Comcast struggles to grow

PHILADELPHIA -- In a bad year for cable stocks, Comcast's fall has been downright ugly.

Shares of the nation's largest cable operator tumbled to a 20-month low Wednesday after it disclosed this year's cable revenue growth and cash flow will come in lower than expected. It said consumers were balking at increasing their spending in a slowing economy and phone companies had stepped up competition.

Meanwhile, Comcast also raised its capital spending to push advanced digital set-top boxes and its digital services.

"Comcast's announcement today is the worst of all possible worlds," said Craig Moffett, senior analyst at Sanford Bernstein. "The promise of the cable stocks has always been as growth decelerates so too will capital intensity and free cash flow will rise."

The stock lost $1.81, or 8.7 percent, to close at $18.92, after earlier trading as low as $18.08. In the past year, Comcast shares have ranged from $18.83 to $30.18.

"We've seen a real softness in the business related to a combination of … macroeconomic issues and markets and you've seen some competitive intensity," Michael Angelakis, Comcast's co-chief financial officer, said Wednesday at the UBS Global Media and Communications Conference in New York.

Cable stocks have struggled in 2007 on worries of stricter regulations, a slowing economy and competition from phone companies as they lured customers with their video services.

The Philadelphia-based company said it expects 2007 cable revenue to increase by 11 percent, instead of 12 percent, as its forecast for the number of new subscriptions fell. Revenue generating units -- the number of services sold -- are expected to increase by 6 million to 57 million instead of by 6.5 million.

Cable operating cash flow growth is projected at 13 percent, down from 14 percent. Consolidated operating cash flow growth is expected at around 13 percent, instead of at least 13 percent. Free cash flow would fall to 80 percent of last year's level, instead of at least 90 percent.