Integral Systems reported its highest quarterly revenue in company history on Dec. 6. Financial results for the satellite software maker’s 4th quarter of 2004 were $25.1 million, up from $23.7 million in the 4th quarter of 2003. Operating income decreased slightly to $3.6 million for the current quarter, versus $3.8 in the same quarter in 2003. Net income was down to $2.4 million from $2.5 million last year.
Qwest agreed to pay $250 million to settle securities fraud charges, the Securities & Exchange Commission said Thurs. The company settled without admitting or denying the allegations. The SEC has been investigating whether Qwest inflated revenue by incorrectly booking network capacity deals to improve the company’s image with Wall St. in 1999-2002. The agency charged Qwest “fraudulently recognized over $3.8 billion in revenue and excluded $231 million in expense as part of a multi-faceted fraudulent scheme to meet optimistic and unsupportable revenue and earnings projections.” The SEC said the payment would be distributed to investors. Qwest also will be required to permanently maintain a chief compliance officer reporting to a committee of outside directors and responsible for making sure the company “conducts its business in compliance with the federal securities laws.” Randall Fons, dir. of the SEC’s central regional office in Denver, said “Qwest senior management created a corrupt corporate culture in which meeting Wall Street expectations was paramount.” Qwest Chmn. Richard Notebaert said the settlement concludes a 2-1/2 year investigation of the company and “will now allow us to focus even more of our effort to provide exceptional value and service to customers.” Company management turned over in 2002.
Market research firm In-Stat/MDR projected that the overall worldwide value of PC-TV tuner products and digital TV set-top boxes will grow to more than $3.8 billion in 2008. PC-TV turners permit consumers to tune in TV programs to capture, store and manage a wide range of video content on their PCs. In-Stat also predicted that the PC-TV tuner market will evolve to include PC-TV tuner products built into motherboards. Europe will continue to be the leader in analog tuners and set-top boxes, while Asia runs a close second, In-Stat said.
GE and Vivendi Universal on Wed. signed a formal agreement creating NBC Universal, merging the French company’s Hollywood studio, cable networks and theme parks with NBC TV business. The new venture is expected to generate roughly $13 billion in annual revenue. The terms of the final deal were largely unchanged from a preliminary agreement reached in September, when the company entered into exclusive negotiations. It gives NBC more clout to compete with bigger rivals Viacom, Disney and Time Warner, the firms said. Vivendi shareholders benefit from reduced debt while keeping a 20% of the new company. GE will control 80% of the company, which will be led by Bob Wright, vice-chmn of GE and CEO of NBC. NBC will pay $3.8 billion cash for the Vivendi Universal assets, and assume $1.7 billion of Vivendi’s debt. The deal is subject to regulatory approvals in Washington, D.C., and Brussels, but GE and Vivendi said they expect the deal to be complete by the beginning of 2004.
Vivendi’s drawn-out effort to sell its U.S. film and TV assets surged forward Tues. with the announcement that it had signed an agreement with GE to enter into exclusive negotiations to merge those assets with GE’s NBC. The deal would create the world’s 6th-largest media company.
Nextel reported 2nd-quarter net income of $309 million, more than double its $123 million a year ago, and said revenue jumped 19% to $2.6 billion. It said it added 591,000 subscribers in the quarter for a total of 11.7 million and its customer churn improved to 1.6%, “the best since 1998.” Nextel said its average revenue per user jumped $2 from the first quarter to $69, and total min. of use on the Nextel National Network grew 34% to 24.5 billion. Nextel CFO Paul Saleh said the company was “ahead of [its] expectations” and had revised its financial guidance for the full year. It said it expected to have a free cash flow of $600 million or more, up from $500 million, and operating income before depreciation and amortization of $3.9 billion or more, up from $3.8 billion. It also predicted it would add 1.9 million or more net subscribers, up from 1.7 million.
News Corp. Chmn. Rupert Murdoch in a conference call with analysts Tues. revealed some of his specific plans for DirecTV, pending approval of his company’s acquisition of parent Hughes Electronics: “With the addition of DirecTV, we will have built the world’s first truly global television platform, a platform that will immediately serve more than 25 million subscribers across the globe.” Murdoch said that he welcomed “stiff competition… from the larger and dominant cable companies” in the U.S. and that the transaction would “energize” the multichannel market.
SBC’s persistent difficulties in meeting wholesale service performance standards prompted Ill. and Mich. regulators to review the carrier’s performance plans. SBC was assessed $3.8 million in penalties by the former Ameritech states for wholesale service performance shortfalls in January, up 62.7% from the $2.34 million paid for Dec. The Mich. PSC adopted a staff recommendation to modify SBC’s performance plan to “increase the incentives” for compliance. Mich. assessed SBC $702,003 for Jan. performance shortfalls, up from $420,972 in Dec., for a total of $8.6 million. Mich. CLECs had complained of inaccurate data in SBC’s compliance reports and urged the PSC to verify the accuracy of the data and to modify the performance plan. The PSC changed the plan to eliminate certain “K-table” factors that amounted to an SBC nonperformance allowance. Those same factors already have been eliminated in Ill., Ind. and Wis. The PSC said the net effect would be to increase the penalties for noncompliance. The agency also ordered SBC to publicize the fines it paid to the state and the credits it gave to CLECs. In Ill., the Commerce Commission staff said it would be reviewing the latest SBC wholesale penalty payments to determine whether the current penalties were providing an adequate incentive for compliance. In Ill., SBC for Jan. must issue $1.9 million in CLEC credits and pay a $743,200 fine to the state. That $2.7 million total is well above the Dec. penalty of $1.6 million, for a total of $46.54 million since July 2000 when the performance enforcement program was implemented in the former Ameritech region. In the other Great Lakes states, Ohio fined SBC $233,245, up from $201,412 in Dec., for a total of $13.8 million. In Ind., SBC was penalized $84,820, up from the Dec. figure of $61,645, for a total of $471,213. SBC also was assessed $92,485 in Wis., up from $23,688 in Dec., for a total of $4.2 million. The Wis. penalties have been stayed pending the final outcome of SBC litigation over the performance plan.
AT&T said it had repurchased $3.8 billion of debt for cash, reducing its $22.6 billion debt 1/6. It said it bought back $1.16 billion of 6.4% notes due March 2004 and $2.59 billion of its 6.5% notes due March 2013. Fitch Ratings said Fri. it cut AT&T’s rating outlook to negative from stable, following similar action by Standard & Poor’s earlier in week (CD Jan 28 p7). Fitch affirmed AT&T’s senior unsecured debt rating at BBB+ and its F2 short-term rating. It said AT&T Business Service revenue was affected by pricing pressures in its long distance voice segment and slowing growth in enterprise data businesses. Fitch said decreased IT spending and increased competition would “impact AT&T Business Service’s ability to return to a revenue growth environment in the near term.” However, it said its rating reflected company’s strong capital structure, strong liquidity position, free cash flow generation capabilities, expectation of further debt reduction. Fitch said AT&T’s liquidity position was supported by $8 billion cash at end of 2002 and $5 billion of available bank and accounts receivable securitization facilities. It said scheduled maturities consisted of $2.4 billion in 2003, including $1 billion short-term debt, and $2.4 billion in 2004. However, it said, after considering completion of AT&T’s debt repurchase offer, 2004 maturities would stand at $1.2 billion.
News Corp. said first-quarter profit increased to $162 million from $73 million last year, with revenue increasing 12% to $3.8 billion and operating income 51% to $548 million. Growth was driven primarily by substantial increases in TV and cable network programming segments, it said. TV segment had operating income of $188 million, up $136 million from year ago. Fox TV stations’ operating income grew $93 million, benefiting from stronger ad market, it said. Cable unit, including Fox News Channel and Fox News Network, reported operating income of $118 million, up $86 million, reflecting strong growth across all of company’s cable TV channels, it said. Fox News operating income rose $29 million on increases both in affiliate and ad revenue, company said, with affiliate revenue being driven by 10% increase in subscribers. Fox Sports operating profit improved 87% primarily due to strong results at Regional Sports Networks and FX channel, it said.