Cablevision Systems Corp posted a higher profit on Thursday, but shares fell as it added fewer Internet and phone subscribers than expected in its core New York area.

Shares dropped around 2-1/2 percent as investors fretted that Cablevision lost more video subscribers than expected in the New York area.

Chief Operating Officer Tom Rutledge said on a conference call there was still weakness in the economy, particularly in some of the poorer neighborhoods it covers.

The company lost 7,000 video subscribers while Collins Stewart analyst Thomas Eagan had forecast additions of 2,000 video subscribers. The company also faces stiff competition from Verizon Communications Inc's FiOS digital video service in New York.

Eagan said Cablevision has still not completely recovered from customer losses related to its 15-day blackout of some Fox channels last October.

Cablevision's core New York business added 22,000 Internet subscribers and 34,000 phone lines.

Eagan had forecast additions of 26,000 Internet subscribers and 40,000 phone lines.

The results were lackluster across the board, said Eagan.

Overall Cablevision, including its recently acquired Bresnan Communications properties, added more video, Internet and phone customers.

Cablevision gains were weak relative to stronger performances from larger publicly traded cable operators Comcast Corp and Time Warner Cable Inc in the first quarter.

Cablevision, which is controlled by the Dolan family, said it benefited in the quarter from the acquisition of smaller cable company Bresnan, which closed on December 14. It plans to drop use of the Bresnan brand in the Western states on May 12.

Executive Vice President Gregg Seibert said the company would be looking toward more acquisitions, at the right price.

We are going to continue to look at acquisition opportunities, said Seibert. He said any other acquisition analysis would be similar to the pretty intense analysis undertaken with Bresnan.

Net income rose to $104.1 million, or 36 cents a share, from $74.2 million, or 27 cents a share, a year earlier.

Revenue rose 9.7 percent to $1.92 billion.

The company said it remains on track with its previously announced spinoff of Rainbow Communications, its cable network unit that owns AMC, IFC and Sundance, among others.

Cablevision has previously said Rainbow will be renamed AMC Networks when it is spun off later this year. Executives said that the company has already reached an agreement with Nasdaq for an listing.

We still have a Cablevision 'buy' rating because we think there's value created with the spin-out of Rainbow, Eagan said.

Shares in Cablevision fell 89 cents or 2.5 percent to $34.38 on the New York Stock Exchange.

(Reporting by Yinka Adegoke, editing by Gerald E. McCormick and Lisa Von Ahn)

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