PHILADELPHIA -- With Wall Street already expressing reservations about Comcast Corp.'s ability to take on new competitors, the Philadelphia cable giant's shares fell more than 3 percent yesterday on disappointing earnings for the fourth quarter.
Comcast said its fourth-quarter net income fell 69 percent because of a decline in investment income, a temporarily higher tax rate and hurricane-related costs.
Earnings, adjusted for the decline in investment income, rose to $186 million, or 9 cents a share, from $91 million, or 4 cents a share, in 2004's fourth quarter. Investment income fell because of a reduced dividend in Sprint Nextel Corp., one of Comcast's investments.
The company also said its board had approved $5 billion in new stock buybacks, in addition to $5 billion in stock and other securities repurchased since 2003.
Comcast reported net income of $133 million, or 6 cents a share, short of Wall Street expectations of 15 cents a share. Its shares fell 97 cents, or 3.47 percent, to close at $27.02 yesterday on the Nasdaq stock market.
Comcast's stock has been struggling because the cable industry faces new competition from traditional phone companies, satellite television and other industries.
Jim Cramer, a former money manager who has been skeptical about Comcast's shares on his CNBC television show Mad Money, said Comcast needs to prove to Wall Street that it can grow despite increased competition.
"I don't think this is a good industry to own. I loved cable because it was monopolistic and it was a growth industry," he said. "There's not a lot of great growth here."
Comcast Chairman and Chief Executive Officer Brian L. Roberts disagreed, saying his company's prospects remain strong.
"We grew cash flow 13 percent last year ... and we just gave guidance that we're going to do it again next year," he said. Increases in cash flow measure the improvement in the company's underlying business, excluding such items as depreciation.
Growth will come from the company's new digital phone service, which Comcast managers believe will also lead to new video and high-speed Internet customers, Roberts said.
Michael Walliser, an analyst at Condor Capital, which owns about 65,000 Comcast shares, said he was pleased with the quarterly performance overall but worried that the company is not adding new digital voice customers as quickly as competitors, including Time Warner Inc., which introduced its service earlier.
To speed sign-ups, Comcast is introducing what it calls a "triple-play" package, which gives customers video, high-speed Internet and phone service for $99 monthly. The package has been rolled out fully in Boston and is available in some parts of the Philadelphia area.
"We're going to have a first-mover advantage here, and I think we're going to have it for a very long period of time," Comcast President Stephen B. Burke said.
Comcast added 40,000 basic cable subscribers in the fourth quarter after losing 46,000 in the third quarter of 2005. The company said 202,000 customers signed up for digital phone service and 1.1 million for digital video during the year. Monthly total revenue of $84.12 per basic cable customer was slightly less than the $85.33 Wall Street had expected, said Aryeh B. Bourkoff, an analyst with UBS Investment Research.
Corporate revenue grew 9.2 percent to $5.7 billion in the fourth quarter from a year ago because of new high-speed Internet and digital cable customers.