Comcast Finds Itself Increasingly Hamstrung

This Could Take a While

Until something happens, the deal appears to have stalled out. One wild card could be the emergence of a white knight, although that appears unlikely. Over the weekend, Viacom (VIA Quote) President Mel Karmazin said the company was not interested in Disney.

"There may or may not be a white knight second or third bidder to emerge, but there is certainly no urgency on Disney's part to sell. This might play out a lot longer than investors think," said William Drewry, an analyst at CSFB.

Indeed, neither company may be in a rush to make a move right away.

Disney doesn't have to act until Comcast raises its bid, focusing instead on its March 3 shareholders meeting, the recent crisis of confidence involving Eisner and the loss of its deal with Pixar(PIXR Quote). And Comcast doesn't have to raise its bid immediately, hoping its share price will rebound once the headlines die down. With shares trading at 11 times cash flow on the basis of Friday's close, some analysts say Comcast appears undervalued when compared with Disney.

Disney's No Means Yes to a Higher Bid

For what it's worth, Disney's management appears to be somewhat open to Comcast's hostile bid because its rejection of the deal pales in comparison with the hostile reaction other companies have had to unsolicited bids.

Recently, PeopleSoft's (PSFT Quote) board called upon the Department of Justice to strike down Oracle's (ORCL Quote) attempt, while Atlantic Coast Airlines (ACAI Quote) filed a lawsuit against both Mesa Airlines (MESA Quote) and United Airlines (UALAQ Quote) after Mesa's unsolicited merger attempt. Unlike those situations, the lack of strong language seems to imply that Disney's board isn't dead set against a merger with Comcast -- just not at the current price.