Analysts not bullish on industry biggies

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NEW YORK -- Wall Street analysts issued some bearish reports on some of the biggest media and entertainment players last week, including Time Warner and radio powerhouse Clear Channel Communications.

In a note titled "A Summer of Tough Love at the Box Office," Bear Stearns analyst Spencer Wang lowered his operating cash flow expectations for TW's filmed entertainment unit "to reflect several disappointing film releases" over the summer, including "Poseidon," "The Ant Bully" and "Lady in the Water."

The sluggishness led to a decline in TW's share of the U.S. boxoffice, "which stands at 12.6% year-to-date vs. 20% in 2005 and its historical range of 17%-23% since 2000," the analyst said.

It will also "likely translate into weak home video performance in the second half" of the year, with weak recent trends in CG animation also providing "a challenging backdrop" for "Happy Feet," TW's last major film release in 2006, according to Wang.

Finally, he also predicted a "ripple effect" from the weak summer boxoffice into ancillary film release windows next year.

Overall, this led Wang to cut his 2006 operating cash flow estimate for TW's film arm by 8% to $1.17 billion, which would be down 5% year-over-year, and his 2007 estimate by about 10% to $1.21 billion, which would mean a 3% uptick over 2006.

Miller Tabak + Co. analyst David Joyce downgraded shares of Clear Channel from "buy" to "neutral" on valuation concerns. Helped by a stock buyback program and solid earnings, the stock has been inching closer to his $32 price target, Joyce said, calling it "more expensive than peers" in the radio space.

Overall, "we think there is only modest upside," he concluded.

Among big technology players with a stake in the entertainment space, Apple Computer earned various positive reviews for its new film offering and new iPod models.

But Jefferies and Co. analyst Youssef Squali was more bearish on the company's new interactive TV hardware strategy, which also garnered a lot of Wall Street attention.

"Apple's solution targets the movie buyer market (vs. rental) and is a light offering (75 Disney titles initially, available via iTunes)," he wrote. "We do not believe that pricing is aggressive enough to change the rent-vs.-buy consumer behavior and pose a threat to (DVD-by-mail pioneer) Netflix short term."

In the long term, Squali expects Netflix to be out with a competing offering, but wouldn't speculate on timing or product specifics.
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