Finance Review

Finance Article Review

By

Presented to

Financial Strategies

MBA 612

July 18, 2005

Article Citation

The title of the article that I am review is "Cable Systems' New Weapon In Phone Battle: Going Private" by Peter Grant. It appeared in the Wall Street Journal on June 21, 2005, section B1. This article can be found online at: http://online.wsj.com/article/0,,SB111930905696564573,00.html

Main Issue of Article

This article addresses the strategy of publicly held cable companies being able to better compete with the telephone companies by going to privately held ownership. The author sites that three of the top eight cable companies have either already taken their companies private or have announced plans to buy the outstanding publicly traded shares.

The three companies that the article talks about, Cox Communications, Cablevision Systems and Insight Communications, are all companies that are poised to take telephone customers away from regional bell companies in addition to fending off a video push from those same telephone companies.

In interviews with executives from these companies, the common theme for going private seems to be to get away from the scrutiny of analyst and investor expectations on immediate returns in favor of being able to position their companies for longer term growth and to be better positioned against competition. Another reason given was the anemic stock performance of the sector over the last couple of years along with the increased pressure from investors to increase prices that consumers pay in the face of increased competition.

In the end, the companies that have gone private or announced plans to go private, are companies that believe that their stock price was not reflective of the true value of their company.

Relationship to Course.

This article relates to chapter one in section 2 where the text talks about the advantages and disadvantages of the different organizational forms of US businesses. This case would seem to be a contradiction to what the text says regarding the advantages of public ownership regarding the raising of capital dollars. These three companies have decided that it is easier to get capital money by being a privately held company.

This article also addresses the role and goals of the corporate