The cable guys morphed from stars in 2006 to goats in 2007, but Time Warner Cable's (NYSE: TWC) results for the December quarter indicate that the company just might be able to someday return to its earlier status. Meanwhile, the company's parent, Time Warner (NYSE: TWX), is contemplating shedding some of its ownership of the cable unit.

For the quarter, Time Warner Cable generated net income of $327 million, up 23% from the $266 million it brought in for the year-earlier quarter. The latest quarter's per-share earnings were $0.33, versus $0.27. The word is that expectations had hewed closer to $0.30. Not bad for one whose share price slid more than 40% since last summer.

The company continues to add steadily, if not spectacularly, to its customer base and now can boast that nearly half its subscribers take two or more of its triple-play offerings of TV, telephone, and high-speed data. About 16% take all three.

A total of 199,000 "bundled" subscribers -- those taking multiple services, not folks wrapped in blankets against winter blasts -- were added in the quarter. And at year end, the company had more than 32 million revenue-generating units (an RGU is one customer taking one service).

So, while subscriber additions have slowed at Time Warner and its brethren, including Comcast (NYSE: CMCSA), Charter (Nasdaq: CHTR), and Cablevision (NYSE: CVC), there's still some growth. My take on the slowing is that it involves three factors:

  • The combination of a general consumer pullback and increasing cable prices
  • Stronger competition from "overbuilders" such as Verizon (NYSE: VZ) and AT&T (NYSE: T)
  • The logic that says the 2006 growth rate -- when the triple play became widespread -- wasn't sustainable even if the operators had given full run to their wildest dreams.

Nevertheless, Time Warner Cable is a solid company. And now, under new CEO Jeff Bewkes, Time Warner may reduce or eliminate its remaining 84% stake in its cable offspring.

In the meantime, maybe you noticed we're not exactly cavorting in the middle of rosy market conditions. As such, and until both the consumer pullback has run its course, and the competitive lay of the land for cable becomes more apparent, I'd suggest giving a pass to initiating or adding to positions in this sector.

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