Chieftain Capital Management owns over 60 million Comcast (CMCSA) shares, which is 2% of share outstanding. The investing firms want CEO Brian Roberts to leave. The problem is that his father founded the company and the family has voting control. In other words, Chieftain is fighting an uphill battle against an entrenched enemy.
What Chieftain really wants is its money back Comcast traded above $30 last year and now sits around $17. Perhaps, the investor says, Comcast would borrow money and pay a "meaningful" dividend; revise its executive compensation and dismantle its dual-class voting structure as The Wall Street Journal writes.
Comcast is not going to do any of those things. For good or ill, the Roberts family owns Comcast. As 24/7 Wall St. has pointed out, he is not leaving. The other shareholders are along for the ride. Cable made many investors a lot of money. CMCSA stock went from $17 in late 2006 to over $30 early last year. It is hard to debate that the return there is fairly good.
Chieftain also does not mention that all cable stocks are down. Comcast is up against the same forces that plague Cablevision (CVC), Time Warner Cable (TWC), and Charter (CHTR). Because of its size and balance sheet Comcast may be better off than the rest.
As for sending Chieftain and other shareholders a big dividend check, that money is likely to be used to upgrade current infrastructure to better compete with fiber-to-the-home offerings from telephone companies. That new technology is a real threat to cable’s franchise in broadband and TV. Comcast has already said it will increase high definition channels and move thousands of movies onto its VOD service.
Chieftain can sit outside the Comcast headquarters and cry all it wants to. The tears would be better shed elsewhere.
Douglas A. McIntyre
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