Viacom Posts Loss on $18 Billion in Charges

REUTERS 24feb2005

NEW YORK — Viacom Inc. (VIAb.N) on Thursday posted a massive quarterly loss after $18 billion in charges for writing down the value of its radio and outdoor advertising businesses in the face of a soft radio market and heightened competition.

Radio advertising sales have faced competition from competing media outlets including the burgeoning satellite radio industry, and Apple Computer Inc.'s iPod.

Wall Street analysts said Viacom's 2005 outlook for mid-single digit revenue and operating income was conservative and likely designed to build confidence in the new management team.

Paul Kim, an analyst at Tradition Asiel, called the 2005 outlook the "low baseline of expectations."

The New York-based media conglomerate said fourth-quarter net loss was $18.44 billion, or $10.99 a share, compared with a net loss of $385.4 million, or 22 cents a share, a year earlier.

Excluding extraordinary items, the company said it had a profit of 42 cents per share, topping an average Wall Street estimate of 39 cents a share, according Reuters Estimates.

Revenue rose 6 percent to $6.3 billion, falling short of analyst estimates of $6.42 billion.

The owner of the Paramount movie studios and radio's Infinity Broadcasting Network has attempted to revitalize its radio and films division in recent months. It hired veteran Hollywood talent manager Brad Grey to run its movie studio.

At Infinity, which lost controversial but popular radio host Howard Stern to satellite radio, Viacom has vowed to prune some of its stations to focus on the top radio markets.

The $18 billion in charges stemmed from the falling market value of its radio and outdoor advertising businesses, reflecting "emerging business trends and the competitive environment," Chief Executive Sumner Redstone said.

"The one thing I hope they've learned is acquisitions are bad for them," Fulcrum Global Partners analyst Richard Greenfield said.

"Massive impairment charges (on) ... Blockbuster, now a massive impairment charge on radio and outdoor. Maybe they should stop buying things," Greenfield said, referring to the charges Viacom took in past quarters related to the video rental chain.

Viacom has said in recent months it is mulling acquisitions in the video game market.

source: http://www.nytimes.com/reuters/business/business-media-viacom-earns.html? 24feb2005

Viacom Posts $18.44 Billion Loss On Huge Impairment Charge

Wall Street Journal 24feb2005

NEW YORK — Viacom Inc. Thursday posted a massive net loss for the fourth quarter, as the company recorded an impairment charge of $18 billion on the value of its radio and outdoor-advertising businesses.

Viacom said its fourth-quarter net loss totaled $18.44 billion, or $10.99 a share, and compares to a net loss of $385.4 million, or 22 cents a share, for the year-earlier quarter. Revenue increased 6% to $6.3 billion from $5.9 billion, led by double-digit increases in the cable networks segment.

The company said its loss from continuing operations totaled $17.12 billion, or $10.21 a share, in the latest quarter, compared with earnings of $586.4 million, or 33 cents a share, a year earlier.

Excluding charges and a tax benefit, Viacom said its fourth-quarter operating income increased 10% to $1.3 billion. The year-earlier quarter's net loss included a charge of 22 cents a share related to the sale of Blockbuster.

Sumner M. Redstone, chairman and chief executive, said in a statement that the massive write-down to Viacom's radio and outdoor businesses was "to reflect emerging business trends and the competitive environment." The charge amounted to $10.43 a share. Viacom said its goodwill and intangible asset balance after the impairment charge is about $49 billion.

Following the move, Viacom is "poised to move rapidly to increase our investment and re-evaluate our portfolio in Radio and to focus on the higher return areas within Outdoor," he said.

Viacom said it expects 2005 operating earnings and revenue to increase by a single-digit percentage, excluding the effects of a change in the accounting for stock compensation.

Viacom's 6% gain in fourth-quarter revenue was paced by a 15% increase at its cable networks to $1.92 billion. The unit posted a 9% gain in operating income to $691.1 million, representing the lion's share of the company total. Cable benefited from the sale of licenses for consumer products based on Nickelodeon characters.

The company's television unit had a 5% increase in revenue to $2.2 billion. Television had a 22% increase in operating earnings to $295.1 million, paced by 16% higher advertisement revenue, helped by CBS's preeminence in prime-time ratings and an increase in political commercials.

Including the charge, radio's operating loss reached $10.7 billion, compared to operating earnings of $252.2 million for the year-earlier quarter. The outdoor unit's operating loss totaled $6.97 million, compared with operating profit of $59.7 million a year earlier.

Mr. Redstone cited Viacom's "underlying operational performance, including 11% advertising growth."

"Excluding the charges and the tax benefit, Viacom delivered 21% earnings-per-share growth and a 17% increase in free cash flow to $3.0 billion," he said in the statement.

Viacom has been under pressure for much of the past several years, as its once-powerful radio business, Infinity Broadcasting, struggling to attract advertising and its Blockbuster movie-rental unit suffered from increasing competition. years. Until the departure of Mel Karmazin as president in June, the company was plagued by management tension between Mr. Karmazin and Viacom Chairman Sumner Redstone.

Some of those issues have been addressed in recent months, and the company's stock price has recovered from its lows. In October, it completed a long-awaited divestment of Blockbuster. Its CBS network, long an also-ran behind NBC, emerged as the clear leader when it won the ratings race both in overall viewers and the coveted 18-year-old to 49-year-old demographic.

But problems remain at movie studio Paramount Pictures, which has had few box-office hits recently. Longtime Chairman Sherry Lansing stepped down in November, one of several high-ranking executives to leave the company in the past year. And at the end of the year, Infinity faces the departure of shock jock Howard Stern to Sirius Satellite Radio, potentially depriving the company of millions of dollars in revenue.

Viacom Posts Large Fourth-Quarter Loss

AP 24feb2005

NEW YORK — Media giant Viacom Inc., the owner of CBS and MTV, reported a net loss of $18.4 billion for the fourth quarter Thursday due to charges to write down the value of its holdings in radio stations and outdoor advertising.

But its results excluding one-time items beat Wall Street's forecasts.

The net loss, which was equivalent to $10.99 per share, compared with a smaller loss of $385.4 million, or 22 cents a share, in the comparable period a year ago.

Revenues rose 6 percent to $6.3 billion from $5.95 billion last year, led by gains in its cable networks unit, which includes MTV, VH1 and Nickelodeon.

Excluding the effect of the accounting charge and another one-time effect from a tax benefit, the company's earnings from continuing operations rose 22 percent to $714 million or 42 cents per share, beating analysts estimates of 38 cents per share.

Viacom Class B shares fell 49 cents to $35.25 in early trading on the New York Stock Exchange. Its shares have traded in a range of $32.56 and $42.32 over the past year.

Viacom's CEO Sumner Redstone said in a statement that the company had written down the value of its radio and outdoor holdings by $18 billion "to reflect emerging business trends and the competitive environment," and would now "increase our investment and re-evaluate our portfolio in radio."

Radio remains a profitable area of business for Viacom, but its growth has been stunted in recent years, and the company has said it intends to trim down its portfolio of radio holdings to focus on higher-profit stations. Revenues from radio were flat in the latest quarter, and revenues from outdoor advertising rose 9 percent.

Excluding the write-down charge, Viacom's earnings from radio fell 6 percent in the latest quarter, which the company attributed to higher expenses for talent and employees as well as sports rights. The division's profit margins, while still high compared to other businesses, declined to 44 percent from 46 percent a year ago.

Radio's business is being challenged by a number of factors, including the rapid growth of the iPod and other portable listening devices; consumers tiring of advertising clutter; and the emerging challenge of commercial-free radio from paid subscription services like Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc.

Other parts of Viacom fared better. Cable networks reported a 9 percent gain in profit on a 15 percent increase in revenues, while earnings from television — essentially the CBS and UPN networks and a group of TV stations — rose 22 percent on a 5 percent gain in revenues.

For the coming year, the company said it expects revenues to grow in the mid single digit percentage range, and earnings per share growth in the high single digits.

For the full year, Viacom reported a net loss of $17.46 billion or $10.19 per share, versus earnings of $1.42 billion or 80 cents per share in 2003. Full-year revenues rose 8 percent to $22.53 billion from $20.83 billion.