Comcast Works to Speed Product Development While Cutting Capital Spending
Comcast said in an earnings call it’s set to introduce a slew of new products in 2012, while also working to bring down its capital spending. Upgrades to its network it has already made, such as installing digital converter adapters in customer homes, DOCSIS 3.0 equipment in its headends and state-of-the art servers at its content delivery network facilities will leave it poised to bring new products to customers quicker and more cost-effectively, it said. Comcast Chairman Brian Roberts said he expects the introduction of a new cloud-enabled set-top box called the X1, formerly Xcalibur, could be just as important a technology rollout as some of the company’s other recent initiatives.
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"It has the same kind of long-term strategic implications” as products such as DOCSIS 3.0 and Comcast’s efforts to take its systems all-digital, he said. With cloud-enabled features, updating program guide software and troubleshooting can be done on Comcast’s servers, without the need for a service call to a subscriber’s home, he said. Moreover, the system will make it easier for Comcast to deliver video to other devices in the home, he said.
"We are very cognizant of the exciting changes in the consumer electronics space, and we want to position our company to take advantage of the innovation,” Roberts said. Comcast’s “getting things into the cloud and out of the cable box will have broad implications over time and 2012 is a year to make it happen and get it started."
Roberts said he expects the X1 platform to be deployed to hundreds of thousands of homes this year, he said. “That’s not the big number for us,” he said, acknowledging it will take time to make the product available to Comcast’s 23-million-plus video subscribers. “It will be in multiple markets and it will be stable and radically improve over time."
Meanwhile, Comcast expects its level of capital spending relative to its revenue to decrease in 2012, even as it continues to invest in new products CFO Michael Angelakis said. The company boosted its dividend 44 percent and said it’s authorized to buy back up to $6.5 billion of its own shares and expects to repurchase $3 billion in 2012. The company hit the limits of its stock buyback authorization in 2011 and wanted to make sure it didn’t again this year, Angelakis said. It will evaluate its capital allocation plan again at the end of the year, he said.
The proceeds from its sale of AWS licenses to Verizon Wireless have not been factored in to Comcast’s 2012 plans, Angelakis said: “First, let’s get the transaction closed.” Comcast expects the deal will be approved toward the end of the year. “We will use that SpectrumCo cash as we think about and evaluate our 2013 [capital allocation] strategy."
Comcast lost 17,000 basic video subscribers during Q4, far fewer than the 125,000 expected by analysts. Neil Smit, president of Comcast’s cable systems unit, attributed the improvement to changes the company made to its customer service and video products, as well as a new focus on retention marketing. Cable operators such as Comcast are also poised to benefit from any rebound in the housing market, Sanford Bernstein analyst Craig Moffett wrote in a note to investors. Both the economy and Comcast’s video operators “are likely to continue to gather momentum, and a return to positive video subscriber growth -- unthinkable in consensus numbers as recently as six months ago -- is now not only plausible, but arguable likely,” he said.
At NBCUniversal, Q4 sales gained less than 1 percent from a year earlier to $5.7 billion as increases at its cable networks were offset by declines in its broadcast TV and movie studio units. Comcast’s cable system Q4 sales gained 4.7 percent from a year earlier to $9.5 billion. Consolidated net income gained 53 percent from a year earlier to $1.58 million on higher sales reflecting its NBCU acquisition. Shares gained 5.4 percent Wednesday.