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Cable Cowboy John Malone Returns

The cable bigwig is getting to work on new frontiers.

After pioneering the cable TV frontier with his empire,


, John Malone sold his herd of 14 million customers to


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nearly a decade ago and hung up his spurs, content to be a passive investor in the media landscape that he helped tame.

Now that landscape is getting wild again as new technologies such as online video, satellite communications and high-definition TV are breaking down the old order. And while there are plenty of new sheriffs in town, the man who was once known as the cable cowboy is back on the move.

Malone's holding company,

Liberty Media


, had long been sitting idle with a portfolio full of stakes in major media and telecom giants, including

News Corp.

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Time Warner




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Recently, the company has launched a series of deals in which Malone is unwinding these passive stakes on a tax-friendly basis in return for cash, or cash-generating assets.

On Tuesday, Liberty said it would swap its stake in CBS, totaling 7.59 million shares, in return for the broadcast network's Green Bay, Wis.-based television station and $170 million in cash -- all tax-free.

Meanwhile, Liberty has reportedly reached a deal to sell nearly half of its 4% stake in Time Warner back to the media conglomerate in return for the Atlanta Braves baseball franchise, a group of craft magazines called Leisure Arts and $1 billion in cash -- again, tax-free.

Andrew Baker, an analyst with Cathay Financial, says Malone has little interest in owning these businesses for long.

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"Malone doesn't want to own the Braves -- that's just the deal that was there at the time," says Baker. "This is a way he can sell his stock tax-free, and that's what he's all about now: getting out of these passive investment stakes so he can put cash to work somewhere new."

The same can't be said about Malone's coup de grace -- his

recent deal for News Corp.'s controlling stake in



in return for his stake in Rupert Murdoch's media conglomerate.

"DirecTV is a place where Malone may be for the long-term, and he may prove to be an activist owner," says Baker.

As the leading provider of satellite TV service, DirecTV has the unique potential of winning the media shootout for both the American living room and the wireless, mobile American consumer.

"These are the two frontiers that are being hotly contested within the media and tech industries now, and satellite has a good bid for winning both constituencies if it can ultimately deliver portability, interactivity and video on-demand, which is really the holy grail," says Aram Sinnreich, managing partner with Radar Research.

"John Malone knows from experience that the people who get richest in this new land grab aren't going to be the content providers necessarily but the distribution providers -- the infrastructure guys," he adds.

With his stake in DirectTV, which will be Liberty's largest holding, Malone may be looking to use the company's leadership in high-definition technologies to take on the very industry that he built: cable.

Right now, Wall Street is betting on the cable industry, which is running on all cylinders thanks to the rise of the so-called triple play offering in which cable, digital phone and high-speed Internet service are combined into one bundle for customers. Shares of


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are nearing their all-time highs set in 2000, and investors are waiting with bated breath for shares of

Time Warner's cable spinoff to hit the

New York Stock Exchange


Shares of DirecTV are down more than 4% so far this year, and Steven Roge, manager of the


Roge Partners fund, says Liberty Media is trading at a big discount.

"Wall Street hates holding companies, and they're afraid that Malone is going to do something stupid with Liberty's cash," says Roge. "To me, John Malone is a pretty bright guy who has made his fortune and made a lot of his shareholders rich through hard work and good instincts. He may have overpaid here and there for some things, but all things considered, he's been a pretty good allocator of capital, and that's a concept that a lot of investors just don't understand."

Roge describes himself as a longtime buyer and holder of Liberty Media for his clients. Now he owns the Liberty Media Capital Class A shares (the most commonly publicly traded form of the company), which are up 34% since last May, when the company spun off its digital media holdings into a separate entity called

Liberty Media Interactive



Despite the performance, Roge estimates that the Capital shares are trading at a 25% discount to his simple, sum-of-the-parts valuation.

Erring on the side of conservatism, he just adds up the value of Liberty's individual holdings and its cash and then subtracts its debt balance. By that measure, he puts the value of the company at $19.5 billion, while its current market cap is roughly $14.9 billion.

"We're happy holding a stock where we're getting a 25% discount even if it doesn't close that margin over the near term, because we know there is a significant margin of safety with the shares," says Roge. "Plus,

Malone is a media genius, and it looks like he's delving back into what will hopefully be the next big winner."