Updated from 8 a.m.

Impressive third-quarter subscriber growth helped

Comcast

(CMCSA) - Get Report

overcome a bottom-line shortfall Thursday.

Though the company is spending more to grab more subscribers,Comcast executives indicated Wednesday morning that they don't believeoperating margins will suffer as a result. The stock was flat in midmorning trading.

On a conference call with analysts, the company expressed increasing confidence in its ability to make money offering phoneservice. It also showed continued faith in growth prospects for businessessuch as high-speed Internet access and advertising sales.

For the quarter ended Sept. 30, the nation's largest cableoperator posted net income of $220 million, or 10 cents per share,just under the Thomson First Call consensus of 11 cents. That reversesthe year-ago continuing operations loss of $153 million, or 7 cents ashare.

The more closely watched figure of operating income beforedepreciation and amortization -- also known as earnings beforeinterest, taxes, depreciation and amortization -- came in at $1.86billion, just below the consensus of $1.92 billion.

Companywide revenue of $5.01 billion came in near the forecast of$5.04 billion. A year ago, Comcast posted revenue of $4.55 billion.

Operating margins for the company's cable business came in at38.4%, up from 37.1% one year earlier, but lower than the secondquarter figure of 39.7% and expectations of about 39%.

But where Comcast far surpassed estimates was in growth ofadvanced services.

In the area of high-speed Internet connections -- the fastestgrowing part of Comcast's business -- Comcast added 549,000subscribers, the highest level of quarterly additions in the company'shistory. Analysts, according to

TheStreet.com's

informalsurvey, had expected Comcast to add anywhere from 400,000 to 500,000subscribers, with the forecasts clustering just below 450,000.

On the conference call with analysts, Comcast Chief OperatingOfficer Steve Burke said the company had spent $30million more than originally planned for the quarter to get 100,000 moresubscribers than expected. With those subscribers translating into anadditional $50 million in annual revenue, he said, "That's a prettygood trade-off."

With analysts wondering how spending on growth will affectoperating margins, CEO Brian Roberts said the company remainsconfident that fourth-quarter margins will come in at the range of 39%to 40%. Comcast's older systems, with 40%-plus operating margins, areperforming above that level, said Roberts. (By implication, the former

AT&T

(T) - Get Report

cable systems are performing below.) Thus,he said, "It's not inconceivable that we could go higher. ... There'snothing we see that's troubling at this point."

The company added 341,000 digital video subscribers in thequarter, compared to analysts' expectations ranging from the low200,000s to 300,000.

The company added 9,000 basic subscribers in the quarter, at thehigh end of estimates that were mostly forecasting the sub count torange from flat to slightly down.

Addressing the telephony business, Burke said, "We're nowconvinced that this will be a good business for us." While results forthe telephone service won't be material in 2005, he said, "We think itcould be a very significant growth engine in 2006 and beyond."

Comcast also reaffirmed its 2004 guidance, which calls for 10%revenue growth. The company said it now expects to report a milliondigital cable net adds and 1.65 million Internet service net adds,figures that are slightly above previous guidance. That would give thecompany about 7 million high-speed data customers by year-end.Expressing confidence about further growth, Burke said, "My feeling isthat 10 million

subscribers will not be the ending point."

The company said it spent $502 million buying back 18.4 millionshares during the third quarter.

Comcast's shares rose 4 cents Wednesday morning to trade at$28.96. After hitting a high of $36.50 in February, the stock hastraded in the high 20s since this past spring.