Business

Dolan head fake: Cablevision suit against Viacom may be a way to deal with other issues

There’s more to Cablevision’s $1 billion channel bundling battle with Viacom than meets the eye.

Sure, James Dolan, CEO of the Bethpage, NY-based cable giant, is hoping the lawsuit against Viacom earlier this month will help it deal with programming costs that have ballooned 12 percent this year — after expensive deals with CBS, Disney-ESPN, Comcast-NBC and NFL Network.

But many on Wall Street, skeptical of Dolan’s chances of success, think the legal volley was launched as a way for the executive to deal with a myriad of other issues hampering the company, like:

* a slumping share price;

* a heavy debt load;

* a commitment to spend nearly $1 billion on network projects to improve broadband speeds and its programming guide, and

* the $100 million hit from Superstorm Sandy, which literally put its plans underwater.

“The stock hasn’t done anything in a bullish environment for cable stocks,” ISI media analyst Vijay Jayant told The Post. “The proof of the pudding is, can you grow cash flow once this is behind you?”

Barton Crocket at Lazard Capital Markets called the suit a desperate attempt to keep programming cost increases at bay.

In the 15 months since former Cablevision COO Tom Rutledge bolted for Charter Communications, Cablevision shares have been a sector laggard, falling 1.5 percent.

By comparison, Comcast gained 95.9 percent, Time Warner Cable rose 57.5 percent, Charter soared 71.6 percent, and Dish Networks gained 46.6 percent.

And the future isn’t so bright, either, according to Jayant, who lowered his Cablevision target price to $14 a share from $15. Shares closed yesterday at $14.27, up 2.2 percent.

Since Rutledge and his key loyalists exited Cablevision, Dolan has remade the company from top to bottom. Yesterday, he tapped Chief Financial Officer Gregg Seibert as vice chairman.

After criticism from the FCC over its slower Internet speeds, Cablevision was ranked the top cable operator after Google Fiber by Netflix yesterday.

“Over the past year, we’ve made a tremendous investment in improving Internet speeds, adding 70,000 hot spots across the area. In addition, we’ve made investments in customer service and infrastructure both inside and outside the company,” said a spokesman.

As Cablevision shares have sputtered, AMC Networks and Madison Square Garden, also controlled by the Dolan family, have enjoyed great times — so much so that the cable company is now the smallest star in the family constellation.

AMC, up 31 percent in the last year, and MSG, up 69 percent, have an almost identical market cap of $4.29 billion and $4.28 billion, respectively, while Cablevision’s is just $3.76 billion.

That has led several Wall Street analysts to wonder how long the company will stay in the family’s hands.

Some analysts believe Cablevision will go private or get together with Time Warner Cable.

However, Cablevision’s poor performance of late plays against a TWC merger.

“We believe the Dolans would logically prefer selling at a healthy [adjusted operating cash flow] level and multiple rather than at a trough,” said Jayant.