Comcast Drops Disney Offer

Updated from 7:46 a.m. EDT

Bowing to the market's wishes, Comcast threw in the towel on its hostile bid for media titan Disney .

The news came as Comcast posted solid first-quarter numbers and said it would resume a $1 billion stock buyback plan. Meanwhile, Disney's board publicly reaffirmed its faith in CEO Michael Eisner Tuesday night. Comcast shares surged in early action before giving back those gains; they were unchanged around midday. Disney's shares dropped 2%.

Comcast cited Disney's lack of interest in the prospect of a merger, though it easily could have noted investors' obvious dissatisfaction with the unsolicited $48 billion offer. Comcast shares skidded sharply in February when the company announced its plans, and Disney stock continued to trade about $2 above the value of Comcast's all-stock offer throughout the spring.

"We have always been disciplined in our approach to acquisitions," said CEO Brian Roberts. "Being disciplined means knowing when it is time to walk away. That time is now."

"It has become clear that there is no interest on the part of Disney's management and board in putting Comcast and Disney together," Roberts continued. "As a result, we have withdrawn our offer."

The withdrawal now puts the spotlight on another potential deal facing the cable industry, the possible sale of Adelphia Communications, the nation's fifth-largest operator of cable systems.

"I suspect we'll look at those" Adelphia systems, Roberts told analysts on a conference call Wednesday morning, though he said the Adelphia opportunity did not factor into the decision to withdraw the Disney offer. He noted that several Adelphia properties fit nicely with Comcast's current operations, and suggested Comcast could acquire those systems, or swap with, or partner with, whoever might purchase them from Adelphia.

Given Comcast's size, said Roberts, "We don't have to make any acquisitions."

Comcast launched its hostile offer for Disney after its friendly overtures were rebuffed by Eisner. While the offer never got off the ground with board members, it helped accent growing dissatisfaction with Disney management and presaged the stripping of Eisner's chairman title.

The move came as Comcast posted 21% operating cash flow growth in its core cable operations. Its results were broadly in line with expectations, and the company reaffirmed guidance for 2004.

Comcast Numbers

Though Comcast's earnings per share based on generally accepted accounting principles came up short against the analysts' consensus, investors have traditionally paid more attention to revenue and cash flow results for Comcast's cable system operations. Comcast, which has 21.5 million basic subscribers, is the nation's largest cable operator.

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