Interview: Timer Warner Cable
>> shares of research in motion trading lower in extended hours. the company says it may miss analysts’ forecasts in the current quarter. research in motion reported a fourth-quarter net less of $2.6 million due to costs in settling a patent dispute. the loss of one cent a share compared with net income of 23 cents a year earlier. sales jumped to $405 million, shy of analysts’ estimates. if you exclude some costs and gains, profit was 71 cents. on that basis, it beat analysts’ estimates of 65 cents a share. the national cable telecom association meeting is underway in san francisco. one of the biggest players there is time warner cable which is the second largest cable operator in the u.s. chairman and c.e.o. sat down with erin burnett.
>> it appears a big focus of the industry meeting has been on convergence and new technologies. what do you think the most significant thing here has been for time warner cable?
>> this industry has just spent the last several years and roughly $95 billion rebuilding our plant. we now have a physical platform that can offer all sorts of new service. what’s really exciting about this show is we see not only our traditional suppliers but also a lot of new entrepreneurs who have ideas for new products and services we can offer. there’s tremendous innovation taking place.
>> what do you think the biggest growth driver is right now for time warner cable?
>> there really are two things. first of all, the broadband business, the sale of high-speed internet access. roughly 20% of homes have passed penetration now, and it’s growing rapidly. we have a long way to go. we just introduced voice service across all of our operating divisions last year and that’s growing rapidly, also.
>> i want to follow up with you on that, one of your chief competitors, brian roberts at comcast, said the next engine for growth is the voip, or phone calls over the internet. over at comcast, they say that is a big priority for 2005. is it your number one priority this year?
>> yes. and i think as you talk across the industry, we’re all at different stages in that. we actually rowland it out last year. our priority now is to get more customers. actually, it uses voip technology but only inside the cable systems so it doesn’t go over the internet, which has all sorts of interference and what have you. it’s voip inside our cable system that uses the existing technology we built for our high-speed data business. when it leaves the cable system, then it’s a regular phone call.
>> how many homes do you expect that to be in by the end of this year?
>> we can’t predict that. at the end of last year, we had over 200,000 customers, adding about 10,000 a week. as we release quarterly results this year, you’ll hear updates. >> one thing i want to ask you about briefly is your relationship with america online. five years after the merger, you’re offering a.o.l. via time warner cable as a broadband service. a lot of investors want you to answer why it took five years. >> right after the merger we started offering a.o.l. in a bundle form and all that we’ve done is evolve the right package for the consumer so we’ve been working with a.o.l. all during the last five years. i think the most recent announcement will be very successful because it involves a.o.l. aggressively moving customers from dial-up to cable, which is going to be good for time warner cable. a.o.l. will get more eyeballs to sell advertising and search, which is good for them, too.
>> when do you expect to formally announce a bid for adelphia?
>> well, adelphia has been in the press a great deal and there is a process underway. everybody knows that we’re part of the process. and i think it’s a bankruptcy so it’s quite complicated and it will come to some fruition. when it does, there’s no particular time table.
>> $17 to $18 billion about right, though?
>> i can’t comment on that.
>> i do want to ask you, time warner, a lot of talk about convergence here. have you and c.e.o. dick parsons ever talked about splitting time warner cable out of a.o.l. time warner?%
>> dick has been forthcoming about that. there’s an industry consolidation takes place in the cable industry. we would like to be bigger. i think time warner likes its current mix of businesses and doesn’t want to be more weighted in cable. we’re already the biggest part of time warner so a logical outcome is for time warner to have a publicly traded cable company that’s controlled by time warner. so dick has talked about that as a potential outcome. exactly how we get there remains to be seen.
>> that was the chairman and chief executive of time warner cable, glenn britt, speaking with eron burnett. we’ll get an update from europe.
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street where you did see stock market gains for the dow, s&p and nasdaq. the nasdaq closing at 1999, still down 8.1% for the year. a check on u.s. treasuries shows that the 10-year was lower by 3/32 today. federal reserve chairman alan greenspan addressed the market and spoke about energy. he did not address monetary policy in the speech on oil. that was a relief to some investors and traders who expected rising energy prices are contributing to inflation. the two-year note unchanged at 3 the -- 3.72%. gas prices climbed to a record high, however, it is not stopping most consumers from spending at the store. june grasso has been following details about a survey on consumer spending.
>> the consumer is not slowing down from this survey by the international council of shopping centers which found that 59% of households did not reduce spending in march on items like clothing, jewelry and consumer lns yet―electronics, yet many did not go out to eat as often because of rising gas prices. gas prices have added between $6 and $8 to the average consumer’s weekly expenditures compared to last year, according to the survey. the icsc’s chief economist says that has not changed discretionary spending for most.
>> our survey found that the incremental impact from a year ago till now is really basically nothing. it’s the same impact that we saw a year ago and that’s somewhat surprising given the fact that you say, gee, the price of gasoline is considerably higher than it was a year ago.
>> he says gas prices have been offset by about a $14 increase in average weekly earnings in the past year. the rising gasoline prices did cause 40% of consumers to cut back on driving. higher gas prices are having a greater impact on low income households. more than half of the consumers with incomes of less than $25,000 were driving less. for households below the median income, they spend 3.5% of their income on gasoline and that’s why they are hit harder with the gasoline price shock than upper income households.
>> gas prices are making more efficient shoppers out of many consumers. the survey shows they are making fewer shopping trips, but buying more per trip. ellen i.
>> thank you very much for the update. siebel systems out after the close. shares fell in extended trading. a decline of 6.8%. declines are coming because the company said first-quarter sales trailed the forecast. it expects earnings per share of break-even to one cent a share compared to the previous estimate of five cents. it is the world’s largest maker of custom service software. it says sales totalled as much as $300 million in. in january, it said sales would be as much as $345 million. siebel says some deals were delayed in the last days of the quarter and that application license revenue was disappointing. if we look at oracle shares, we do see a decline there, as well. oracle and siebel both produce software for businesses. look for those to be active in trading tomorrow. google and other tech shares led the nasdaq higher in trading on this tuesday. robert gray has details in the nasdaq marketsite.
>> the nasdaq composite index finishing higher for the second consecutive session. google shares were rising today by nearly 2% on the day after an upgrade at lehman brothers to overweight from equal weight. lehman brothers seeing the fundamentals in search remaining strong and google capturing an overall share of the greater search revenue and softness in google shares since the fourth quarter created a compelling buying opportunity. shares of apple computer, one of the biggest gainers in the nasdaq 100, american technology research reiterating their buy rating, highlighting product momentum and the i-mac g-five and power books and see more switchers from windows to the mac platform and american technology seeing the new tiger operating system for the macs to ship out by april, ahead of expectations. shares of dell rising ahead of wednesday’s analyst meeting. shares of american eagle outfitters rising to a record ahead of the monthly staples re―same-store sales release on thursday. on the software side, we did see weak and disappointment for investors. r.s.a. security saying first-quarter profit only eight to 10 cents a share, missing its own january forecast of as much as 15% and the preliminary results also fell short of the averagea estimate of analysts, 14 cents per share. the head of nasdaq trading at wells fargo securities is bearish on the software industry, saying this looks like, from the software companies, it’s an example of what we can expect from more tech companies and this could not only be a software-specific problem, we may see more profit disappointments in the coming days as earnings underway.
>> coming up, time warner, the nation’s second largest cable operator, we’ll hear from the executive in charge of that business about changing technology and how the industry is evolving.
