Friday, December 03, 2004

Cox Communications Returns to the Mother Ship

Cox Communications ceased to exist today as Cox Enterprises, Inc., announced the successful conclusion to its $34.75 per share tender offer. Here's the story. Here's how the Cox Enterprise newspaper the Atlanta Journal Constitution reported the story today.

The move could have both positive and negative impacts for consumers. The positive impact will be that Cox Enterprises will be able to make its cable investment decisions in a more rationale environment than stock markets which are driven by the ability of companies to meet the expectations of analysts who have never run a business like the ones whose fates are so closely linked to their opinions. This should allow Cox to take a longer term perspective on things like network infrastructure investments. Who knows? Maybe Cox Enterprises, Inc., will get into the fiber to the premises business!

The negative impact will be that customers and consumers will have less influence on the performance of the privately-held Cox Enterprises, Inc. There will be less transparency; that is, there will be less information about the company that will be publicly available. For instance, there will be no way to check the company's claims about its financial situation once it's private.

Today marks the end of an era. It remains to be seen what kind of impact this change will have on the company's business practices.

1 comment:

John said...

6.6 billion in completely non-productive (in the sense of producing no new revenue) investment will surely put a crimp in Cox's ability to raise capital for a big money infrastructure investment like a widespread fiber-optic build.

A chief reason for taking a company public is to make capital available for just such massive expansions. Taking a company private can,as you say, be a prelude to more rational competition. But it can also be a move by majority stockholders (in this case the Cox family) to close down expansion and start turning a no-longer expanding company into cash for other, more profitable ventures. With the margins available in the cable business this may seem an unlikely business to move for rate of return reasons but one never knows. The majority shareholders may well be looking at having to radically reduce margins in the face of Verizon's fiber and satellite's challenge. It may well be that their judgment is that the only way to keep their cash flow as high as they have grown to expect is to refuse to make the investments that are expected by analysts and to start milking the company.

Only time will tell.