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Liberty Media Will Stick to Knitting

Vail, Colo. -- Liberty Media Group won't stray from a
winning game plan, despite the financial clout that comes with a favored spot under the
AT&T Corp. umbrella.

That means continuing to beat the bushes for small, but
promising, telecommunications and technology companies to enhance a portfolio that is
already crowded with market leaders that routinely produce double-digit cash-flow growth.

"The investments that we're in are investments
with real revenues, real cash flow, real multiples," Liberty executive vice president
Gary Howard said at last week's Janco Partners Annual Institutional Investors
Conference here.

Liberty started out with its many programming stakes, such
as 49 percent of Discovery Communications Inc., and it added $5.5 billion in cash when
AT&T closed its acquisition of Liberty parent Tele-Communications Inc. last week.

Liberty sold AT&T assets such as TCI's control
stake in At Home Corp. and 47 million shares of AT&T stock. Liberty is technically an
AT&T subsidiary, but it is controlled by its own shareholders, principally chairman
John C. Malone.

Despite Liberty's bulging war chest, Howard warned
against expecting any big outlays from Liberty, which plans to continue to be "pretty
tight" with its money.

"There won't be a large deployment of cash,"
he said. "Liberty has never gone out and made high-dollar acquisitions at anywhere
near market multiples. That's not our way of thinking."

Instead, the company will continue to look for
"creative" ways of investing, always seeking to gain stakes of between 20
percent and 30 percent in new companies.

However, Howard took pains to dispel speculation that one
such creative deal will have Liberty jumping into the cable set-top-leasing business.

"It's not our first strategy," Howard said.

In a recent interview with The Wall Street Journal,
Malone said the company might take equity positions in cable companies in exchanging for
providing digital set-top boxes to operators looking to avoid adding debt to their balance

Howard said Malone was offering an "illustrative
example" of something that Liberty might be willing to do -- but not just for a
"leasing return."

"Our shareholders want more than that," he said.
"Just providing set-top boxes, per se, is not where we'd like to focus our time
and attention."

If it did enter into such a deal, Liberty would be looking
for the tax advantages that go with carrying the boxes on its balance sheet as a
depreciating asset.

Theoretically, it could structure a lease transaction that
could include itself, a cable operator and General Instrument Corp., a leading set-top
manufacturer in which it has a 12 percent stake.

The resulting deal would benefit GI by enhancing its
distribution; it would help the operator, which doesn't want any additional debt on
its books; and it would Liberty give a tax break and a piece of the cable operator.

"For an MSO that doesn't want to take all of that
capital on its balance sheet, we could do a master lease and provide a structure where all
of the depreciation comes into our portfolio," Howard said. "At the time when
the assets are fully depreciated, we would take the remaining value and convert it into
equity in the MSO."

However, set-top boxes are just one such idea "being
pushed around."

"It could be the headend. It could be file servers for
a company. It could be a satellite. I'd rather get into more unique assets than a
mere generic set-top box," Howard said.

Under developing opportunities, Howard said, Liberty will
be able to offer new programming partners spots on AT&T Broadband & Internet
Services' cable lineups, under an agreement that allows it to program up to 14
digital channels on AT&T Broadband's networks.

Howard dismissed the idea that with the AT&T deal
completed, Malone was "riding off into the sunset."

"John's got a lot of money invested in this
company," he said. "Frankly, I've never seen him happier or more energized
than with the closing of this transaction."

Ted Henderson, managing director of research for Janco,
said that as cable operators move into the "deployment and distribution phase of
their lives," Liberty is ready to leverage a "mutual fund of content
assets," while adding to its portfolio.

"Say they take stakes in 10 companies," Henderson
said. "Are all of these going to be winners? No. But when they win, they're
going to win big."