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Comcast Goes Digital

Posted on Tuesday, May 19th 2009

Comcast (NASDAQ:CMCSA) was optimistic last quarter about its performance in the troubled economy, and the recently announced Q1 results are proof that this optimism wasn’t entirely unfounded. Q1 revenues of $8.84 billion grew 5% over the year and beat the market’s expected $8.76 billion. EPS of $0.27 was higher than the Street’s expected $0.23 and grew 11% over the year.

By segment, Cable revenues grew 5.5% to $8.35 billion while Programming revenues fell 1% over the year. Besides adding nearly 549,000 customers to its voice, high-speed Internet, and business services subscriber base, the company also managed to grow revenue per customer by 8% to $115. However, Comcast continued to experience lower gross connect activity due to the weak economy and increasing video competition. The Programming division was hurt by an 8% fall in advertising revenues.

Comcast’s cost-control measures initiated earlier last year continue to remain a focus area for 2009. As a result of theses measures and focused capital spending, the company managed to grow free cash flow by 95% to $1.4 billion.

Comcast also made significant advances in its digital strategy. The company added or upgraded 288,000 digital customers and now provides advanced services to nearly 47% of the total digital video customer base. It has deployed the DOCSIS 3.0 wideband service to 35% of its footprint and have a goal of 65% deployment by the year’s end.

On bandwidth reclamation, the company recaptured nearly 250-300 megahertz of spectrum by moving 40-50 channels from analog to digital. Today 72% of Comcast’s customers have digital service. Last quarter, the company launched its All-Digital initiative in Portland; the program is now being extended to Seattle and the San Francisco Bay Area and is being planned for Atlanta, Philadelphia and Baltimore. At the end of the quarter Comcast had completed the digital conversion for nearly 5% of its footprint.

The stock is currently trading at $15.16 with a market capitalization of $43.7 billion. There is much for Comcast to look into as the future of television unfolds in the upcoming months and years.

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