UPDATE, 9:25 AM: Time Warner Cable’s shares are off 6.9% at midday — even as the overall market is rallying on an encouraging economic report and news of a deal to help resolve Greece’s debt crisis. Comcast and Cablevision also are down about 2.9%. Credit Suisse analyst Stefan Anninger says he was “surprised” by the drop in phone cutomers at TWC and wonders whether many chose to cut the cord and rely on wireless phones. But Wells Fargo’s Marci Ryvicker says that the problems at TWC probably won’t be seen at Comcast which “is likely to once again show significant outperformance versus its peers” — and may benefit as analysts lower their expectations. Meanwhile, Bernstein Research’s Craig Moffett warns that the drop in TWC video customers is a bad sign for satellite companies: “As pure-play video providers, profitability is unsustainable when their direct competitors, the cable (operators), are experiencing video falling margins.” DirecTV and Dish Network shares are down less than 1%.
PREVIOUS, 4:34 AM: The No. 2 cable operator reported net income of $356M, down 1.1% vs the same period last year, on revenues of $4.9B, up 3.7%. Earnings came in at $1.09 a share, missing the $1.14 that analysts expected. They also thought revenues would be slightly higher at $4.95B. The miss came as Time Warner Cable lost 128,000 residential video customers, ending the quarter with 11.9M. The company says that the drop in subs as well as in revenues from premium channels and transactional VOD outweighed the additional cash the company saw from price increases and payments for installation charges and DVR services. The number of home broadband customers increased 9.2% to 9.8M in the quarter — but the company lost 8,000 residential phone subscribers, ending with 4.5M. All told, CEO Glenn Britt says that the company “posted steady financial progress” but will continue to “focus our efforts on maximizing our growth opportunities.” Still, some analysts are concerned. “If broadband is the anchor product, then video is increasingly simply the anchor,” Bernstein Research analyst Craig Moffett says. “Subscribers are falling, costs are rising, and margins are contracting.”
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