Draft Group Report

Bernice,

I still have not received your portion of the group project. Please post it via blog so I can add it to the report!

Draft Copy (Rough draft)
I have added a cover page and title as well as numbering to each page.
Please review and make changes as deemed necessary.

Thanks
MMM


Abu Khan (Intro.&Conclusion)
Bernice Walker (Comcast Background)*
Margaret M. Mozone (Comcast Success)
Vkonopka (Adelphia Background)
Tammy Lasalle (Adelphia Failure)


Introduction (Abu Khan)
What makes one company fail and the other succeed in the exact same sector? Our premise is that it is the leadership of the organization. In every organization you will have good and bad leaders, why one fails is a reflection of the leader and the tone they set for the organization. This paper will look at the history of two people who started two very similar types of companies and grew at a similar rate, then in sharp contrast to one another, one failed, the other succeeded to the point of acquiring the other company. The company that failed did not do so because sales were softer than the other company, nor did it fail because their product was inferior, or because it was in a much more competitive environment, it failed because leadership at the top cheated and because they cheated they managed to subvert portions of the organization up to and including it’s auditing firm.

Comcast Background (Bernice)

Comcast Successes (Margaret)
Comcast is a multi media cable company that attributes the success of the company to mergers that assisted in Comcast becoming the largest media company in history. Mergers and acquisitions of such companies with the majority stakes in Comcast-Spectator, the owner of the Philadelphia Flyers and 76ers; Comcast Sports Net, E! Entertainment Television, the Style Network, Golf Channel, Outdoor Life Network and G4 have defined Comcast as a conglomerate cable network. When Comcast merged with AT&T Broadband in November 2002, they became the largest cable TV company in the country with 21 million subscribers. As time continued, so did the success of Comcast.
Comcast began the road to fame in 1996 when they completed a $1.49 billion acquisition of E.W. Scripps Co.’s cable television operations, raising its total subscribers to 4.3 million. After acquiring rival cable systems including Jones Intercable Inc. and Lenfest Communications Inc., Comcast grew to the nation’s third largest cable operator with more than 8 million subscribers. In addition to the takeover of the two cable companies, Comcast announced a $520 million deal to buy majority ownership of Comcast- Spectacor, owner of Philadelphia Flyers and 76ers and the Spectrum and Corestates Center, the city’s two indoor sports arenas. This ensured Comcast sweep of stardom.
In 2002, Comcast completed the acquisition of AT&T’s cable division for about $29 billion in stock to become the nation’s largest cable operator with about 22 million subscribers, nearly twice as many as second-place AOL Time Warner Inc. In a statement, Comcast stated, “The merger will also generate significant operating efficiencies and overhead cost savings. Within five years, the companies say in the document, the merger should result in $1.25 billion to $1.95 billion a year in increased earnings before interest, taxes, depreciation and amortization. That's actually far less than the estimated $2.6 billion to $2.8 billion in potential annual cost savings and synergies Comcast said it could expect when it first announced its bid last July.” But it was only late last year that Comcast was able to perform a thorough review of AT&T's books, and in the interim, AT&T's new senior management team, led by Bill Schleyer, has instituted cost-cutting measures of its own.
On Feb. 11, 2004 Comcast proposed to buy media and entertainment powerhouse Walt Disney Co., owner of ABC and ESPN television networks, movie studios and theme parks, for about $54 billion in stock. Under the merger, Comcast said it would issue 0.78 of a share of its Class a stock for each Disney share, and Disney shareholders would retain 42 percent of the combined company. The deal values each Disney share at $26.49, a 10 percent premium the closing price. That’s a relatively small premium for a takeover offer, but Comcast may be counting on the fact that other potential suitors in the media industry would surely face tougher regulatory scrutiny in Washington. Most of Comcast’s holdings are in cable TV systems, while Disney’s are in broadcast, cable and “content” businesses like movie studios. In a sign that investors expect an extended fight, Disney’s shares shot up $3.52, or 15 percent to $27.60 in very heavy trading on the New York Stock Exchange, above Comcast’s current offer. Comcast’s Class A shares tumbled $2.70, or 8 percent, to $31.23 on the NASDAQ Stock Market. Disney and Comcast together had $45 billion in revenues last year. If a deal is reached to combine the companies, they would edge out Time Warner, which had $39.6 billion in revenues last year, atop the heap of media and communications companies. Thus far, this deal has not been sealed. If this merger occurs, Comcast will succeed all it’s competitors and become the most infamous, powerful, cable company in an international market!

Adelphia Overview (Vkonopka)
Adelphia Communications Corporation was the fifth largest cable company in the U.S. before filing for bankruptcy in 2002 because of internal corruption. Adelphia was founded in 1952 in Coudersport, Pennsylvania. The headquarters for the company was moved to Greenwood Village, Colorado shortly after filing for bankruptcy. Time Warner Cable and Comcast officially acquired the majority of Adephia’s assets on July 31, 2006. As a result of this acquisition, Adelphia no longer exists as a cable provider. Currently, LFC, an internet-based real estate marketing firm, is auctioning the remaining Adelphia real estate assets.Adelphia History Adelphia was founded in 1952 in Coudersport, Pennsylvania, by John J. Rigas. In 1951 Rigas, at the time an electronic engineer, bought a cinema in Coudersport. During the following year he acquired the local cable company for $300, apparently as a hedge against lost movie sales. With his brother Gus he then formed Adelphia, named after the Greek word “brothers”. They borrowed heavily to buy suburban cable companies across the U.S. Many of the family interests were reorganized as Adelphia Communications Corporation in 1972. The company went public in 1986. The Adelphia’s slogan was “Get. Watch. Do What You Want.” The company grew by acquiring other systems. In the late 1990s it purchased Century Communications. Operations included telephone, a sports radio station, the Empire Network sports cable channels, property development and NHL Buffalo Sabers. Adelphia also bought naming rights to a football stadium, Adelphia Coliseum in Nashville, Tennessee. In 2002 Adelphia’s share price plummeted after it was deleted from the NASDAQ for a failure to file returns. Company filed for Chapter 11 bankruptcy protection in June 2002, after it disclosed $2.3 billion in off-balance-sheet debt. Adelphia at that time was the fifth largest cable provider in the U.S. and through various subsidiaries provided cable television and local telephone service to customers in 30 U.S. states and Puerto Rico. It had huge affiliations in Los Angeles, New England, Western New York, West Palm Beach, Cleveland, Pennsylvania, and Virginia. In 2002 the Securities & Exchange Commission charged the company, its founder, his three sons (Timothy, Michael, and James Rigas) and two senior executives in “one of the most extensive financial frauds ever to take place at a public company” (SEC).

Adelphia Failures (Tammy)
Adelphia Communication Corporation downfall began March 27, 2002; this is when the discovery of the Rigas Family had borrowed $2.3 billion dollars that was reported on the company’s balance sheet. This money was borrowed for the family’s personal use. It was reported that they family used the company’s money to pay for apartments, to build a golf course, to purchase the Buffalo Sabers Hockey team, and to create the Rigas investment firms and subsidized documentary film. During this time period, Adelphia Business Solution Inc. filed for bankruptcy protection and dropped 18% of its stock. In the month of April, Adelphia delayed in filing its annual reports that would address the question that was raised about the off-the-book debts. The stockholders accused her of misleading them with their financial reports. Adelphia as hires investment banks to explore the ways they can reduce their debt and improve their sales. During the month of May, Adelphia announces its soliciting bids for cable systems in Los Angeles, Florida, Virginia, and in the Southeast to reduce their debt. Also John Rigas, the founder, decided to step down as chairman, president, and CEO of Adelphia Communications. Erland Kailbourne takes John Rigas place; he was the chairman of Adelphia board’s audit committee. NASDAQ also stopped trading in Adelphia’s stock because they needed more information dealing with Adelphia’s finance. May 2002, CFO Timothy Rigas decided also he would resign from his position with Adelphia during this month. Kailbourne announces the company has missed $44.7 million dollars in bonds and interest payments. The Rigas family decides to relinquish control of the company and turned over assets to help cover loans. They also released details showing the Rigas family use of the company’s assets for their personal use. The estimated liability was for $3.1 billion dollars in family debts. During the month of June, Adelphia dismisses Deloitte and Touche as its accountants and starts to look for replacements. On June 21st Adelphia agrees with two banks for $1.5 billion in financing to continue operating while it was reorganizing under the Chapter 11 bankruptcy protection. On the 25th, Adelphia realized they were not going to be able to handle the situation they were in and decide to file for bankruptcy. In July the Rigas family (John, Timothy, and Michale), James Brown and Michael Mulcahey was arrested by the Federal authorities and charged on the counts of conspiracy. In November 2002, Adlephia sued their former auditors Deloitte and Touche for “professional negligence, breach of contract, fraud, and other wrongful conduct.” On April 2005, Deloitte and Touche agreed to pay a settlement of $50 million dollars to Adelphia Communications Corporation’s for the fiscal year 2000 financial statements.

Conclusion (Abu)
From humble beginnings at the forefront of cable television to riches and growth at Comcast versus jail and bankruptcy at Adelphia, where did one go right and the other wrong. As we have stated above the two companies are virtual mirror images of each other, the one difference was leadership, who was the leader and what was his motivation.
At Comcast, Ralph Roberts created a company that he could leave that would have a positive impact on the world and on his family, his mantra for the company from the time the company was only a handful of employees to the giant it is now with 96,000 was always that we are a family and we should treat each other as a family. Ralph and his successor and son, Brian Roberts, have always maintained that they should continue to keep and retain subscribers and employees by listing its touchstones as:
· Ethics
· Quality
· Flexibility
· Diversity
· Employee focus
· Enthusiasm
The organization, read “the leadership”, has understood that since the company went public, the leaders moved from owners to stewards and the responsibility was to grow shareholder value for the shareholders, which in turn would enrich the company, the employees, and themselves. Interestingly, as you see the AT&T attack ads about Comcast, you will not see an attack ad by Comcast against AT&T, simply put, Comcast leadership said we would succeed on the value of our product; it’s price, and our people, not by attacking the other company. This type of organizational leadership is a rally’s employee around its employers.
At Adelphia, John Rigas, had a lofty goal and accomplished it, at the end, he felt that the company owed him more than the millions he made as a CEO and the hundreds of millions he was worth through the stocks he owned, he felt the company owed him anything he wanted. His leadership and corruption moved it be way through his three sons, two top lieutenants, and on to his auditing firm. His greed was so much that at one point his son had to put him on a $1, 000, 000 a month budget, this family over the course of 2 and ½ years was able to steal $3,100,000,000 (three billion, one hundred million dollars)(sec.gov) without concern for what it did to the rest of the organization or the shareholders.What makes one company succeed and one fail? Organization leadership and its commitment to fairness and its commitment to inclusion of all of its stakeholders clearly define a success story. Clearly in this case Comcast took the high road and Adelphia did not and in the end transparency won the day.