The largest cable MSO (multi-service operator) in the U.S, Comcast Corporation’s (CMCSA) subsidiary, thePlatform recently entered into a contract with Microsoft Corporation (MSFT). As per the deal, Microsoft’s PlayReady digital rights management (DRM) and Internet Information Services (IIS) Smooth Streaming technologies will be integrated with thePlatform’s video management system.
Comcast’s Xfinity TV service will be the first to use this new streaming service for their subscribers. It will support smooth streaming of videos on iPads and Android-based tablets.
thePlatform mainly delivers video and audio content over the Internet. The main advantage of PlayReady DRM is that it supports non-Microsoft technology platforms. Integration of DRD will also allow controlled usage of copyrighted material by end users.
In the age of smartphones and tablets, people enjoy watching television anywhere they feel like. Moreover, the launch of 3G and 4G services will offer faster internet services, which in turn will drive the online video services. Hence, deployment of such services by Microsoft will allow better streaming of videos for the Comcast’s clients.
Comcast has become the largest integrated content development and distribution company of the U.S. after completing the acquisition of NBC Universal. We also remain very much optimistic regarding the company’s diversification, network upgrade and innovative product offering strategies. In 2010, the company posted strong growth in revenue and free cash flow.
However, Comcast is facing severe competition from both telecom and satellite service providers that started offering subscription TV services at a lower price. Verizon Wireless (VZ) with its FiOS network and AT&T (T) with its U-Verse network are likely to make the market highly competitive. The recent growth of online video streaming companies such as Netflix Inc. (NFLX) and Hulu have become major threats to the company.Furthermore, the company has a huge debt, which also remains a major concern.
We, thus, maintain our long-term Neutral recommendation for Comcast. Currently, Comcast has a Zacks#3 Rank, implying a short-term Hold rating on the stock.
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