The sudden retreat of the Taliban to the boondocks of Afghanistan on Nov. 14 (Asian time) was predicted by the stock market. By that date (on the U.S. clock) Nasdaq was up 30% from the Sept. 27 post-World Trade Center doldrums to 1903 and the Dow Jones Average was up 13%, to 9824. Even the mysterious crash of an American Airlines jet on takeoff from Kennedy Airport on Nov. 12 didn't shake the resolve of investors reloading their portfolios.
There's a strong belief that if the recession began last spring, after a full year of market decline, the WTC and anthrax attacks simply led to stock price overkill. The recent rally is, at least, the first tangible, upward correction resulting from 18 months of market hell.
Oddly, cable hasn't enjoyed it. The Kagan Cable MSO Average, on Nov. 14, was down 1.8% from Sept. 27, to 3066. Its all-time high was 6096 on Jan.21, 2000. It's odd because, regardless of the global environment, the industry has been doing its usual thing: controlling its costs, growing revenues and cash flow and developing new technology. With the Western Cable Show in Anaheim just a week away, it feels like (dare I say it?) normal times. The show will be years-smaller because of exhibitor-cost cutbacks, but that will make it easier for delegates to sharpen their knives on the Western's usual cutting edge.
The reason this convention is so good ? in any size ? is that it's cliché-free. As a preview platform, it annually provides a stealth mode for new technologies that are too hot to wait for the NCTA floor six months into the next year. This time it's home networking, VOD, advanced set-tops and interactivity. It used to be modems and digital boxes, but they're already industry bellwethers, however misunderstood by people who don't use them.
I've seen several articles recently ? the most prominent one in USA Today ? alleging disappointing progress in signing up broadband subscribers. But it's no different than the early days of video rentals, when most pundits didn't think VCRs would penetrate almost all American homes. My favorite skeptical line is ?most consumers won't pay for high-speed, they're satisfied with dial-up.? OK, they may be slow to open their wallets, but they absolutely hate the worldwide wait. NCTA said Nov. 12 that operators added 825K new high-speed subs in Q3 and now have placed 6.4 million modems or 9% penetration. They also signed up 1.5 million new digital video subs and now serve 13.7 million, or 20% penetration. Not enough acceptance? Well, modems and digital boxes are only 2-year olds. They're just warming up for the Kentucky Derby of digital media.
I make some good predictions from time to time, but here's one I totally missed: I never thought it would take two years (after first bidding for MediaOne) for AT&T to put Continental Cable executives in charge of its broadband operations. I didn't think they'd EVER do it. The recent appointments of Bill Schleyer as CEO, Ron Cooper as COO, David Fellows as CTO and Kevin Casey as EVP/Operations give AT&T a new lease on its cable life. That includes having a stronger team to boost value in a sale mode.
Analyst Paul Kagan is an active investor and money manager and often owns securities mentioned in his columns. He may buy or sell before and after the columns are published, and his positions may change at any time. Kagan owns shares of AT&T. Information in his columns does not represent a recommendation to buy or sell securities, nor is it a solicitation of any securities transaction. Kagan is vice chairman of Primedia Ventures, an affiliate of the owner of Cable World.
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