Liberty seeing Starz in Q1 profit

QVC disappoints, but interactive revenue jumps 10%

NEW YORK -- Liberty Media Corp. reported a higher first-quarter profit at its key QVC and Starz Entertainment units Tuesday, but the QVC figures fell below expectations.

Management said the board has approved another $1 billion buyback of Liberty Capital Group stock and predicted that an asset swap with News Corp. will close in July at the earliest.

CEO Greg Maffei said FCC approval of the transaction, in which Liberty will exchange a large stake in News Corp. for cash, a controlling stake in satellite TV giant DirecTV Group and other assets, likely will take the longest to rule on it. He said this could push final approval into September.

Liberty, controlled by chairman John Malone, has two tracking stocks -- Liberty Capital, which includes Starz and stakes in such companies as News Corp., and Liberty Interactive Group, which houses QVC, among others.

At Liberty Interactive, revenue increased 10%, with operating cash flow rising 5%.

Home-shopping juggernaut QVC boosted first-quarter revenue 8% to $1.7 billion, with operating cash flow up 5% to $374 million and operating income up 15% to $243 million. The results came in below expectations though as management cited sluggish overseas markets because of lower prices in the U.K. and Germany and regulatory changes in Japan.

Maffei said in a conference call that his team was "disappointed" with QVC's international performance, but added: "We have identified the pertinent issues and are confident that over the remainder of the year we will successfully address them."

Nonetheless, Liberty Interactive Class A shares fell 6.4% on Tuesday to $23.81.

Starz Entertainment reported a 2% increase in first-quarter revenue to $265 million, a 78% jump in operating cash flow to $73 million and a near-doubling in operating income from $33 million to $60 million.

It marked the second quarter in a row that Starz cash flow rose strongly, with brass citing the higher revenue and lowers costs, including for programming.

"We expect those trends to continue this year under our long-term contracts with our studio partners and our cable and satellite affiliates," Starz CEO Robert Clasen said.

Malone was asked Tuesday how he feels about DirecTV's competitive position vis-a-vis cable, which has shown improved subscriber growth as of late. He said DirecTV has a "tactical advantage" in being able to roll out a broad lineup of high-definition TV content ubiquitously.

Malone also said that DirecTV and competitor EchoStar Communications, short of a much-discussed merger, can cut costs and reach synergies via cooperation in various areas. He said such collaboration is at the top of his team's list of priorities as they prepare for taking over control of DirecTV.
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