##### Table of Contents



UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
   þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number
    000-51205
  DISCOVERY HOLDING
    COMPANY
 (Exact name of Registrant as
    specified in its charter)
  State of Delaware

20-2471174(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)12300 Liberty BoulevardEnglewood, Colorado

80112(Address of principal executive
    offices)

(Zip Code)   Registrants telephone number, including area code:
 (720) 875-4000
   þ o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
    Series A
    common stock 269,159,338 shares; and




---



TABLE OF CONTENTS  Condensed Consolidated Balance Sheets (unaudited)Condensed Consolidated Statements of Operations and Comprehensive Earnings (Loss) (unaudited)Condensed Consolidated Statements of Cash Flows (unaudited)Condensed Consolidated Statement of Stockholders Equity Nine months ended September 30, 2007 (unaudited)Notes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 6. Exhibits2005 Incentive Plan, As Amended and Restated2005 Non-Employee Director Incentive Plan, as Amended and RestatedTransitional Stock Adjustment Plan, as Amended and RestatedRule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationSection 1350 Certification    Table of Contents   DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Condensed Consolidated Balance Sheets
 (unaudited)
  September 30,


December 31,2007


2006amounts in thousandsASSETSCurrent assets:Cash and cash equivalents

$
157,461



154,775Trade receivables, net


152,413



147,436Prepaid expenses


15,424



11,522Other current assets


11,077



3,629Total current assets


336,375



317,362Investments in marketable securities


51,878



51,837Investment in Discovery Communications Holding, LLC
    (Discovery) (note 7)


3,294,999



3,129,157Property and equipment, net


278,503



280,775Goodwill (note 6)


2,075,671



2,074,789Other assets, net


15,710



17,062Total assets

$
6,053,136



5,870,982LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
32,984



43,656Accrued payroll and related liabilities


25,985



32,292Other accrued liabilities


32,468



29,924Deferred revenue


21,792



16,015Total current liabilities


113,229



121,887Deferred income tax liabilities


1,240,090



1,174,594Other liabilities


29,808



25,237Total liabilities


1,383,127



1,321,718Commitments and contingencies (note 9)Stockholders equity:Preferred stock, $.01 par value. Authorized
    50,000,000 shares; no shares issued






Series A common stock, $.01 par value. Authorized
    600,000,000 shares; issued and outstanding
    268,868,635 shares at September 30, 2007 and
    268,194,966 shares at December 31, 2006


2,689



2,682Series B common stock, $.01 par value. Authorized
    50,000,000 shares; issued and outstanding
    11,869,696 shares at September 30, 2007 and
    12,025,088 shares at December 31, 2006


119



120Series C common stock, $.01 par value. Authorized
    600,000,000 shares; no shares issued






Additional paid-in capital


5,727,019



5,714,379Accumulated deficit


(1,082,903
)


(1,183,831
)Accumulated other comprehensive earnings


23,085



15,914Total stockholders equity


4,670,009



4,549,264Total liabilities and stockholders equity

$
6,053,136



5,870,982    I-1




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Condensed Consolidated Statements of Operations and
    Comprehensive Earnings (Loss)
 (unaudited)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006amounts in thousands, except per share amountsNet revenue

$
177,913



169,876



529,015



489,233Operating expenses:Cost of services


122,539



111,503



362,174



318,725Selling, general, and administrative, including stock-based
    compensation (notes 2 and 10)


39,644



42,772



122,497



131,894Restructuring and other charges


192



3,633



192



3,963Gain on sale of operating assets


(85
)


(120
)


(327
)


(287
)Depreciation and amortization


17,176



16,036



50,162



47,995Impairment of goodwill (note 6)






93,402







93,402179,466



267,226



534,698



595,692Operating loss


(1,553
)


(97,350
)


(5,683
)


(106,459
)Other income:Share of earnings of Discovery (note 7)


10,493



32,051



157,847



83,569Other income, net


2,653



2,581



14,268



7,05413,146



34,632



172,115



90,623Earnings (loss) before income taxes


11,593



(62,718
)


166,432



(15,836
)Income tax expense


(4,086
)


(13,915
)


(64,244
)


(35,448
)Net earnings (loss)


7,507



(76,633
)


102,188



(51,284
)Other comprehensive earnings, net of taxes:Foreign currency translation adjustments


4,826



4,873



9,529



13,961Unrealized holding gains (losses) arising during the period


(4,514
)


160



(2,358
)


844Other comprehensive earnings


312



5,033



7,171



14,805Comprehensive earnings (loss)

$
7,819



(71,600
)


109,359



(36,479
)Basic and diluted earnings (loss) per common share (note 3)

$
.03



(.27
)


.36



(.18
)    I-2




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Condensed Consolidated Statements of Cash Flows
 (unaudited)
  Nine Months EndedSeptember 30,2007


2006amounts in thousands (note 4)Cash flows from operating activities:Net earnings (loss)

$
102,188



(51,284
)Adjustments to reconcile net earnings (loss) to net cash
    provided by operating activities:Depreciation and amortization


50,162



47,995Stock-based compensation


1,652



1,200Impairment of goodwill






93,402Share of earnings of Discovery


(157,847
)


(83,569
)Gain on lease buyout


(6,992
)


Deferred income tax expense


62,768



33,649Other non-cash charges (credits), net


(1,008
)


135Changes in assets and liabilities, net of acquisitions:Trade receivables


(4,492
)


(21,875
)Prepaid expenses and other current assets


(3,964
)


(3,730
)Payables and other liabilities


(9,960
)


33,213Net cash provided by operating activities


32,507



49,136Cash flows from investing activities:Capital expenditures


(36,310
)


(51,220
)Proceeds from lease buyout


7,138



Net purchases of marketable securities


(41
)


(51,052
)Cash paid for acquisitions, net of cash acquired






(46,793
)Other investing activities, net


(4,765
)


1,431Net cash used in investing activities


(33,978
)


(147,634
)Cash flows from financing activities:Net cash from option exercises


4,626



Other financing activities, net


(469
)


(6
)Net cash provided (used) by financing activities


4,157



(6
)Net increase (decrease) in cash and cash equivalents


2,686



(98,504
)Cash and cash equivalents at beginning of period


154,775



250,352Cash and cash equivalents at end of period

$
157,461



151,848    I-3




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Condensed Consolidated Statement of Stockholders Equity
 Nine months ended September 30, 2007
 (unaudited)
  AccumulatedAdditional





Other


TotalPreferred


Common Stock


Paid-in


Accumulated


Comprehensive


StockholdersStock


Series A


Series B


Series C


Capital


Deficit


Earnings


Equityamounts in thousandsBalance at January 1, 2007

$




2,682



120







5,714,379



(1,183,831
)


15,914



4,549,264Net earnings






















102,188







102,188Other comprehensive earnings


























7,171



7,171Stock compensation


















634











634Cumulative effect of accounting change (note 8)






















(1,260
)






(1,260
)Conversion of Series B to Series A






1



(1
)


















Stock option exercises






6











12,006











12,012Balance at September 30, 2007

$




2,689



119







5,727,019



(1,082,903
)


23,085



4,670,009    I-4




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial Statements
 September 30, 2007
 (unaudited)
  (1)
    Basis of
    Presentation  2 3
        Form 10-K
    (2)
    Stock
    Options and Other Long-Term Incentive Compensation  Stock
    Options
   I-5




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
      Share-Based Payment
          Weighted





WeightedAverage





AverageDHC


Exercise


DHC


ExerciseSeries A


Price


Series B


PriceOutstanding


1,215,000


$
15.33



2,997,000


$
18.87Exercisable


971,000


$
15.49



2,937,000


$
18.93     2006
    Ascent Media Long-Term Incentive Plan
   I-6




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    (3)
    Earnings
    (Loss) Per Common Share    (4)
    Supplemental
    Disclosure of Cash Flow Information  Nine MonthsEndedSeptember 30, 2006amounts inthousandsCash paid for acquisitions:Fair value of assets acquired

$
48,264Net liabilities assumed


(1,471
)Cash paid for acquisitions, net of cash acquired

$
46,793   (5)
    Acquisition     I-7




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  (6)
    Goodwill    September 30,


December 31,2007


2006amounts in thousandsGoodwillCreative Services group

$
106,599



106,599Network Services group


198,072



197,190Discovery


1,771,000



1,771,000Total goodwill

$
2,075,671



2,074,789         (7)
    Investment
    in Discovery       I-8




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  2 3 1 3
  2 3
      Consolidated
    Balance Sheets
  September 30,



December 31,2007



2006amounts in thousandsCash and cash equivalents

$
55,310




52,263Other current assets


982,431




918,373Property and equipment, net


383,989




424,041Goodwill and intangible assets


4,807,931




472,939Programming rights, long term


1,143,477




1,253,553Other assets


354,198




255,384Total assets

$
7,727,336




3,376,553Current liabilities

$
740,068




734,524Long term debt


3,978,252




2,633,237Other liabilities


220,756




175,255Mandatorily redeemable equity in subsidiaries


48,010




94,825Members equity (deficit)


2,740,250




(261,288
)Total liabilities and members equity (deficit)

$
7,727,336




3,376,553  I-9




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Consolidated
    Statements of Operations
  Nine Months EndedSeptember 30,2007


2006amounts in thousandsRevenue

$
2,241,238



2,061,036Cost of revenue


(735,159
)


(706,008
)Selling, general and administrative


(819,997
)


(793,525
)Restructuring and other charges


(15,798
)


Equity-based compensation


(129,226
)


(10,561
)Depreciation and amortization


(95,891
)


(87,036
)Asset impairment


(26,174
)


Gain on sale of operating assets


134,671



Operating income


553,664



463,906Interest expense, net


(179,135
)


(149,828
)Other income, net


6,031



21,261Income tax expense


(73,938
)


(143,727
)Earnings from continuing operations


306,622



191,612Loss from discontinued operations, net of income taxes


(60,532
)


(24,473
)Net earnings

$
246,090



167,139DHCs share of Discoverys net earnings

$
157,847



83,569     Note:
  (8)
    Income
    Taxes       I-10




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
      (9)
    Commitments
    and Contingencies        (10)
    Related
    Party Transactions      (11)
    Information
    About Operating Segments       I-11




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
           I-12




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    Consolidated Reportable SegmentsCreative


Network








EquityServices


Services


Corporate


Consolidated


Affiliate-group


group(1)


and other


Total


Discoveryamounts in thousandsNine months ended September 30, 2007Revenue from external customers

$
316,401



212,614







529,015



2,241,238Operating cash flow (deficit)

$
35,478



32,507



(21,753
)


46,232



686,082Capital expenditures

$
19,240



13,482



3,588



36,310



55,317Total assets

$
413,219



388,992



5,250,925



6,053,136



7,727,336Nine months ended September 30, 2006Revenue from external customers

$
303,498



185,735







489,233



2,061,036Operating cash flow (deficit)

$
32,241



34,576



(27,003
)


39,814



561,503Capital expenditures

$
19,243



29,481



2,496



51,220



40,109     (1)
    
    Included in network services group revenue is broadcast services
    revenue of $113,951,000 and $119,118,000 and systems integration
    revenue of $98,663,000 and $66,617,000 for the nine months ended
    September 30, 2007 and 2006, respectively.  Consolidated Reportable SegmentsCreative


Network








EquityServices


Services


Corporate


Consolidated


Affiliate-group


group(1)


and other


Total


Discoveryamounts in thousandsThree months ended September 30, 2007Revenue from external customers

$
99,959



77,954







177,913



744,631Operating cash flow (deficit)

$
9,995



13,407



(7,248
)


16,154



231,170Capital expenditures

$
5,815



5,014



387



11,216



18,682Three months ended September 30, 2006Revenue from external customers

$
101,567



68,309







169,876



704,530Operating cash flow (deficit)

$
8,181



15,503



(7,868
)


15,816



204,960Capital expenditures

$
7,142



10,472



1,206



18,820



14,334     (1)
    
    Included in network services group revenue is broadcast services
    revenue of $38,145,000 and $41,178,000 and systems integration
    revenue of $39,809,000 and $27,131,000 for the three months
    ended September 30, 2007 and 2006, respectively. I-13




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
     Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006amounts in thousandsConsolidated segment operating cash flow

$
16,154



15,816



46,232



39,814Stock-based compensation


(344
)


(215
)


(1,652
)


(1,200
)Depreciation and amortization


(17,176
)


(16,036
)


(50,162
)


(47,995
)Impairment of goodwill






(93,402
)






(93,402
)Share of earnings of Discovery


10,493



32,051



157,847



83,569Other, net


2,466



(932
)


14,167



3,378Earnings (loss) before income taxes

$
11,593



(62,718
)


166,432



(15,836
)     Nine Months EndedSeptember 30,2007


2006amounts in thousandsRevenueUnited States

$
420,081



373,697United Kingdom


90,339



98,976Other countries


18,595



16,560$
529,015



489,233   September 30,


December 31,2007


2006amounts in thousandsProperty and equipment, netUnited States

$
185,326



184,052United Kingdom


70,293



70,363Other countries


22,884



26,360$
278,503



280,775  I-14




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results Of
    Operations  Form 10-Q
  
    general economic and business conditions and industry trends
    including the timing of, and spending on, feature film and
    television production;
    spending on domestic and foreign television advertising and
    spending on domestic and foreign first-run and existing content
    libraries;
    the regulatory and competitive environment of the industries in
    which we, and the entities in which we have interests, operate;
    continued consolidation of the broadband distribution and movie
    studio industries;
    uncertainties inherent in the development of new business lines
    and business strategies;
    integration of acquired operations;
    uncertainties associated with product and service development
    and market acceptance, including the development and provision
    of programming for new television and telecommunications
    technologies;
    changes in the distribution and viewing of television
    programming, including the expanded deployment of personal video
    recorders, video on demand and IP television and their impact on
    television advertising revenue;
    rapid technological changes;
    future financial performance, including availability, terms and
    deployment of capital;
    fluctuations in foreign currency exchange rates and political
    unrest in international markets;
    the ability of suppliers and vendors to deliver products,
    equipment, software and services;
    the outcome of any pending or threatened litigation;
    availability of qualified personnel;
    the possibility of an industry-wide strike or other job action
    by or affecting a major entertainment industry union;
    changes in, or failure or inability to comply with, government
    regulations, including, without limitation, regulations of the
    Federal Communications Commission, and adverse outcomes from
    regulatory proceedings;
    changes in the nature of key strategic relationships with
    partners and joint venturers;
    competitor responses to our products and services, and the
    products and services of the entities in which we have
    interests; and
    threatened terrorists attacks and ongoing military action in the
    Middle East and other parts of the world.  Form 10-K
 I-15




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##### Table of Contents



Form 10-K
  Recent
    Events
    Overview
  2 3
  and/or
      2 3 1 3
   I-16




---



##### Table of Contents



Operating
    Cash Flow
    Results
    of Operations
       I-17




---



##### Table of Contents



Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006amounts in thousandsSegment RevenueCreative Services group

$
99,959



101,567



316,401



303,498Network Services group


77,954



68,309



212,614



185,735Corporate and other














$
177,913



169,876



529,015



489,233Segment Operating Cash FlowCreative Services group

$
9,995



8,181



35,478



32,241Network Services group


13,407



15,503



32,507



34,576Corporate and other


(7,248
)


(7,868
)


(21,753
)


(27,003
)$
16,154



15,816



46,232



39,814   Revenue.
    Cost of Services.
 I-18




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##### Table of Contents



Selling, General and Administrative.
  Restructuring Charges.
  Depreciation and Amortization.
  Stock-Based Compensation.
      Share of Earnings of Discovery. 2 3 2 3
 I-19




---



##### Table of Contents



Other Income.
  Income Taxes.
  Net Earnings (Loss).
  Liquidity
    and Capital Resources
      Discovery
  2 3
 I-20




---



##### Table of Contents



brick-and-mortar e-commerce
  Consolidated
    Results of Discovery
  Nine Months EndedSeptember 30,2007


2006amounts in thousandsRevenue:Advertising

$
968,087



887,627Distribution


1,099,624



1,063,138Other


173,527



110,271Total revenue


2,241,238



2,061,036Expenses:Cost of revenue


(735,159
)


(706,008
)Selling, general and administrative (SG&A)
    expense


(819,997
)


(793,525
)Operating cash flow


686,082



561,503Restructuring and other charges


(15,798
)


Expenses arising from long-term incentive plans


(129,226
)


(10,561
)Depreciation and amortization


(95,891
)


(87,036
)Asset impairment


(26,174
)


Gain on sale of operating assets


134,671



Operating income


553,664



463,906Other income (expense):Interest expense, net


(179,135
)


(149,828
)Realized and unrealized gains from derivative instruments, net


2,507



11,562Minority interests in consolidated subsidiaries


(2,049
)


3,077Other


5,573



6,622Earnings before income taxes


380,560



335,339Income tax expense


(73,938
)


(143,727
)Earnings from continuing operations


306,622



191,612Loss from discontinued operations, net of income taxes


(60,532
)


(24,473
)Net earnings

$
246,090



167,139  I-21




---



##### Table of Contents



Business
    Segment Results of Discovery
  Nine Months EndedSeptember 30,2007


2006amounts in thousandsRevenue:U.S. networks

$
1,468,061



1,391,520International networks


723,984



641,299Commerce, education and other


49,193



28,217Total revenue

$
2,241,238



2,061,036Operating Cash Flow:U.S. networks

$
595,123



541,393International networks


99,886



96,667Commerce, education and other


(8,927
)


(76,557
)Total operating cash flow

$
686,082



561,503     Note:
    Revenue.
     I-22




---



##### Table of Contents



Cost of Revenue.
  SG&A Expenses.
  Restructuring Charges.
  Expenses Arising from Long-term Incentive
    Plans.
 I-23




---



##### Table of Contents



Depreciation and Amortization.
  Asset impairment.
  Gain on sale of operating assets.
  Other
    Income and Expense
  Interest Expense.
  Realized and Unrealized Gains from Derivative Instruments,
    net.
  Minority Interests in Consolidated
    Subsidiaries.
  Other.
  Income Taxes.
  Net Earnings.
  Liquidity
    and Capital Resources
   I-24




---



##### Table of Contents



Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk  Foreign
    Currency Risk
   I-25




---



##### Table of Contents



Item 4.
    Controls
    and Procedures  Rules 13a-15 15d-15,
   I-26




---



##### Table of Contents



DISCOVERY
    HOLDING COMPANY
 
  PART II 
    OTHER INFORMATION
 
  Item 1.
    Legal
    Proceedings  Form 10-K
 
  Item 6.
    Exhibits  (a)
    Exhibits  10
.1

Discovery Holding Company 2005 Incentive Plan (As Amended and
    Restated Effective August 15, 2007)*10
.2

Discovery Holding Company 2005 Non-Employee Director Incentive
    Plan (As Amended and Restated Effective August 15, 2007)*10
.3

Discovery Holding Company Transitional Stock Adjustment Plan (As
    Amended and Restated Effective August 15, 2007)*31
.1

Rule 13a-14(a)/15d-14(a)
    Certification*31
.2

Rule 13a-14(a)/15d-14(a)
    Certification*31
.3

Rule 13a-14(a)/15d-14(a)
    Certification*32


Section 1350 Certification*     *
    
    Filed herewith. II-1




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##### Table of Contents



SIGNATURES
    DISCOVERY HOLDING COMPANYDate: November 7, 2007

By:

/s/  John
    C. MaloneJohn
    C. Malone
    Chief Executive OfficerDate: November 7, 2007

By:

/s/  David
    J.A. FlowersDavid
    J.A. Flowers
    Senior Vice President and Treasurer
    (Principal Financial Officer)Date: November 7, 2007

By:

/s/  Christopher
    W. SheanChristopher
    W. Shean
    Senior Vice President and Controller
    (Principal Accounting Officer)  II-2




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##### Table of Contents



EXHIBIT INDEX
  Regulation S-K):
  10
.1

Discovery Holding Company 2005 Incentive Plan (As Amended and
    Restated Effective August 15, 2007)*10
.2

Discovery Holding Company 2005 Non-Employee Director Incentive
    Plan (As Amended and Restated Effective August 15, 2007)*10
.3

Discovery Holding Company Transitional Stock Adjustment Plan (As
    Amended and Restated Effective August 15, 2007) *31
.1

Rule 13a-14(a)/15d-14(a)
    Certification*31
.2

Rule 13a-14(a)/15d-14(a)
    Certification*31
.3

Rule 13a-14(a)/15d-14(a)
    Certification*32


Section 1350 Certification*     *
    
    Filed herewith.