CBS Posts Loss in Quarter

For Wall Street viewers, the financial picture at CBS Corp. started coming into focus Thursday.

The company posted a $9.14-billion fourth-quarter loss in its first earnings report since being split from Viacom Inc. at the start of the year. The loss was the result of a massive noncash write-down aimed at more realistically valuing the CBS television and radio operations.

The move marks the third time CBS properties have been substantially marked down in value since mogul Sumner Redstone’s Viacom paid nearly $50 billion for the company in 2000. Wall Street now pegs CBS’ value at $19.5 billion, mostly reflecting the diminished worth of its broadcast operations as audiences continue to splinter and competition from the Internet, video games and cable TV heats up.

“It seems that they really overpaid for some stations,” said Philip Remek, media analyst for Miami-based brokerage Guzman & Co.

All told, CBS wrote down $9.5 billion in assets: $6.4 billion for TV operations and $3.1 billion for radio stations.

The loss came to $6 a share. That was significantly smaller than the $18.44-billion deficit, or $10.99 a share, that Viacom posted in the fourth quarter of 2004, when it slashed the value of the radio and outdoor advertising businesses now under the CBS umbrella.

Thursday’s move was a way to clear the decks as Redstone, who still controls CBS, turns over the day-to-day reins to Chief Executive Leslie Moonves, whom he referred to as “the real boss” during a conference call with analysts. CBS began trading as a separate company Jan. 3.

On an operational basis, the new CBS beat the consensus of analysts surveyed by Thomson Financial by 2 cents a share as its flagship broadcast network bolstered results. CBS, No. 1 in total viewers, boasts such hits as “CSI: Crime Scene Investigation,” “Survivor” and “Two and a Half Men.”

“CBS continues to have more breadth and depth of success than any other network,” Moonves told analysts.

Revenue climbed 2% to $3.83 billion from $3.75 billion a year earlier. Television advertising revenue rose 1% to $2.5 billion. Ad sales for the CBS network were up 5.8%.

“There might be some more growth at the CBS network after all,” said Frederick Moran, media analyst for Stanford Group. “Many of us analysts had underestimated management’s ability to squeeze some more growth out of the network.”

CBS stock did not get a lift Thursday despite the improved operating results, falling 3 cents to $25.20.

In addition to the network, CBS owns the UPN network, cable channel Showtime, TV and radio stations, a television production studio and syndication arm, a billboard unit, book publisher Simon & Schuster and the Paramount theme parks.

Another bright spot was outdoor advertising, in which revenue rose 3% to $527.4 million.

“The outdoor business remains a viable business,” Moran said. With so many motorists stuck in traffic jams, he said, “there really is no competitive alternative to the good, old-fashioned billboard business.”

Meanwhile, radio revenue slid 1% to $543.5 million, reflecting the reduced value of station ad inventory. Satellite radio has lured away some listeners from broadcasters, and Internet advertising continues to eat away at the revenues of traditional media outlets such as radio, TV and newspapers.

CBS executives were quick to downplay the loss last month of shock jock Howard Stern, its biggest star, noting that only 27 of the company’s 179 radio stations carried his show.

But Moran said that the industry remained challenged and that CBS’ stations were off to a sluggish start.

“The radio division represents CBS’ biggest uncertainty for 2006,” Moran said.