True story: Once upon a time, I was leaving the house on a business trip. No sooner had I left (I later learned) than our cat hopped into bed with my wife, and deposited at her side a dead mouse. Screaming ensued.

Which brings us to investors' reaction to the "present" that Lions Gate's (NYSE:LGF) deposited for them in Friday's earnings report. Upon learning that Lions Gate fell $0.15 short of analysts' $0.37 consensus earnings prediction for Q4, shareholders sold the stock off by nearly 8%.

Now, I understand that the GAAP results looked bad. Since this one was a full-year report, let's focus on Lions Gate's fiscal 2007 numbers. In fiscal 2006, Lions Gate earned $0.25 per share. Swinging from a profit to a $0.62-per-share loss, despite growing revenue nearly 40%, sure wasn't what people were expecting this year. But regardless of what the analysts predicted, Lions Gate delivered on everything it had promised:

  • Management said it would book more than $400 million in Q4 revenues. It pulled in $512 million for the quarter and $1.4 billion for the year.
  • Management promised to generate at least $110 million in free cash flow for the year. It produced $137 million. 

Those facts tell me two things. First, the company is more profitable than I had previously believed. Second, when CEO Jon Feltheimer promises to deliver $1.5 billion in revenue this year, and to turn that into more than $100 million in cash profits, he just might be lowballing the numbers.

I continue to be impressed with the broad-ranging business empire Lions Gate is assembling -- not just in film, but in TV as well, doing shows for Disney's (NYSE:DIS) ABC, GE's (NYSE:GE) Sci-Fi Channel, Mexico's Grupo Televisa SA (NYSE:TV), and CBS' (NYSE:CBS) Showtime. Chances are, if I watch a show on television or order a movie from Netflix, and it's good, "Lions Gate" will pop up somewhere in the credits. These guys seem to have a hand in everything.

A free hand
Speaking of hands, this brings us to Lions Gate's latest promise and peril. Last month, Lions Gate joined with Viacom (NYSE:VIA) and MGM to announce that it's biting one of the hands that feeds it. Following a feud with Showtime over the fees it gets paid for its work, Lions Gate wants to go it "alone" and help set up a new premium TV channel with its new partners.

Will Lions Gate's venture yield the same kind of success that Marvel (NYSE:MVL) reaped, when the latter morphed from character licensor to movie studio? Or will the cable and satellite operators hiss and arch their backs at the idea? Stay tuned.

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