In this segment of the MarketFoolery podcast, host Chris Hill and Hidden Gems' Abi Malin tune in for a big news week from Comcast (NASDAQ: CMCSA). It scored major wins in the first quarter thanks to the Olympics and the Super Bowl, but it has set its sights on a big new prize: U.K.-based entertainment and broadcast major Sky.
Fox already had a deal in the works to turn its minority stake into a full acquisition, which has been upended. There's a complex -- and expensive -- dance occurring here among Fox, Comcast and Disney (NYSE: DIS). The Fools discuss.
A full transcript follows the video.
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This video was recorded on April 25, 2018.
Chris Hill: Comcast. Some pretty nice numbers in the first quarter for Comcast. Profits and revenue came in higher than expected. They had the Super Bowl, they had the Winter Olympics. It seems like both of those paid off in a big way.
Abi Malin: Yeah, adding $1.6 billion in revenue for the quarter.
Hill: That's a lot of zeroes.
Malin: It's a lot of zeros.
Hill: This is an interesting company to me because they had this great quarter, and this actually takes a backseat to the other headline from Comcast, which is that Comcast has made a $31 billion bid -- I think I have that number right -- for Sky, the U.K.-based broadcaster. As a result of that bid, Sky has withdrawn its recommendation of a takeover bid from 21st Century Fox. So, interesting to see the chess moves that Comcast is making, because Disney had made the bid for Fox's movie studio assets, and Comcast had made a competing bid for that. But, it seems like once we got the details on that bid, it really didn't seem as compelling as Disney's. What do you make of this move to take over Sky?
Malin: I think it's interesting. I've talked with Mike Olsen a lot, who follows Comcast pretty closely here. We've both been confused by this. I think that's a talented management team, and I think they're playing three steps ahead. But I do, a little bit, question the move, especially at that price.
Hill: So, it's not so much the move, it's the price. Or, is it both? Is it the move and the price tag?
Malin: It's both. I think Comcast is a little bit of a misunderstood business. I think people like to think that its fate is ultimately tied up with the media broadcasting. But, in my head, I think it's a little bit more of a utility company. Their advantage is really that they own that final mile stuff of the internet transmission, think, like, pipes, for lack of a better term, cable and fiber, the fastest networks, things like that. So, as long as people continue to increase consumption of data, which they have been historically, I don't think Comcast's business is necessarily at risk, and I think it's sort of tangential to what I think their future opportunities are.
Hill: It's interesting, because you go back a few years, you mentioned Comcast to the average person, and you were probably going to get a negative response because for a good stretch of time, it had one of the worst customer service ratings of any consumer-facing business.
Malin: It's the ultimate sign of utility and/or monopoly, when you can have terrible ratings and continue to be so prominent.
Hill: Yes, so prominent and a good stock. Like, for all the hating on Comcast from a customer standpoint, that was a stock that continued to do well for shareholders. But, they started to make these moves to compete more with the Walt Disney Company in terms of, not just broadening their broadcast and cable offerings, but also studios as well and theme parks and that sort of thing. And I have to say, they were more successful in that endeavor than I thought they were going to be.
Malin: I think that goes back to that being a very talented management team. I acknowledge that they are thinking three steps ahead. I can't tell what the steps in between are, but I acknowledge that it's probably something strategic. And like you said, they have done a really good job with what they've attempted to do so far, so I have to give them credit for that.
Hill: I'm just thinking out loud here, but maybe they are looking, in part, at what Costco did with their dividend and thinking, "We have the money, and we don't want to do that. The attempt to outbid Disney, that didn't work, so we have to throw money at something. If we have to pay more than we want to, maybe it's still worth it."
Malin: I think, also, a demand for programming isn't going away, it's just the medium in which it's being consumed. NBCUniversal has the scale, the resources and the brand to deliver. So, I can see why expanding that sort of section of the business could be opportunistic.
Hill: I don't know why, but it always makes me smile any time I'm watching CNBC and they are talking about Comcast. And of course, they have to give the disclosure, "This is our parent company." And to their credit, they're not fawning, necessarily, over Comcast as a business just because it happens to be the parent company.
Abi Malin owns shares of Walt Disney. Chris Hill owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool recommends Comcast and Costco Wholesale. The Motley Fool has a disclosure policy.