Leichtman: Wall St. Guilty of Bad Parenting Being a research analyst, by design, requires a certain level of dispassion. And that’s why I find Bruce Leichtman such a unique guy. Leichtman, a former Continental Cablevision marketer, has spent the past seven years as a researcher and analyst. But when you talk to him about a subject he feels passionate about, he immediately drops any pretense of being calculating or analytical and holds nothing back. I love talking to Bruce because whether it’s the Dana-Farber Cancer Institute, for which he raises funds by running in the Boston Marathon, or the cable industry’s relationship with Wall Street-which, frankly, drives him crazy-if it’s a subject about which he has passion, Bruce Leichtman morphs into a walking sound byte. I caught up with Bruce recently and asked him for a quick "state of the industry" address heading into ’05. Within minutes he was on a roll. He told me the standards by which cable operators are judged have to change, and that he’s had it up to here with Wall Street analysts who seem use, in his words, "metrics that are 10 years old." Among Bruce’s other thoughts: "The analysts are like parents who are constantly telling their kids, ‘Do this and don’t do that.’ And they’re making the kids schizophrenic. They’re telling Time Warner to be more profitable, but they better not lose basic subs. Well, what’s it going to be? Do you want me to chase bad customers instead of rolling out DVRs and expanding my VOD offerings? Do you want me to lock up these $120-a-month customers, or do you want me to spend my money chasing these $40-a-month customers?" And speaking of analysts, Leichtman feels there is only one company who can tell the analysts, "You have to stop looking at X. You have to look at Y." That, of course, is Comcast, cable’s only "pure play." The others lose by default, Leichtman says. Time Warner’s stock price is only partially determined by its cable holdings. Cox is no longer public. Adelphia and Charter are laden with too much debt and/or are for sale, and companies like Mediacom and Insight simply lack the size. ("They’re not even as big as some Comcast regions.") Leichtman told me another reason the analysts have to recalibrate their measuring sticks is the nature of the market. Said Leichtman, "We’re in a very saturated video market and Time Warner is being taken to task for losing ten thousand basic customers? Are you kidding me-in a saturated market, they have 10.9 million customers and they only lost ten thousand? That’s great. In fact, it’s incredible." According to Leichtman, being in Wall Street’s good graces is always important, but especially as new products start to roll out in the marketplace. The success or failure of such things as VoIP and VOD will not be determined by their actual performance, but by the analysts’ expectations. "Why is this so important? It completely dictates what VoIP will be in the next year. The success or failure of VoIP will be based almost entirely on the perceptions of the analysts. That’s crazy." He said it would be incredibly tough to be a cable operator these days, given how little analysts seem to understand their business. "Why do you think Cox did what they did?" Leichtman asked. "They got tired of Wall Street telling them what to do, when they knew better than anyone it wasn’t the right thing."

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