Company owns a dizzying array of stakes in various public and private companies, including News Corp., AOL Time Warner, Vivendi Universal, Discovery Communications, the QVC shopping network and several cable-system operators worldwide.
$1.5 bil loss
Liberty posted a first-quarter loss of just under $1.5 billion, due to a $1.8 billion charge incurred after a change in accounting rules. Revenue for the quarter edged up 1.8% to $513 million.
Liberty has hit a number of snags in its investment plans over the past few months. Its stake in Viv U, acquired as part of the French conglom’s elaborate tie-up with USA Networks, has since shrunk in value. More recently, separate discussions to buy stakes in cable assets owned by Deutsche Telekom and ailing U.K. operator NTL have stalled.
“Obviously we took some flyers on some investments that didn’t work out,” Malone conceded. “We still believe that there are some great opportunities for us in cable TV, but our enthusiasm is cushioned by the capital-intensive nature of these businesses.”
Malone and his executive team promised that they would pursue investments more judiciously now that the days of easy financing are over. By the same token, however, exec said that with many cable operators now up to their necks in debt, Liberty may be able to pick up some lucrative assets at bargain prices.
“What seems to be cheap now also seems to get cheaper if one waits,” he said. “There is the opportunity to take advantages of debt pressures on other companies.”
Malone’s own company isn’t devoid of debt pressures. United GlobalCom — which controls European cable system United Pan-Europe Communications and is itself controlled by Liberty — is in the process of restructuring its crushing $9 billion debtload and has axed 1,400 employees to trim costs. On Wednesday, UPC was delisted from the Nasdaq stock market.
Despite skepticism on Wall Street, Liberty’s execs did their best to pitch the company as a grossly undervalued array of assets.
For example, prexy and chief exec Robert R. Bennett said that, at current prices, investors were valuing Liberty’s dozens of private investments at roughly $7 billion. Bennett said that value corresponded roughly to the company’s stake in QVC, plus two other smaller assets, meaning Liberty investors get the company’s investments in more than 20 other private properties “free of charge.”
Meanwhile, the heads of Liberty’s two flagship content businesses, cable-TV channel operators Starz Encore and Discovery, both touted strong growth in revenues and cash flow, and they pointed to future growth driven by higher-margin video-on-demand services.