The Hot and Cool on MediaOne, and Might Best Buy Be One?

Stock Exchange gives readers a chance to listen in as staff writers James Peltz and Michael Hiltzik discuss the merits of individual stocks and other investments.

MediaOne Group (UMG)

MediaOne close Friday: $43.63

Jim: Know what's the first thing MediaOne Group should do, Mike?

Mike: Change its ticker symbol?

Jim: Exactly what I was thinking! You're scary.

Mike: MediaOne has the weirdest symbol this side of Woolworth, which has Z.

Jim: Actually, Woolworth changed its name to Venator Group--don't you love these names they come up with?--so that's now got the Z. Anyway, why does MediaOne have UMG?

Mike: Call it a historical artifact. MediaOne is a cable TV company that used to be called US West Media Group because it was owned by the Baby Bell phone company US West. Just recently it became a stand-alone company, and some readers have asked us to check it out.

Jim: It's got a big presence in Los Angeles, and overall it's the nation's third-biggest cable operator.

Mike: Right. It's got 4.9 million basic cable subscribers--as well as an odd, and hard to value, partnership with Time Warner Entertainment, another cable company. The joint venture is supposed to have a footprint covering nearly 30% of all U.S. households.

Jim: Meaning?

Mike: Meaning it owns the rights to offer cable to geographical regions that encompass 30% of all U.S. households.

Jim: But MediaOne wants to be much more than a cable company when it grows up. It loves to brag about "broad band," which basically means it can shove all sorts of telecommunications and computer services to customers through its cable lines. But then, every cable and telecom firm is promising that. Isn't that why AT&T agreed this summer to buy TCI?

Mike: Yep. "Broad band" is the buzzword with this group.

Jim: And speaking of jargon, reading the financial results of the cable industry is like reading "Alice in Wonderland." For instance, nobody cares about earnings--so forget about using conventional yardsticks with these stocks. The business, and the analysts who follow it, are obsessed with cash flow instead.

Mike: For a very good reason. They have a ton of debt and no profits.

Jim: Right. And cash flow is everything, because it determines whether they can keep servicing, or paying off, their debt.