Rutledge, 58, who was chief operating officer, had seen his responsibilities shrink after AMC Networks (AMCX.O) was spun off over the summer as a separate public company, could be attracted to running a larger cable company, said several analysts.

Rutledge, who was paid more than $28 million in 2010, could join the larger St Louis-based Charter Communications (CHTR.O) whose CEO Michael Lovett said in October he'll be leaving the role on April 30 or as soon as Charter finds a replacement. Charter, which is controlled by Microsoft co-founder Paul Allen and private equity holders, has around 5 million subscribers spread across the United States.

The resignation was unexpected by Wall Street and the company said it has commenced a search for an executive to oversee its cable business, which serves some 3 million subscribers across New York, Connecticut and New Jersey. The news also comes just a few weeks after the president of its cable business John Bickham also stepped down.

Analysts at ISI Group downgraded Cablevision to a 'hold' from a 'buy' late on Thursday describing Rutledge's departure as "one of the biggest bombshells in recent industry history" which has given the stock a higher risk premium.

Cablevision said an experienced senior management would be overseeing cable and its other businesses while it searches for a replacement.

"Clearly, there's no one at the company that can run the company beyond Rutledge," said Mario Gabelli, of Gabelli & Co, a long-time major shareholder of Cablevision. "Chuck Dolan clearly controls the exit strategy and Time Warner Cable and Comcast Corp (CMCSA.O) are the logical partners if the Dolans decide it makes sense to turn it over to someone else to run it."

Cablevision spokesman Charlie Schueler declined to comment.

A former Time Warner Cable (TWC.N) executive, Rutledge was well regarded on Wall Street as a safe pair of hands to steer the Dolans' business. Rutledge is given credit by investors for helping the New York cable company successfully fend off stiff competition from Verizon Communications' (VZ.N) FiOS TV and Internet service which is heavily penetrated into its Long Island, New York stronghold.

"This is a devastating loss for Cablevision," said Bernstein Research analyst Craig Moffett. "It's his steady hand on the till that has led to Cablevision's spectacular success in competition with Verizon and satellite TV."

Rutledge's departure also comes at a tricky time for Cablevision after it missed Wall Street forecasts in the third quarter as subscriber growth slowed significantly. Its shares are down around 25 percent since August.

In a statement, Cablevision Chief Executive James Dolan said Rutledge had applied a "rare combination of technological vision and operational excellence" in delivering results.

(Reporting By Yinka Adegoke. Editing by Gunna Dickson)

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