AOL Deal Puts Malone Back on Shopping Spree

Complicating the issue on that front, however, is that Comcast has first dibs on buying 100% of QVC, once the owners settle on a price for the whole retailer. And as J.P. Morgan analyst Jason Bazinet pointed out in a note Friday morning, Comcast's 10-K filed Thursday indicates it can issue at least 250 million new shares without jeopardizing the tax-free status of its acquisition of AT&T Broadband. That gives Comcast plenty of room, says Bazinet, to acquire Liberty's QVC stake, should it desire.

Complicating the Liberty-Comcast relationship even further, Liberty separately announced Thursday evening that because of its ongoing dispute with Comcast over affiliation fees for the Liberty-owned Starz Encore cable channels, Liberty is cutting the revenue it's recognizing from Comcast by $9 million in 2002 and $80 million in 2003. The newer, more conservative approach led analysts to cut their numbers for Liberty on Friday. Salomon Smith Barney's Niraj Gupta, for example, dropped his target price for Liberty from $14 to $13.

Spruce Goose II

Another possible application of the AOL Time Warner money could be Hughes, parent of direct broadcast satellite operator DirecTV, subject to on-again, off-again speculation. Such a scenario would be good news for Hughes shareholders, since only one other company -- Rupert Murdoch's News Corp. NWS -- has been bruited about as a possible buyer for Hughes, and two possible purchasers are always better than one, as far as auctions are concerned.

In a Friday note, Merrill Lynch analyst Jessica Reif Cohen asserted that Liberty could conceivably acquire both QVC and DirecTV without injuring its investment-grade status. In addition to the $4.5 billion cash balance that Liberty would have after the AOL Time Warner offer, says Cohen, Liberty owns another $7 billion worth of nonstrategic equity assets, and could use the cash-generating QVC to support at least $4 billion in debt. Cohen has a buy rating on Liberty; Cohen or another analyst covering Liberty owns shares in the stock, as does Merrill or an affiliate thereof.