Wall Street queries Cablevision interest in Newsday

By Yinka Adegoke

NEW YORK (Reuters) - Now that Cablevision Systems Corp (CVC.N: Quote, Profile, Research, Stock Buzz) has won the bid for Robert Redford's Sundance Channel, investors are turning to another acquisition the U.S. cable operator is angling for: Newsday.

But while Wall Street thinks Redford's independent film network is a good fit for Cablevision, which owns other cable movie networks, investors are challenging the wisdom of its interest in the struggling U.S. newspaper industry.

Cablevision, controlled by the Dolan family, submitted a $650 million bid to Tribune Co for Newsday, topping rival offers from newspaper moguls Rupert Murdoch and Mortimer Zuckerman, a source briefed on the matter said last week.

Yet, although it makes sense for Murdoch's News Corp (NWSa.N: Quote, Profile, Research, Stock Buzz) or Zuckerman's Daily News to buy Newsday, analysts said the daily paper would add little strategic benefit to Cablevision and could actually erode shareholder value.

Investors said they would much prefer the Bethpage, New York-based cable operator to use its cash to issue a dividend or repurchase shares to boost shareholder value.

"One of the best investments any company can make is in its own stock and they have to weigh that against any other opportunities they come across," said Chris Marangi, portfolio manager at Gabelli & Co, which owns about 8 percent of Cablevision.

Cablevision declined to comment.

Gabelli & Co, led by Mario Gabelli, and other shareholders have clashed with the Dolans over management decisions in the past, including the family's attempt to take Cablevision private last year for a price investors deemed too low.