CBS Corp. shares fell nearly 10% amid expectations that advertising revenue at the No. 2 U.S. television network will weaken in the second half.
The decline came after Morgan Stanley Dean Witter & Co. analyst Frank Bodenchak cut his cash-flow estimates, saying CBS lost advertising because of the General Motors Corp. strike. The network also will get less ad revenue than expected from NFL broadcasts and political campaigns, said Bodenchak.
CBS is paying $550 million a year for NFL rights--more than double what rival NBC paid for the previous football contract--to attract more viewers and ad dollars. President Mel Karmazin is revamping the money-losing TV network and selling 20% of the company's profitable radio and billboard unit to the public in a plan to boost the value of CBS stock.
"TV is a terrible business," said Larry Haverty, portfolio manager at State Street Research & Management, which owns CBS shares. "We look at CBS as a radio stock with a couple of bells and whistles."
CBS dropped $2.50 to close at $23.25 in trading volume of 13.4 million shares on the New York Stock Exchange, making it the eighth-most-active stock in U.S. markets. Earlier, it hit a 52-week low of $21.88.
Bodenchak said the company lost revenue after General Motors and its dealers cut back on advertising because of recent labor strikes. GM accounts for about 5% of CBS' TV station and network ad income. The network generates 50% of CBS' revenue.
"Management indicated to me they are more comfortable with a lower estimate," Bodenchak said. "Nineteen ninety-nine should be much better."