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Cablevision Systems Corp. (CVC) swung to a first-quarter profit, helped by strong cable results, and the company pleased investors by saying it may spin off its MSG operations.

The company's MSG unit, which lost $17 million last year, includes famous New York entertainment venues Madison Square Garden, Radio City Music Hall and the Beacon Theater, as well as the New York Rangers and New York Knicks sports franchises.

"It's operating income doesn't come close to reflecting the true value of its assets," said Sanford C. Bernstein analyst Craig Moffett, who said the true value of MSG is not reflected in Cablevision's stock price.

A potential MSG spin-off is welcome news on Wall Street, as many investors have argued that MSG should be separated from Cablevision's higher growth businesses and perhaps held privately by the Dolan family, which controls Cablevision through a dual-class share structure.

"[Cablevision Chief Executive James Dolan] likes to pay big bucks for sport stars," Joyce said. He estimated MSG could be worth between $750 million and $1.5 billion as a stand-alone business. In the first quarter, MSG's revenue rose 2.3% to $271.3 million and its operating loss improved 89% to $2.2 million reflecting a prior-year write-down.

Cablevision's MSG announcement suggests renewed confidence in its financial position. The Bethpage, N.Y.-based cable and entertainment company had pulled back last fall from considering strategic options like asset sales and spin-offs during the meltdown in global financial markets and went about refinancing its 2009 debt maturities.

"MSG is largely a trophy asset, with extremely volatile earnings," said Pali Capital analyst Richard Greenfield, who noted that "investors give Cablevision very limited credit for MSG's assets, particularly with the rebuild of the Garden set to begin later this year."

On the company's conference call, Cablevision Vice Chairman Hank Ratner said the renovation of the MSG arena will likely cost more than planned. In February, the company said there was no change in the company's plans to spend $500 million on the iconic arena. He said the company expects to fund the renovation solely from the resources of MSG, but he declined to provide a new cost estimate or forecast the potential return on the investment.

Greenfield estimated that a spin-off of MSG could add 75 cents a share to Cablevision's free cash flow next year, and he said it could have larger implications for the future of the Dolan's entertainment empire, like a sale of its cable business to a cable operator like Time Warner Cable Inc. (TWC) or Comcast Corp. (CMCSA CMCSK), or a merger of its live entertainment assets with other companies in the live-music industry, where the Dolans have strong ties.

Meanwhile, the company's solid cable results should bolster more confidence in the cable industry, despite its recent slowdown in subscriber additions. But Morgan Stanley analyst Benjamin Swinburne noted that its revenue and subscriber metrics were lighter than expected in contrast with recent strong reports from its cable counterparts.

Like other cable companies, Cablevision's chief operating officer, Tom Rutledge, said the company saw a slowdown in subscription growth in March, which he attributed to weakness in the economy.

"March was a difficult month for us relatively speaking, compared to last year, and the effect of March was almost all in lower income or working class neighborhoods like the Bronx and Brooklyn and Newark and not really a change in the competitive environment," said Rutledge.

For the three months ended March 31, Cablevision reported a profit of $20.2 million, or 7 cents a share, reversing a year-earlier loss of $31.6 million, or 11 cents a share. The loss on derivative contracts narrowed to $33.7 million from $106.3 million.

Revenue rose 11% to $1.902 billion, basically in-line with the average analyst estimate of $1.898 billion on Thomson Reuters. Analysts were expecting earnings of 15 cents a share.

Adjusted operating cash flow increased 14.3% to $590 million, and consolidated operating income grew 21.3% to $297.8 million.

"Overall, this was a strong quarter from Cablevision," said Miller Tabak's Joyce.

At Cablevision's telecommunications business, by far the company's largest, revenue rose 5.3% and earnings jumped 14%, driven by broadband-subscriber growth and higher rates.

In February, Chief Operating Officer Thomas Rutledge said cable-subscriber growth in the quarter to that point was ahead of last year's results.

Cablevision said late last month that it will launch a 101-megabits-per-second high-speed Internet service - more than twice as fast as rival Verizon's much-touted FiOS. The announcement suggested Internet service providers might be moving away from bundled packages to focus on bandwidth and speed, rapidly becoming more important to subscribers using the Internet.

The company's Rainbow unit - which includes cable channels such as AMC and IFC - posted an 11% revenue rise while operating income rose 40%. Cable networks have been a rare bright spin in the media industry as they are less advertising-dependent.

Rutledge said the company has plans this summer to launch an online subscription business for its Long Island-based newspaper, Newsday, which the company acquired last year. The business posted revenue for the quarter of $83.4 million, down sharply as the publishing industry continues to founder amid a decline in advertising and the rise of the Internet.

Rutledge signaled that Newsday would experiment with an online subscription model earlier this year, and the company is expected to make Newsday available online to its cable subscribers.

-By Nat Worden, Dow Jones Newswires; 201-938-5216; nat.worden@dowjones.com

(Mike Barris contributed to this report.)