BusinessWeek's March 24, 2008 issue has an article about Comcast CEO, Brian Roberts, entitled "Deal or No Deal" and the supposed "fork in the road" that he is at. Wall Street and numerous significant stockholders are hoping and pushing for Roberts to stick to Comcast's knitting (content distribution) and not go for media mogul-dom. I'm sure investment bankers are pushing for the big sexy acquisition of a large entertainment company. As you may remember, Roberts did make an unsuccessful overture to Disney several years ago.
For once, I think the Street is really getting this right. There is no reason aside from ego or shear boredom for Roberts and Comcast to go after an acquisition especially one so outside it's core business. Every few years, the distribution vs content debate emerges with people arguing that one is more important than the other and then people rushing to buy whatever is "hot" at the time. AOL Time Warner was an attempt at this, right? Wildly successful, eh?
But the main point here is not that these deals don't work. No actually, that is the main point. M&A really doesn't work esp when trying to smash two businesses together that aren't that similar and for which the rationale for the smashing are ever-elusive "synergies". So I hope Mr. Roberts continues to focus on his 'core' business and grow that and not give into the temptation of becoming a media mogul.
The other assertion made in the article is that the cable business is a low-growth utility. Ultimately, there should be plenty of room for Comcast to develop new, innovative ways to distribute content. Pursuit of these efforts would serve to strengthen Comcast over the long-term and at considerably less risk.
If Comcast does pursue the mega-deal by acquiring a content play, does anyone want to bet it will destroy shareholder value? Any takers?
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