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Comcast profits flat in quarter

10¢ per share fails to meet expectations; revenues up slightly

Comcast's T.J. Berrett heads out on a service call in August in Salt Lake City. Comcast is the nation's largest cable television operator.
Comcast's T.J. Berrett heads out on a service call in August in Salt Lake City. Comcast is the nation's largest cable television operator.
Douglas C. Pizac, Associated Press

PHILADELPHIA — Comcast Corp., the nation's largest cable TV systems operator, said Thursday that profit for the third quarter was essentially flat, even as revenue from digital cable and high-speed Internet services showed improvement.

Net income was $222 million, or 10 cents per share, compared with $220 million, or 10 cents per share, a year earlier. The results fell short of the expectations of analysts surveyed by Thomson Financial, who expected the company to report earnings of 14 cents a share.

Third-quarter revenue rose to $5.58 billion from $5.1 billion.

The company's Class A shares fell $1.44, or 5 percent, to close at $27.36 on the Nasdaq Stock Market as it lowered its forecast for operating cash flow for the full year.

Comcast said revenue at its cable operations rose 10 percent to $5.3 billion. Higher monthly revenue per subscriber for its basic services, plus a 12 percent increase in digital subscribers, led to an almost 6 percent gain in video revenue. The division added 307,000 new digital subscribers during the quarter and said 44 percent of its basic customers now subscribe to digital services.

The number of basic subscribers was unchanged at 21.4 million.

Comcast said revenue from its high-speed Internet service rose 26.1 percent to $1 billion in the third quarter, reflecting a 24.2 percent increase in subscribers.

The cable operator lowered its estimate for full-year growth in operating cash flow to 13 percent from a previous range of 14 percent to 15 percent, citing costs for launching coverage of National Hockey League games on its Outdoor Life Network and other content spending. Free cash flow, which excludes interest, income taxes and capital spending, is expected to grow by 30 percent, compared with a previous estimate of 35 percent to 45 percent, reflecting additional spending on set-top boxes and the digital video service.

Cable capital expenditures increased 3.2 percent to $899 million compared with $871 million in the third quarter of 2004.

Vijay Jayant, an analyst with Lehman Brothers, said he thought the higher expenditures played a role in the lower-than-expected earnings. "The fact that it looks like they will have to spend more is a fear," Jayant said.

Craig Moffett, an analyst at Sanford C. Bernstein, said earnings were hurt because Comcast is falling behind with its voice-over-IP technology, an Internet-style phone service that routes calls over Comcast's broadband network.

"The lack of an aggressive voice-over-IP rollout is hurting Comcast in a whole host of areas," Moffett said. "They are late getting it to market."

Comcast said it was optimistic about a joint cell-phone venture announced this week. The company joined three other top cable TV providers on Wednesday in announcing plans to deliver their own cell phone services through Sprint Nextel Corp., creating a "quadruple play" of voice, video, Internet and wireless products for a new battle against telephone companies.

The deal envisions a launch of cell phones and services sometime next year. The products will be co-branded by Sprint and one of the cable companies.

"We have for a long time said that wireless is a potentially important fourth product line that we would like to explore," Brian Roberts, chief executive of Comcast, said during a conference call Thursday. "I think it's a wonderful, natural alliance."

The company also said Wednesday that it spent more than $1 billion to buy back its common stock in the third quarter as part of a repurchase program begun in December 2003. Since that time, the company has spent $4.1 billion on buybacks.