Comcast, the largest U.S. cable company, has responded to shareholder group Chieftain Capital Management, which is trying to oust chief Brian Roberts for wasting money and offering a lousy return on investment.
Comcast’s boilerplate statement, published this afternoon by Broadcasting & Cable:
The company “continues to perform well, consistently delivering superior revenue and cash-flow growth and significant free cash flow despite a challenging economy and an increasingly competitive environment. Our management team is intensely focused on executing our strategic plan, investing for profitable growth and creating long-term shareholder value.” … “We have met with Chieftain and have discussed their perspective on numerous occasions. While we have expressed our disagreement with Chieftain’s perspective in the past, we will review Chieftain’s most recent correspondence and will respond in due course.
We understand the investors’ concern — Chieftain has seen a 0% return on their Comcast investment since late 1998. And things are especially bad this year: CMCSA shares are down some 44% from their 52-week high, and are flirting with their year-low.
But the most sober analysis might be from Rich Greenfield of Pali Research, who urges Comcast to keep spending (registration required) despite some pleas to the contrary. “Like it or not, Comcast is in a ‘war’, with competition escalating on existing fronts (satellite and RBOCs) and all-new fronts (Apple, wireless),” he writes.
In other words, unless Comcast is simply going to wave the white flag, it has no choice but keep spending. If it can’t upgrade its broadband speeds, improve its TV offerings, and generally keep up with its competitors, Chieftain’s investment returns won’t get better — ever.
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