The Wall Street Journal-20080119-The Buzz- Call to Oust Comcast-s Roberts By Investor Draws Mixed Reviews
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The Buzz: Call to Oust Comcast's Roberts By Investor Draws Mixed Reviews
Despite widespread disillusionment with the recent stock performance of cable operator Comcast Corp., Wall Street appeared to be divided over whether a major shareholder's call for the ouster of the company's chief executive makes sense.
Chieftain Capital Management Inc., which manages 60.5 million Comcast shares, or about 2% of its stock outstanding, this week wrote to Comcast calling for the ouster of CEO Brian Roberts, describing his management as a "Comcastrophe" for shareholders after a decade of "zero return."
But some analysts and investors said that while they were unhappy with Comcast's stock, which has dropped 43% over the past year, ousting Mr. Roberts was an extreme move they didn't support. In Nasdaq Stock Market 4 p.m. composite trading , the shares fell 38 cents, or 2.2%, to $17.03.
"Clearly investors are frustrated with the stock price," said media analyst Thomas Eagan, who recently left Oppenheimer & Co. "But asking for his resignation is a little bit premature."
Mr. Eagan and several investors said they recognize that the cable industry overall is in a slump, with competition from phone companies offering TV service more fierce than ever. They think Comcast has been slack in its approach to fighting back, and many, including Glenn Greenberg, Chieftain's managing director, are calling for Comcast to return cash to shareholders.
Jessica Reif Cohen, an analyst at Merrill Lynch, in a note to investors touted Mr. Roberts's leadership, which includes impressive growth to become the largest video provider in the U.S. and said calls for his ouster were "misplaced."
Still, some investors applaud Mr. Greenberg's move simply because pressuring Comcast could prompt the company to take more aggressive steps as it battles Verizon Communications Inc. and AT&T Inc., which are pouring billions of dollars into competing with cable companies.
"I would say it's never bad to shine a spotlight on management," said Chris Marangi, associate portfolio manager of Gamco Investors, an investment firm that owns 1.8 million shares of Comcast.
Investors such as Mr. Marangi say there is little Mr. Roberts can control about the sagging economy and the heavy resources competitors are pouring into battling Comcast. Besides, Mr. Marangi said, since there is no heir apparent to Mr. Roberts, eliminating him wouldn't necessarily leave the company in better hands.
In a survey that Chieftain completed last fall of other shareholders about why they think Comcast's stock had underperformed, 23 responded, representing 565 million Comcast shares, including some of Comcast's biggest investors. They cited such issues as "wasteful use of capital," "unwillingness to appropriately lever the balance sheet" and "insufficient return of capital in the form of buybacks and dividends."
Chieftain's letter also has highlighted a sore spot for some investors: that Mr. Roberts owns supervoting shares giving him 33.3% of the voting power, despite owning about 0.3% the outstanding shares. His stake amounts to just 9.4 million shares, the company said, out of 3.07 billion shares outstanding.
The Communication Workers of America, a union that represents about 2,500 Comcast workers, offered an unsuccessful resolution on Comcast's proxy last year to eliminate the dual-class structure of Comcast's voting shares. A spokeswoman for the union said it will try again this year.
"This whole action of unhappy shareholders certainly puts Comcast and Brian Roberts on notice that some changes need to be made," said the spokeswoman, Candice Johnson.
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Merissa Marr contributed to this article.
