Updated from 7:46 a.m. EDT

Bowing to the market's wishes, Comcast ( CMCSA) threw in the towel on its hostilebid for media titan Disney ( DIS).

The news came as Comcast posted solidfirst-quarter numbers and said it would resume a $1billion stock buyback plan. Meanwhile, Disney's boardpublicly reaffirmed its faith in CEO Michael EisnerTuesday 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 theprospect of a merger, though it easily could havenoted investors' obvious dissatisfaction with theunsolicited $48 billion offer. Comcast shares skiddedsharply in February when the company announced itsplans, and Disney stock continued to trade about $2above the value of Comcast's all-stock offerthroughout the spring.

"We have always been disciplined in our approachto acquisitions," said CEO Brian Roberts. "Beingdisciplined means knowing when it is time to walkaway. That time is now."

"It has become clear that there is no interest onthe part of Disney's management and board in puttingComcast and Disney together," Roberts continued. "As aresult, we have withdrawn our offer."

The withdrawal now puts the spotlight on anotherpotential deal facing the cable industry, the possiblesale of Adelphia Communications, the nation'sfifth-largest operator of cable systems.

"I suspect we'll look at those" Adelphiasystems, Roberts told analysts on a conference callWednesday morning, though he said the Adelphiaopportunity did not factor into the decision towithdraw the Disney offer. He noted that severalAdelphia properties fit nicely with Comcast's currentoperations, and suggested Comcast could acquire thosesystems, or swap with, or partner with, whoever mightpurchase them from Adelphia.

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

Comcast launched its hostile offer for Disneyafter its friendly overtures were rebuffed by Eisner.While the offer never got off the ground with boardmembers, it helped accent growing dissatisfaction withDisney management and presaged the stripping ofEisner's chairman title.

The move came as Comcast posted 21% operating cashflow growth in its core cable operations. Its resultswere broadly in line with expectations, and thecompany reaffirmed guidance for 2004.

Comcast Numbers

Though Comcast's earnings per share based ongenerally accepted accounting principles came up shortagainst the analysts' consensus, investors havetraditionally paid more attention to revenue and cashflow results for Comcast's cable system operations.Comcast, which has 21.5 million basic subscribers, isthe nation's largest cable operator.

Comcast reported net income of$65 million, or 3cents per share, for the first quarter ended March 31.The Thomson First Call consensus was for a 7-centgain, though expectations varied from a one-cent lossto a 17-cent gain. In the first quarter of 2003,Comcast reported a loss of $355 million, or 16 centsper share, excluding the results of the home shoppingchannel QVC. (Comcast sold its majority stake in QVCto fellow owner Liberty Media ( L) last September.)

Companywide revenue for the quarter amounted to$4.91 billion, ahead of the $4.84 billion First Callconsensus. Operating cash flow of $1.73 billionmatched up to the $1.74 billion consensus.

At the cable operations, revenue grew 10% to $4.65billion, in the range of forecasts such as Banc ofAmerica's $4.66 billion and Credit Suisse FirstBoston's $4.58 billion.

Operating cash flow for the cable operations, orearnings before interest, taxes, depreciation andamortization, grew 21% to $1.72 billion.

In the quarter, the company added 35,000subscribers to basic cable service and 394,000high-speed Internet customers, both in the range ofexpectations.

Disney Doings

The Disney board, which last month replaced Eisnerwithindependent director George Mitchell as chairman ofDisney's board of directors, also issued a resolutionclarifying the duties of the suddenly non-executiveboard chairman.

The news emerged from the Disney board's annualretreat -- the board's first formal meeting since theannual shareholder meeting in early March inPhiladelphia, when an overwhelming number of Disneyshareholders voted to withhold their votes to re-electEisner to the board.

The vote reflected both dissatisfaction withDisney's corporate governance and concerns about thecompany's performance.

"As a result of the thorough review of Disney'slong-term growth plan, the board is confident that themanagement team is executing against its strategicplan in order to continue to drive long-termshareholder value," the board said in Tuesday night'sstatement. "The board continues to have completeconfidence in Michael Eisner, Disney ChiefOperatingOfficer Bob Iger and the senior managementteam, andin their strategic growth plan to continue tostrengthen the company's position as the global leaderin quality family entertainment."

The board's confidence,evidently, has not beendisturbed by such recent events as the poor box-officeperformance of Disney's much-hyped historical epic The Alamo, as well as the recent managementshakeup at the company's television operations.

Addressing investor concern that Eisner has failedto groom management who might succeed him, the boardsaid that it "continued its systematic assessment ofboth CEO and senior management succession" inexecutive session at the meeting.

Disney's shares fell 50 cents to trade at $23.68Wednesday, while Comcast's rose a dime to $30.07.

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