UPDATE 2-Liberty Media sees weakness at QVC, eyes new deals

(Adds details throughout, executive comments, byline)

By Michele Gershberg

NEW YORK Feb 28 (Reuters) - Liberty Media posted lower operating profits on Thursday at its key QVC shopping channel due to weakness overseas and a shift to consumer electronics, and said it was eyeing electronic commerce acquisitions worth up to $5 billion.

The company controlled by cable mogul John Malone is embroiled in a legal dispute with its IAC/InterActiveCorp (IACI.O) and just completed an asset swap with Rupert Murdoch's News Corp NWSa.N for control of U.S. satellite operator DirecTV.

That has not deterred it from contemplating new corporate moves, including preliminary talks on an asset swap with other companies in which it holds stakes.

"As far as size, I think anything from $50 million to $5 billion," Liberty Chief Executive Greg Maffei said on a conference call with analysts, regarding acquisitions.

"While that sounds like an enormous range, if you start looking at how many attractive, independent, stand-alone e-commerce businesses at reasonable valuation there are that fit that criteria, the field narrows quickly."

Maffei said Liberty was open to various e-commerce categories, but would be most interested in companies that could be promoted via its QVC cable shopping network.

QVC's fourth-quarter revenue rose 4 percent to $2.33 billion. But operating cash flow fell 5 percent to $531 million and operating income fell to $396 million from $419 million a year ago.

QVC saw particular weakness in Germany and in Japan, where enforcement of laws relating to health and beauty products have forced it to reduce sales of those products. Its sales mix in the United States shifted to consumer electronics from higher margin clothes and jewelry.

"Over time, we think we can continue to maintain relatively stable margins," QVC CEO Mike George said. "We think the fourth quarter result was really exaggerated from what we would normally expect to see."

Revenue at Starz Entertainment rose 3 percent to $265 million, while operating cash flow fell 4 percent to $48 million. Operating income fell to $30 million from $46 million.

TIME WARNER REDUX

Liberty Media operates under two main tracking shares to allow investors to follow its businesses more closely. Liberty Interactive Group (LINTA.O) is home to QVC, while Liberty Capital LCAPA.O includes Starz.

After completing its swap for DirecTV on Wednesday, Liberty will add a third tracking stock, Liberty Entertainment, to begin trading on March 4 under the Nasdaq symbol "LMDIA." Liberty Entertainment will comprise its DirecTV holding, Starz, about $1 billion in cash and $551 million in tradable debt.

Liberty Capital will encompass holdings in such companies as Time Warner Inc (TWX.N) and Sprint Nextel Corp (S.N). Of the bunch, Maffei said a new asset swap was most likely with Time Warner.

"While nothing is imminent, you can imagine them being a seller of assets that we might like and frankly might understand better or might be able to run better, given the media characterization," he said.

In May 2007, Liberty swapped 68.5 million shares of Time Warner it owned in exchange for the Atlanta Braves baseball team, Time Inc's Leisure Arts and $960 million in cash.

Maffei would not discuss an impending trial in March over its dispute with IAC CEO Barry Diller, other than to say the company hoped to "perfect" its holding in the Internet conglomerate over 2008.

Diller has outlined a plan to spin off four of IAC's largest business in a manner that would dilute Liberty's current voting control over the units. Liberty has charged Diller with trying to extend his influence over its properties against its wishes.

Analysts have said the two might reach a settlement that would give Liberty full control over one of the proposed IAC spinoffs -- home shopping channel HSN -- and possibly another unit, rather than postpone the restructuring.

The value of Liberty's stake in IAC fell to $1.86 billion as of the end of 2007 compared with $2.57 billion at the end of 2006, according to a Liberty statement.

Liberty Interactive Class A shares fell 2.5 percent, or 37 cents, to close at $14.71, while Liberty Capital Class A shares dropped 1.2 percent, or $1.46, to $117.24. (Additional reporting by Kenneth Li, editing by Leslie Gevirtz/Andre Grenon)