Cable Guy Malone Investing in Satellite Technology.

For almost three decades, John C. Malone seemed the quintessential Cable Guy.

No more. He has become an unbridled financier since selling Tele-Communications Inc., the nation's largest cable-television operator, to AT&T Corp. last year. The transaction left him with a $5 billion war chest and control of the Liberty Media Corp. subsidiary and tracking stock.

Malone, unfettered, is a scary sight to former cable brethren and even AT&T. He recently agreed to make a big investment in cable's arch enemy, the direct-broadcast satellite business, with the announcement that he will invest in Rupert Murdoch's Sky Global Networks Inc.

It's all in a day's work for Malone, 59, who has amassed big stakes in some of the world's premier -- and competing -- media companies. Liberty Media owns 9 percent of Time Warner Inc., 8 percent of Rupert Murdoch's News Corp., 21 percent of Barry Diller's USA Networks Inc. and 21 percent of Gemstar-TV Guide International Inc., a lesser-known company with a $34.2 billion market capitalization and vital patents in TV technology.

Malone has announced that he would exchange his Gemstar stake -- worth about $6 billion -- to increase his News Corp. holdings to 18 percent and take a 4.8 percent interest in Sky Global, which is readying an initial public offering. Malone also agreed to buy $500 million of the Sky Global shares in that sale, to increase his stake to about 6 percent.

Among Sky Global's assets: all of Murdoch's satellite TV investments like British Sky Broadcasting, and the 21 percent stake in Gemstar that News Corp. already owns. Murdoch said the new company will be worth $40 billion.

Malone's support may bolster News Corp.'s chances of buying DirecTV, the largest U.S. satellite-TV service, to fill the North American gap in Murdoch's global satellite enterprise. General Motors Corp. recently said it is willing to sell all or part of DirecTV's parent, Hughes Electronics Corp.

All of this means fiercer competition for cable-TV operators. According to a 1997 survey conducted by the Consumer Electronics Association, 64 percent of new satellite-TV subscribers dropped their cable service entirely after purchasing a dish, resulting in an estimated $1.4 billion annual loss to the U.S. cable industry.

Covering all the angles

Why' is Malone, an AT&T director and its biggest individual shareholder, investing in such a rival? The Liberty Media chairman has always been intrigued by new technologies, and he is functioning as a portfolio manager these days.

"He's spreading his bets more," says Scott Cleland, chief executive of the Precursor Group, an industry research company in Washington. "Malone wants to do what will increase the value of his portfolio. He's the consummate capitalist."

Malone may also want to rattle AT&T'S cage. He criticized AT&T management in July, recommending ways that the giant telecommunications company might restructure itself to boost its sagging stock price.

Perhaps he'll goad AT&T into severing ties with Liberty. If that happens, U.S. regulators might ease their decades-old scrutiny of Malone and his deals. (As Tele-Communications chief executive, Malone seldom hid his disdain for federal regulators, and in turn, was called Darth Vader in the late 1980s by then-Sen. Al Gore.)

The U.S. Justice Department "created a wall map charting Tele-Communication's cross-investments and influence," wrote Stephen Keating in his 1999 book, "Cutthroat," which chronicles Malone's exploits.

When antitrust regulators finally found cause to sue in May 1998, the case centered on a proposal by Malone and five other cable-TV operators to buy Murdoch's never-launched U.S. satellite assets for a venture called PrimeStar. The Justice Department asserted that the cable-TV operators intended to hobble the fledgling service and to eliminate Murdoch as a competitor.

But Malone was never a complete cable partisan. With academic degrees in economics, electrical engineering and operations research, he investigated the possibilities of rival technologies. In testimony, Malone suggested that his cable-TV partners in PrimeStar feared that he would start a bonafide satellite business with Murdoch.

Taking 20 percent

Six weeks after the Justice Department filed its lawsuit, Malone announced the decision to sell Tele-Communications to AT&T for $59 billion. He would give up his direct control over cable-TV systems, but retain and solidify his grip on the Liberty Media programming arm.

Outside the U.S., Malone has continued to invest in cable-TV systems. In June, Liberty Media announced a transaction that will give it 38 percent ownership and 72 percent voting interest in UnitedGlobalCom Inc., the largest broadband communications company outside North America, with 12.5 million subscribers.

As Richard Bilotti, an analyst for Morgan Stanley Dean Witter & Co., has observed, Liberty Media will control a company as large as the former Tele-Communications. In addition to traditional cable-TV service, UnitedGlobalCom has expanded into cable-telephony service, wireless data and programming.

There's no telling how European regulators might react to Malone's investment in Murdoch's satellite TV business. But the issue may not arise, since Malone is taking only a 6 percent stake in Sky Global, with the bulk of his holding in News Corp. itself. Apart from regulatory concerns, Malone has established a pattern of merging assets into larger companies with more liquid stock, and News Corp. fits the bill.

In truth, Malone has functioned as a portfolio manager for years. He stated his strategy in an interview with Wired magazine in 1994, with only a whiff of condescension to Wall Street.

"We're gonna own a lot of 20-percents of things, and we're going to put a fair amount of money into it," Malone told the magazine. "Those things are going to be leveraged and grow like hell, and we're going to create a lot of shareholder wealth doing that. As for Wall Street, we're just going to have to keep training them to understand the Value of that approach. I mean, I've been doing it my whole career."