Viacom Rebounds to Post Profit

Viacom Inc. reinforced its position as the most valuable entertainment stock on Wall Street on Tuesday by rebounding to a profit in the first quarter, defying investor concerns about war-related costs and a slowdown in radio advertising.

The New York-based conglomerate’s bottom line was boosted by strong performances by its cable networks and Blockbuster Video chain.

Viacom posted a net profit of $443 million, or 25 cents a share, for the quarter ending March 31, compared with a loss of $1.1 billion, or 63 cents, in the same period last year. The losses stemmed from write-downs required by new accounting rules.

Its revenue rose 7% to $6.1 billion compared with a year ago.

Viacom shares rose $2.53 to $43.40 on the New York Stock Exchange.

The company also announced Tuesday plans to spend $1.23 billion to buy a 50% stake in Comedy Central from its partner AOL Time Warner Inc.

The deal and the first-quarter results underscore the strength of Viacom at a time when some of its rivals have been forced to retrench. In fact, AOL Time Warner is selling its stake in Comedy Central to pay down a crippling debt of $28 billion.

Early last year, Viacom surpassed AOL Time Warner as the most valuable media company on Wall Street. AOL Time Warner’s revenue is nearly double that of Viacom, making it the world’s largest entertainment company. But it has lost 35% of its value in the last year because of a collapse of Internet values and an ongoing federal probe of its accounting practices.

“Viacom has an amazing lack of turnover in top management and does deals that enhance what they do,” said media analyst John Tinker of Blaylock & Partners.

Viacom resolved a major distraction -- one that worried Wall Street -- last month when it secured highly regarded President Mel Karmazin to a new three-year contract.

In contrast, the three top executives at AOL Time Warner are new to their jobs. Walt Disney Co., the nation’s second-largest entertainment company, has also suffered from continuing turnover in its top ranks during the last decade.

The one area of Viacom’s empire that is not clicking is the Infinity Broadcasting radio group, built by Karmazin. Quarterly revenue for the division dropped 2%, to $443.8 million.

“There is no reason other than our sales organization,” Karmazin said. “This is the single biggest issue for me.”

At the other end of the spectrum was Blockbuster Video, which turned in the biggest gains for the quarter. Its revenue jumped 14%, besting the cable group, traditionally the strongest performer. Cable revenue increased 13%.

Viacom is hoping that its cable operations will be even stronger with the addition of Comedy Central. The acquisition will give the company more clout with distributors and advertisers, while allowing for cost savings through the consolidation of back-office operations with other Viacom channels such as MTV, VH1 and Nickelodeon.

“Comedy Central strengthens and reinforces our already prominent role with younger demographics,” said Karmazin during a conference call with analysts to announce the deal and first-quarter earnings.

Comedy Central is home to such popular programs as “South Park” and “The Daily Show.”

Although the channel did not come cheaply, analysts expect Viacom to easily recoup its investment. As an example, they point to the company’s 2000 purchase of Black Entertainment Television, which has doubled its ad sales in two years.