Viacom Isn’t Going Private, Redstone Says
Viacom Inc. Chairman Sumner M. Redstone dashed cold water Wednesday on the much-rumored idea that the media conglomerate might address its lagging stock price by going private.
“We like the company exactly as it is,” Redstone said. “We think it’s going to grow tremendously,” he said, adding that he believed the stock market had undervalued Viacom shares.
Redstone’s remarks came during a conference call with analysts and reporters in which the company reported a larger-than-expected 24% profit gain for the second quarter, driven by strong results from its domestic cable TV networks.
New York-based Viacom, parent of Paramount Pictures and the cable TV channels MTV, Comedy Central and Nickelodeon, also reported a 24% increase in quarterly revenue, to $2.85 billion, due largely to the acquisition of the DreamWorks movie studio earlier this year.
The company reported net income of $437 million, or 61 cents a share, in the quarter ended June 30. That was up from $354 million, or 47 cents a share, in the second quarter of 2005.
Viacom has seen its stock price slump nearly 16% since completing its split-up with CBS Inc. on Jan. 1. Its shares fell 69 cents Wednesday to $33.75, but the earnings report came after the close of trading.
Investment bankers and private equity firms have in recent weeks bombarded both Viacom and CBS with proposals for taking the now-separate companies private or for spinning off such assets as CBS’ radio and billboard businesses.
Redstone had told people internally that he was not interested in such a plan, which has been discussed in at least two recent analyst reports. On Wednesday, Redstone, 84, made his position public when an analyst asked whether, given the disappointing stock performance, Viacom had considered going private or engaging in a much bigger stock buyback than the one currently underway.
Viacom Chief Executive Tom Freston also chimed in on the issue, saying that the company wanted to make sure it had resources available to invest in its own brands or in opportunities such as the $200-million purchase of digital film and game producer Atom Entertainment announced Wednesday.
Expending much more capital on share repurchases would threaten that objective, Freston said.
Regarding the quarterly earnings, Freston said: “Despite a challenging cable advertising environment, we once again outperformed the market, driving success with our best-in-class brands and unmatched connections with our audiences.”
Although this has been a tough year for “upfronts,” or advertising sales in advance of the new fall television season, Freston held to a prediction that full-year ad growth in cable TV would be in the “upper single digits,” which would be a stronger performance than that expected from the industry as a whole.
A number of advertisers -- AOL and Johnson & Johnson, for example -- have opted for maximum flexibility this year and largely pulled back from the upfront market, Freston said. He said he was optimistic about the prospects for “scattered,” or spot-market, ad sales in the second half of the year.
“You like to be able to lock in as much as possible” through upfront sales, he added, “but scattered [advertising] sells for a better price.”
Cable revenue for the second quarter rose 8% to $1.75 billion, with ad revenue up 8% and affiliate fees -- the income cable TV providers pay to carry Viacom channels -- up 11%. International cable sales were weaker, up 4%, with ad revenue falling by 2%.
“The ad growth trend is improving off a depressed first quarter,” UBS analyst Aryeh Bourkoff said. He noted that Viacom was staking much of its hopes for the full year on stronger ad performance in the second half.