Investors Eye Changes at CBS With Optimism

Wall Street showed its approval Friday of a reorganization at CBS by driving up the languishing stock price of its parent, Westinghouse Electric Corp.

The stock jumped $1.75, to $18.75, on the New York Stock Exchange after Westinghouse announced that Mel Karmazin, chief of the company’s star CBS Radio group, would take over the troubled CBS television stations.

Peter Lund, president of CBS Television & Cable since 1995, resigned, as expected, after refusing to take a cobbled-down role as head of only cable and the CBS network. Those entities will report directly to Westinghouse Chairman Michael Jordan.

In addition to signaling approval of Karmazin, who did not return telephone calls, analysts seemed optimistic about the new fall prime-time schedule unveiled to advertisers in New York on Thursday by CBS Entertainment Chief Leslie Moonves. Although the network is still last among the Big Four networks in key demographic ratings, it is attracting an increasing number of viewers at a time when its rivals are losing audience share.

Still, the CBS Television group has been stuck in a slow turnaround for the last two years. While the 14 CBS-owned TV stations logged a slight profit increase in the first quarter, ended March 31, their revenues fell 5.9% to $177 million, highlighting the historic weakness of the group.

By contrast, CBS Radio, which is the nation’s largest radio group with 77 stations, is the fastest-growing and most profitable sector of Westinghouse.

Known as a fierce competitor and an efficient radio operator, Karmazin became Westinghouse’s largest shareholder last year when he merged his Infinity Broadcasting Corp. into CBS Radio in a transaction valued at $4 billion. Karmazin, who sits on the Westinghouse board, has complained loudly to the directors about the spending at CBS and the lagging stock price.

As head of the new CBS Station Group, Karmazin is expected to rely on the same formula that distinguished Infinity.

“I would think you’ll see a rather quick turnaround of the TV station group under Mel,” said Herb McCord, who sold his radio company to Infinity before forming the radio consulting group Granum Communications Corp.

McCord predicted that Karmazin would pump up station revenues by increasing their sales staff. He said that when Infinity bought the WFAN radio station in New York, he increased the sales force from 12 to 30 people in a year.

McCord said that Karmazin believes in programming investment, having built radio stars out of Don Imus and Howard Stern at Infinity. Some analysts speculated Friday that Karmazin would make a run at a high-visibility program.