The sudden resignation this week of Cablevision chief operating officer Tom Rutledge has taken a big bite out of the cable operator’s wallet.
Shares of Cablevision on Friday morning plummeted 16 percent as investors pondered a future without Rutledge, a seasoned veteran who many observers believe is the most savvy executive in the cable business.
In early trading, Cablevision shares dropped $2.18 to $11.75. Ninety minutes before the closing bell was set to ring, the stock remained down 9 percent to $12.75.
Analysts took a dim view of Cablevision’s post-Rutledge prospects. In a note to investors, Craig Moffett, senior analyst at Sanford C. Bernstein, commented that Rutledge’s departure is a “staggering loss” to the operator, as “no company in our telecom, cable, and satellite coverage universe is as exposed to key-man risk as Cablevision.” Moffett went on to say that the 58-year-old COO is “the hands-down best executive in the industry.”
Analyst David Joyce of Miller Tabak + Co. downgraded Cablevision stock from “buy” to “neutral” and lowered his short-term target prices from $22 to $15. (In the long view, Joyce believes the stock will stabilize to $30.)
Rutledge’s surprising departure comes on the heels of a disappointing third quarter, in which Cablevision saw its earnings fall 45 percent to $39.6 million—down from $112.4 million in the year-ago period. The weak performance sent the stock down 15 percent in late October.
Since hitting a 52-week high of $45.93 in June, Cablevision shares have fallen 74 percent.
In a sense, Cablevision can be said to be a victim of its own success. The company boasts the industry’s highest digital-video adoption rate, as approximately 95 percent of its subs are iO: Interactive Optimum customers. As such, year-on-year growth has become a harder target to hit.
Under Rutledge’s watch, Cablevision is also one of the most innovative operators. Not only did he successfully deploy Cablevision’s controversial network-DVR service, but he also was an early proponent of streaming TV content to iPads.
While neither side offered an explanation for Rutledge’s resignation, analysts believe he’s in the running for the top job at Charter Communications. CEO Mike Lovett has said he will step down by April 30, 2012, and Charter has not announced a successor.
“Everything I hoped for when I came to Cablevision has come true,” Rutledge said, by way of announcing his decision. “I have spent my entire working life—34 years—in the cable industry, but my decade at Cablevision will always stand out because of the things we were able to achieve.”
For his part, Cablevision president and CEO James Dolan offered muted praise, saying that Rutledge “has played a key role” in the company’s success, adding that the outgoing exec boasted a “rare combination of technological vision and operational excellence that has delivered results.”
Cablevision said it has already begun its search for Rutledge’s successor.