This is a difficult question, which is better absorbed with the chart. That is, comcast Corporation (Nasdaq:CMCSA) on the belt in the bidding war for UK-based satellite pay-TV network and broadband provider sky PLC (ADR) (OTCMKTS:SKYAY).
It is against US rival bidder for the twenty-first century Fox Inc (Nasdaq:has closet), but in light of the fact that Walt Disney (Ticker NYSE:DIS) is looking to acquire the most from the Fox, sky the end may end up being a Disney property.
While normally, there is an opportunity to buy a large piece of Fox, with or without the sky, if for some reason Disney/Fox pairing did not work as expected.
That’s a lot for any current or future Comcast stock for the process.
The fact — and several of my colleagues on InvestorPlace said the same — everything is moving fine could do here, aiming for the sky can be too much of a headache with little to no winnings.
It’s not a complete mismatch. To be fair, there are certain advantages. As Disney CEO Bob iger said in a sky: “the sky is just an amazing Platform. We are very impressed with their user interface, their ability to attract and retain customers, value for their customers.”
University of Westminster Professor of communications Steven Barnett commented on the benefits of the strategy “any large global player, especially with comcast and would like the opportunity to be [in] the European markets. And the sky is the obvious entry point”.
By and large, though, analysts are not worried about possible comcast and sky, and what should bother the people Comcast shares.
MoffettNathanson analyst Craig Moffett explained a few weeks ago:
“Yes, the sky is more than just a direct distributor of satellite TV, but … well, let’s face the truth, the sky is a direct distributor of satellite TV. And Yes, the sky is also a provider of broadband … but it’s resale broadband platform, not hall, so it is one that unlike the US, has no competitive advantages.”
Macquarie analyst Amy Yong also questioned the validity of the transaction on mathematics, noting that “would never be able to purchase its own shares on the 8x vs the acquisition of the sky at 12x”.
If doubt seem familiar, there’s a good reason. He something in common with our own will Ashworth said just a couple of weeks ago:
“I think [Comcast CEO] Roberts wise to move away from any complicated, time consuming transactions and focus instead on small acquisitions that can strengthen its existing assets without costing the company a lot of money.”
InvestorPlace Author Vince Martin also has doubts as to the parties to the transaction, commenting in March:
“Comcast needs to make a move or risk being left behind. This is quite a serious problem in the future. Adding sky to fix their problems. Not adding Lisa, if Comcast can somehow cheat your way to own all, or most, of blasphemy in the process. That would at least give the company grounds to challenge Netflix and Disney on the streaming side.”
It’s just a lot of very smart people, they all say the same thing — too many voices, to pretend that the concern is just on the verge.
The bottom line for Comcast stock
There’s a reason why Comcast shares have fallen about 15% since the end of last year. This bleeding of relevance, in a world where over-the-Top (OTT) TV is winning the war for traditional TV for viewers eyes.
UBS believes the company will lose another 400 000 subscribers video only this year. Combining sky programming in the mix, of course, sweetens the pot for TV watchers, and between the sky and NBCUniversal studios, the combined company may develop a great OTT service, which can only be destructive even for the venerable Netflix, Inc.in (NASDAQ:NYSE: nflx).
Many (perhaps too many) of the planet should be lining up to take shape, as I would like.
Moffett may have summed up the problem better, saying:
“There are so many assumptions required if the intended strategy Comcast wants to succeed. Running the table on all of them is quite uncertain, and requires to read, and the acceptance of business decisions from a rather wealthy competitors…. The point here is not just whether global or pan-European OTT war-a war that comcast can win. It’s also whether this war is worth winning”.
In other words, perhaps it is a struggle with comcast does not want to take. Let’s hope that it’s all just a red herring to catch a Fox, or at least part of Fox, as comcast tried to do a few months ago. This proposal was rejected, paving the way for the BID to Disney to Fox.
Regardless, that does not solve the underlying problem that Comcast.
At the time of this writing, James Brumley does not occupy a position in any of the above securities. You can follow him on Twitter @jbrumley.