##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, 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
    June 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 Boulevard
    Englewood, 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 268,587,277 shares; and
    Series B common stock 11,874,196 shares.




---



TABLE OF CONTENTS  DISCOVERY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited)DISCOVERY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Earnings (unaudited)DISCOVERY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited)DISCOVERY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Statement of Stockholders Equity Six months ended June 30, 2007 (unaudited)DISCOVERY HOLDING COMPANY AND SUBSIDIARIESItem 2.Managements Discussion and Analysis of Financial Condition and Results Of OperationsItem 3.Quantitative and Qualitative Disclosures about Market RiskItem 4.Controls and ProceduresDISCOVERY HOLDING COMPANYPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSIGNATURESEXHIBIT INDEXRule 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)
  June 30,


December 31,2007


2006amounts in thousandsASSETSCurrent assets:Cash and cash equivalents

$
174,663



154,775Trade receivables, net


140,505



147,436Prepaid expenses


12,904



11,522Other current assets


4,086



3,629Total current assets


332,158



317,362Investments in marketable
    securities


53,508



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


3,282,062



3,129,157Property and equipment, net


282,294



280,775Goodwill (note 6)


2,075,288



2,074,789Other assets, net


16,234



17,062Total assets

$
6,041,544



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

$
30,970



43,656Accrued payroll and related
    liabilities


30,173



32,292Other accrued liabilities


30,991



29,924Deferred revenue


27,777



16,015Total current liabilities


119,911



121,887Deferred income tax liabilities


1,237,066



1,174,594Other liabilities


30,539



25,237Total liabilities


1,387,516



1,321,718Commitments and contingencies
    (notes 8 and 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 268,580,700 shares at June 30, 2007
    and 268,194,966 shares at December 31, 2006


2,686



2,682Series B common stock,
    $.01 par value. Authorized 50,000,000 shares; issued
    and outstanding 11,877,196 shares at June 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


5,718,860



5,714,379Accumulated deficit


(1,090,410
)


(1,183,831
)Accumulated other comprehensive
    earnings


22,773



15,914Total stockholders equity


4,654,028



4,549,264Total liabilities and
    stockholders equity

$
6,041,544



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
    (unaudited)
  Three Months Ended


Six Months EndedJune 30,


June 30,2007


2006


2007


2006amounts in thousands, except per share amountsNet revenue

$
177,220



165,789



351,102



319,357Operating expenses:Cost of services


121,609



109,623



239,635



207,222Selling, general, and
    administrative, including stock-based compensation (notes 2
    and 10)


41,333



46,281



82,853



89,452Gain on sale of operating assets


(208
)


(167
)


(242
)


(167
)Depreciation and amortization


17,415



16,304



32,986



31,959180,149



172,041



355,232



328,466Operating loss


(2,929
)


(6,252
)


(4,130
)


(9,109
)Other income:Share of earnings of Discovery
    (note 7)


125,797



30,345



147,354



51,518Other income, net


2,318



2,523



11,615



4,473128,115



32,868



158,969



55,991Earnings before income taxes


125,186



26,616



154,839



46,882Income tax expense


(50,969
)


(12,882
)


(60,158
)


(21,533
)Net earnings


74,217



13,734



94,681



25,349Other comprehensive earnings, net
    of taxes:Foreign currency translation
    adjustments


3,349



6,451



4,703



9,088Unrealized holding gains (losses)
    arising during the period


1,700



(103
)


2,156



684Other comprehensive earnings


5,049



6,348



6,859



9,772Comprehensive earnings

$
79,266



20,082



101,540



35,121Basic and diluted earnings per
    common share (note 3)

$
.26



.05



.34



.09    I-2




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##### Table of Contents



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


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

$
94,681



25,349Adjustments to reconcile net
    earnings to net cash provided by operating activities:Depreciation and amortization


32,986



31,959Stock-based compensation


1,308



987Share of earnings of Discovery


(147,354
)


(51,518
)Gain on lease buyout


(6,992
)


Deferred income tax expense


58,660



20,176Other non-cash charges (credits),
    net


(776
)


165Changes in assets and liabilities,
    net of acquisitions:Trade receivables


7,244



(162
)Prepaid expenses and other current
    assets


(1,839
)


33Payables and other liabilities


(2,539
)


5,054Net cash provided by operating
    activities


35,379



32,043Cash flows from investing
    activities:Capital expenditures


(25,093
)


(32,400
)Proceeds from lease buyout


7,138



Net purchases of marketable
    securities


(1,671
)


(50,661
)Cash paid for acquisitions, net of
    cash acquired






(46,793
)Other investing activities, net


366



256Net cash used in investing
    activities


(19,260
)


(129,598
)Cash flows from financing
    activities:Net cash from option exercises


4,083



Other financing activities, net


(314
)


(4
)Net cash provided (used) by
    financing activities


3,769



(4
)Net increase (decrease) in cash
    and cash equivalents


19,888



(97,559
)Cash and cash equivalents at
    beginning of period


154,775



250,352Cash and cash equivalents at end
    of period

$
174,663



152,793    I-3




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Condensed
    Consolidated Statement of Stockholders Equity
    Six months ended June 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






















94,681







94,681Other comprehensive earnings


























6,859



6,859Stock compensation


















401











401Cumulative effect of accounting
    change (note 8)






















(1,260
)






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






1



(1
)


















Stock option exercises






3











4,080











4,083Balance at June 30, 2007

$




2,686



119







5,718,860



(1,090,410
)


22,773



4,654,028    I-4




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial Statements
 June 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


1,723,520


$
15.40



2,996,525


$
18.87Exercisable


1,267,561


$
15.92



2,936,525


$
18.93    I-6




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  2006
    Ascent Media Long-Term Incentive Plan
    (3)
    Earnings
    Per Common Share    (4)
    Supplemental
    Disclosure of Cash Flow Information  Six MonthsEndedJune 30, 2006amounts in thousandsCash 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    June 30,


December 31,2007


2006amounts in thousandsGoodwillCreative Services group

$
106,599



106,599Network Services group


197,689



197,190Discovery


1,771,000



1,771,000Total goodwill

$
2,075,288



2,074,789     (7)
    Investment
    in Discovery      2 3 1 3
  2 3
   I-8




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    Consolidated
    Balance Sheets
  June 30,


December 31,2007


2006amounts in thousandsCash and cash equivalents

$
67,880



52,263Other current assets


1,013,824



918,373Property and equipment, net


385,476



424,041Goodwill and intangible assets


4,793,972



472,939Programming rights, long term


1,132,758



1,253,553Other assets


384,771



255,384Total assets

$
7,778,681



3,376,553Current liabilities

$
682,219



734,524Long term debt


4,082,810



2,633,237Other liabilities


237,516



175,255Mandatorily redeemable equity in
    subsidiaries


47,298



94,825Stockholders equity (deficit)


2,728,838



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

$
7,778,681



3,376,553   Consolidated
    Statements of Operations
  Six Months EndedJune 30,2007


2006amounts in thousandsRevenue

$
1,539,779



1,392,606Cost of revenue


(527,329
)


(485,404
)Selling, general and administrative


(574,814
)


(571,730
)Restructuring and other charges


(21,097
)


Equity-based compensation


(85,012
)


(9,976
)Depreciation and amortization


(68,144
)


(63,674
)Asset impairment


(54,438
)


Gain on sale of operating assets


134,671



Operating income


343,616



261,822Interest expense


(107,141
)


(99,805
)Other income, net


8,895



16,567Income tax expense


(15,019
)


(75,549
)Net earnings

$
230,351



103,035DHCs share of net earnings

$
147,354



51,518  I-9




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  (8)
    Income
    Taxes          (9)
    Commitments
    and Contingencies        (10)
    Related
    Party Transactions   I-10




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##### Table of Contents



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


Network








EquityServices


Services


Corporate


Consolidated


Affiliate-Group


Group(1)


and Other


Total


Discoveryamounts in thousandsSix months ended June 30, 2007Revenue from external customers

$
216,442



134,660







351,102



1,539,779Operating cash flow (deficit)

$
25,481



19,101



(14,504
)


30,078



437,636Capital expenditures

$
13,425



8,467



3,201



25,093



36,635Total assets

$
416,654



389,428



5,235,462



6,041,544



7,778,681Six months ended June 30, 2006Revenue from external customers

$
201,930



117,427







319,357



1,392,606Operating cash flow (deficit)

$
24,060



19,073



(19,465
)


23,668



335,472Capital expenditures

$
12,101



19,009



1,290



32,400



25,775     (1)
    
    Included in network services group revenue is broadcast services
    revenue of $75,806,000 and $77,941,000 and systems integration
    revenue of $58,854,000 and $39,486,000 for the six months ended
    June 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 June 30,
    2007Revenue from external customers

$
105,730



71,490







177,220



811,953Operating cash flow (deficit)

$
11,198



10,813



(7,295
)


14,716



257,839Capital expenditures

$
7,292



2,880



1,514



11,686



23,228Three months ended June 30,
    2006Revenue from external customers

$
103,400



62,389







165,789



733,005Operating cash flow (deficit)

$
10,962



9,576



(10,214
)


10,324



190,561Capital expenditures

$
6,506



11,406



686



18,598



18,431     (1)
    
    Included in network services group revenue is broadcast services
    revenue of $38,391,000 and $38,650,000 and systems integration
    revenue of $33,099,000 and $23,739,000 for the three months
    ended June 30, 2007 and 2006, respectively. I-12




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##### Table of Contents



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


Six Months EndedJune 30,


June 30,2007


2006


2007


2006amounts in thousandsConsolidated segment operating
    cash flow

$
14,716



10,324



30,078



23,668Stock-based compensation


(342
)


(441
)


(1,308
)


(987
)Depreciation and amortization


(17,415
)


(16,304
)


(32,986
)


(31,959
)Share of earnings of Discovery


125,797



30,345



147,354



51,518Other, net


2,430



2,692



11,701



4,642Earnings before income taxes

$
125,186



26,616



154,839



46,882     Six Months Ended June 30,2007


2006amounts in thousandsRevenueUnited States

$
278,674



245,808United Kingdom


59,834



62,446Other countries


12,594



11,103$
351,102



319,357   June 30,


December 31,2007


2006amounts in thousandsProperty and equipment, netUnited States

$
188,608



184,052United Kingdom


70,198



70,363Other countries


23,488



26,360$
282,294



280,775  I-13




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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 and integration of new
    business lines, acquired operations and business strategies;
    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-14




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##### Table of Contents



Form 10-K
  Overview
    and/or
      2 3 1 3
    Operating
    Cash Flow
   I-15




---



##### Table of Contents



Results
    of Operations
          Three Months Ended June 30,


Six Months Ended June 30,2007


2006


2007


2006amounts in thousandsSegment RevenueCreative Services group

$
105,730



103,400



216,442



201,930Network Services group


71,490



62,389



134,660



117,427Corporate and other














$
177,220



165,789



351,102



319,357Segment Operating Cash FlowCreative Services group

$
11,198



10,962



25,481



24,060Network Services group


10,813



9,576



19,101



19,073Corporate and other


(7,295
)


(10,214
)


(14,504
)


(19,465
)$
14,716



10,324



30,078



23,668  I-16




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##### Table of Contents



Revenue.
    Cost of Services.
  Selling, General and Administrative.
  Depreciation and Amortization.
  Stock-Based Compensation.
 I-17




---



##### Table of Contents



Share of Earnings of Discovery. 2 3 2 3
    Other Income.
  Income Taxes.
  Net Earnings.
  Liquidity
    and Capital Resources
     I-18




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##### Table of Contents



Discovery
  2 3
    brick-and-mortar e-commerce
 I-19




---



##### Table of Contents



Consolidated
    Results of Discovery
  Six Months EndedJune 30,2007


2006amounts in thousandsRevenue:Advertising

$
647,166



593,307Distribution


732,518



696,545Other


160,095



102,754Total revenue


1,539,779



1,392,606Expenses:Cost of revenue


(527,329
)


(485,404
)Selling, general and
    administrative (SG&A) expense


(574,814
)


(571,730
)Operating cash flow


437,636



335,472Restructuring and other charges


(21,097
)


Expenses arising from long-term
    incentive plans


(85,012
)


(9,976
)Depreciation and amortization


(68,144
)


(63,674
)Asset impairment


(54,438
)


Gain on sale of operating assets


134,671



Operating income


343,616



261,822Other income (expense):Interest expense, net


(107,141
)


(99,805
)Realized and unrealized gains from
    derivative instruments, net


4,948



12,221Minority interests in consolidated
    subsidiaries


(1,394
)


268Other


5,341



4,078Earnings before income taxes


245,370



178,584Income tax expense


(15,019
)


(75,549
)Net earnings

$
230,351



103,035   Business
    Segment Results of Discovery
  Six Months EndedJune 30,2007


2006amounts in thousandsRevenue:U.S. networks

$
992,842



932,892International networks


464,960



408,446Discovery commerce, education and
    other


81,977



51,268Total revenue

$
1,539,779



1,392,606Operating Cash Flow:U.S. networks

$
400,355



355,733International networks


58,789



58,367Discovery commerce, education and
    other


(21,508
)


(78,628
)Total operating cash flow

$
437,636



335,472     Note:
 I-20




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##### Table of Contents



Revenue.
        unitedstreaming e-commerce e-commerce
 I-21




---



##### Table of Contents



Cost of Revenue.
  SG&A Expenses.
    Restructuring Charges.
  Expenses Arising from Long-term Incentive
    Plans.
  Depreciation and Amortization.
 I-22




---



##### Table of Contents



Asset impairment.
  Gain on sale of operating assets.
  Other
    Income and Expense
  Interest Expense.
  Realized and Unrealized Gains from Derivative Instruments,
    net. non-designated
  Minority Interests in Consolidated
    Subsidiaries.
  Other.
  Income Taxes.
  Liquidity
    and Capital Resources
         I-23




---



##### Table of Contents



Item 3. Quantitative
    and Qualitative Disclosures about Market Risk
  Foreign
    Currency Risk
   
  Item 4. Controls
    and Procedures
  Rules 13a-15 15d-15,
   I-24




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##### Table of Contents



DISCOVERY
    HOLDING COMPANY
 
  PART II 
    OTHER INFORMATION
 
  Item 1.Legal
    Proceedings
  Form 10-K
 
  Item 4.Submission
    of Matters to a Vote of Security Holders
      Votes for


Votes WithheldPaul A. Gould


319,760,741



67,868,315M. LaVoy Robison


360,052,476



27,576,580
     Votes for


Votes Against


Abstentions2. Ratification of KPMG LLP
    as the Companys independent auditors for the fiscal year
    ended December 31, 2007. There were no broker
    non-votes
    with respect to this proposal


362,954,003



722,121



23,952,932
    
  Item 6.Exhibits
  (a)  Exhibits
  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: August 8, 2007

By:

/s/  John
    C. MaloneJohn
    C. Malone
    Chief Executive OfficerDate: August 8, 2007

By:

/s/  David
    J.A. FlowersDavid
    J.A. Flowers
    Senior Vice President and Treasurer
    (Principal Financial Officer)Date: August 8, 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):
  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.