source
With Voom Sale, Cablevision Founder Faces Choices
Friday January 21, 6:54 PM EST
NEW YORK (Dow Jones)--A respected cable industry pioneer, Chuck Dolan is facing a crossroads in his long and varied career.
An industry veteran, Dolan, 78, started and built Cablevision Systems Corp. ( CVC) into the sixth largest cable operator in the country. He also created Home Box Office Inc., the first premium cable TV channel.
But for the past several years, Dolan has moved away from cable and spent the better part of his time focused on Voom, a startup satellite TV business. Now that Cablevision has announced the sale of Voom to EchoStar Communications Corp. (DISH) for $200 million, Dolan will have to decide what to do next.
"Cable is not a religion, it's a delivery system," he once told those who wanted to know why he was showing so much interest in a rival pay-TV technology.
Nagged by a doubtful Wall Street, Dolan shrugged off criticism, hoping to prove naysayers wrong. After all, HBO drew doubts when it first launched, he pointed out. But after millions of dollars invested and only 26,000 subscribers, Dolan was forced to give up his satellite project.
Despite Dolan's stake in and his continued enthusiasm for Voom, Cablevision's board of directors and Jim Dolan, his son and chief executive, reportedly stood up against the founder, forcing him to sell. The Dolan family owns about 75% of the company's voting shares, but Chuck Dolan himself owns 41%. The elder Dolan's control in the company has made it hard for others to oppose his decisions. Chuck Dolan reportedly threatened to use his voting power to unseat directors who opposed him.
"It's been known for some time that Chuck was in favor of Voom and Jimmy and the board were not," said Kurt Funderberg of Harris Associates, which owns shares of Cablevision.
The board's turnaround and willingness to stand up to its chairman comes at a time the idea that directors can have personal liability for a company's missteps is gaining ground. Last week, court documents revealed that former directors at WorldCom, now MCI Inc. (MCIP) and Enron Corp. (ENRNQ), agreed to pay $31 million out of their own pockets to help settle shareholder lawsuits.
Sanford C. Bernstein & Co. analyst Craig Moffett wrote in a research note that the sale of Voom is "a welcome signal" that Cablevision's board members are " appropriately respectful of their fiduciary obligations,"
But for the elder Dolan, without his pet project, it's anyone's guess what he will want to do now. One possibility that's has been circulating for years is the idea is that Dolan might put Cablevision up for sale.
Dolan "doesn't seem to have that much interest in the cable business" and he's in a position now in which he has lots of assets at Cablevision and can't pursue his entrepreneurial dreams, said Anthony Gennaro, media analyst at Principal Global Investors Group.
Cablevision has never been particularly receptive to the idea of selling, but that could be changing, said Richard Greenfield, an analyst at New York research firm Fulcrum Global Partners.
"Whether it is fear of being personally held liable or simply a greater focus on independence and shareholder value, the board of Cablevision would appear to be more receptive to a takeover offer than ever before," Greenfield, who does not own shares, said.
Time Warner Cable, whose New York City cable system is next to Cablevision's territories, has long been seen as the most interested party. But the company has already cast a joint bid with Comcast Corp. (CMCSA, CMCSK) for bankrupt Adelphia Communications Corp.'s (ADELQ) cable systems. Adelphia's call for bids ends this month. If Dolan wants to sell, "he'll have to do something sooner rather than later," Gennaro said.
Cablevision, with its tightly focused customer base in the New York area, is considered prime realty. Greenfield said that buying Cablevision subscribers would cost more, but the added cost would be "worth it."
Adelphia subscribers are estimated to be worth about $3,500 each, while Cablevision's could be worth between $4,000 and $4,500 each.
Consideration of any bid would require Chuck Dolan's approval, but pressure from the board and his apparently waning interest in cable might do the trick, analysts said.
Cablevision's shares closed up 13.2% at $28.84 Friday - a 52-week high. Charlie Schueller, a spokesman for Cablevision, declined to comment. Chuck Dolan was not available.
-By Ellen Sheng, Dow Jones Newswires; 201-938-5863; ellen.sheng@dowjones.com
With Voom Sale, Cablevision Founder Faces Choices
Friday January 21, 6:54 PM EST
NEW YORK (Dow Jones)--A respected cable industry pioneer, Chuck Dolan is facing a crossroads in his long and varied career.
An industry veteran, Dolan, 78, started and built Cablevision Systems Corp. ( CVC) into the sixth largest cable operator in the country. He also created Home Box Office Inc., the first premium cable TV channel.
But for the past several years, Dolan has moved away from cable and spent the better part of his time focused on Voom, a startup satellite TV business. Now that Cablevision has announced the sale of Voom to EchoStar Communications Corp. (DISH) for $200 million, Dolan will have to decide what to do next.
"Cable is not a religion, it's a delivery system," he once told those who wanted to know why he was showing so much interest in a rival pay-TV technology.
Nagged by a doubtful Wall Street, Dolan shrugged off criticism, hoping to prove naysayers wrong. After all, HBO drew doubts when it first launched, he pointed out. But after millions of dollars invested and only 26,000 subscribers, Dolan was forced to give up his satellite project.
Despite Dolan's stake in and his continued enthusiasm for Voom, Cablevision's board of directors and Jim Dolan, his son and chief executive, reportedly stood up against the founder, forcing him to sell. The Dolan family owns about 75% of the company's voting shares, but Chuck Dolan himself owns 41%. The elder Dolan's control in the company has made it hard for others to oppose his decisions. Chuck Dolan reportedly threatened to use his voting power to unseat directors who opposed him.
"It's been known for some time that Chuck was in favor of Voom and Jimmy and the board were not," said Kurt Funderberg of Harris Associates, which owns shares of Cablevision.
The board's turnaround and willingness to stand up to its chairman comes at a time the idea that directors can have personal liability for a company's missteps is gaining ground. Last week, court documents revealed that former directors at WorldCom, now MCI Inc. (MCIP) and Enron Corp. (ENRNQ), agreed to pay $31 million out of their own pockets to help settle shareholder lawsuits.
Sanford C. Bernstein & Co. analyst Craig Moffett wrote in a research note that the sale of Voom is "a welcome signal" that Cablevision's board members are " appropriately respectful of their fiduciary obligations,"
But for the elder Dolan, without his pet project, it's anyone's guess what he will want to do now. One possibility that's has been circulating for years is the idea is that Dolan might put Cablevision up for sale.
Dolan "doesn't seem to have that much interest in the cable business" and he's in a position now in which he has lots of assets at Cablevision and can't pursue his entrepreneurial dreams, said Anthony Gennaro, media analyst at Principal Global Investors Group.
Cablevision has never been particularly receptive to the idea of selling, but that could be changing, said Richard Greenfield, an analyst at New York research firm Fulcrum Global Partners.
"Whether it is fear of being personally held liable or simply a greater focus on independence and shareholder value, the board of Cablevision would appear to be more receptive to a takeover offer than ever before," Greenfield, who does not own shares, said.
Time Warner Cable, whose New York City cable system is next to Cablevision's territories, has long been seen as the most interested party. But the company has already cast a joint bid with Comcast Corp. (CMCSA, CMCSK) for bankrupt Adelphia Communications Corp.'s (ADELQ) cable systems. Adelphia's call for bids ends this month. If Dolan wants to sell, "he'll have to do something sooner rather than later," Gennaro said.
Cablevision, with its tightly focused customer base in the New York area, is considered prime realty. Greenfield said that buying Cablevision subscribers would cost more, but the added cost would be "worth it."
Adelphia subscribers are estimated to be worth about $3,500 each, while Cablevision's could be worth between $4,000 and $4,500 each.
Consideration of any bid would require Chuck Dolan's approval, but pressure from the board and his apparently waning interest in cable might do the trick, analysts said.
Cablevision's shares closed up 13.2% at $28.84 Friday - a 52-week high. Charlie Schueller, a spokesman for Cablevision, declined to comment. Chuck Dolan was not available.
-By Ellen Sheng, Dow Jones Newswires; 201-938-5863; ellen.sheng@dowjones.com
