Analyst Downgrades Cablevision, Sharply Criticizes Loss of COO

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NEW YORK - BTIG analyst Richard Greenfield on Tuesday downgraded his stock rating on cable operator Cablevision Systems from "buy" to "neutral" in an acerbic note.

"We screwed up sticking to our 'buy' rating, now it’s time for [CEO] Jim Dolan to fess up,” he wrote.

Greenfield suggested that some conflict between Dolan and former COO Tom Rutledge, who last week announced his surprise departure and on Monday emerged as new CEO of Charter Communications, must have rattled the company.

"We have long-held that the Dolans never got the respect they deserved for hiring Tom Rutledge," Greenfield wrote. "However, the chain of the events over the past 18 months, culminating in Rutledge’s departure, increasingly worry us as we dig into what actually happened. We are even beginning to wonder whether Cablevision is going to replace Rutledge at all."

What if Jim Dolan, son of company founder and chairman Charles Dolan, took on a larger role? "Given Mr. Dolan’s interests outside of Cablevision (including two other public companies, AMC Networks and MSG, with MSG set for a brutal carriage battle with Time Warner Cable), along with his band (JD and the Straight Shots), we would not be comforted by Dolan taking a meaningfully larger operational role at Cablevision," Greenfield said.

"We also find it hard to believe the company will be able to find a talented operating executive to join until the “whole story” surrounding Rutledge and [another top executive's] departures becomes clear," he added.

Greenfield lashed out further and demanded a meeting with the Dolan family that controls Cablevision.

"We also do not really know Jim Dolan, as the company has completely shielded our access to him for years," he said. "We would very much like to sit down with Chuck and Jim Dolan before year-end 2011, to understand what happened with Rutledge and what their plans are for Cablevision’s operations in 2012."

Greenfield said he would love to believe that the management departures at Cablevision would spur the Dolans to put the company up for sale. But he concluded: "We believe the Dolans are not interested in selling the cable division and are focused on improving operational performance and resuscitating their stock price."

Greenfield's conclusion on the stock: "Without fully understanding the Rutledge situation, no clarity on whether there will actually be a replacement to Rutledge and how a new COO’s duties will be defined versus Jim Dolan and a meaningful reduction in 2012 free cash flow forecasts, we simply cannot continue to rate Cablevision a buy."

Email: Georg.Szalai@thr.com
Twitter: @georgszalai

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