Plan to Shed Blockbuster Boosts Viacom

Updated from 7:46 a.m.

Viacom (VIA.B - Cramer's Take - Stockpickr) shares rose Tuesday as the company rolled out a long-awaited plan to shed its Blockbuster (BBI - Cramer's Take - Stockpickr) movie-rental business.

Viacom posted strong fourth-quarter revenue, but bottom-line results were hobbled by a $1.3 billion charge at Blockbuster, which Viacom plans to spin off. That move ended weeks of speculation about the future of the problematic video retailer, fed occasionally by Viacom executives' vague comments about Blockbuster's fate.

The spinoff of Blockbuster, of which Viacom now owns 81%, is slated to happen by mid-2004, Viacom said. The announcement indicates Viacom has been unable to find a satisfactory buyer for the property.

The move "will allow each company to focus exclusively on its core businesses," Viacom CEO Sumner Redstone said in a statement. "Blockbuster can maximize its growth opportunities and Viacom can focus on the many opportunities we see ahead."

Speaking to analysts on a conference call Tuesday morning, Viacom President Mel Karmazin promised that each of the company's advertising-supported businesses would be up in the first quarter of 2004, bouncing back from weak year-over-year performances in TV and radio.

On the bottom line, Viacom reported earnings, excluding the Blockbuster charge, of $630 million, or 36 cents per diluted share. That matches the Thomson First Call consensus and is down from the 37 cents reported a year earlier.

On the basis of generally accepted accounting principles, Viacom reported a loss for the quarter of $385.4 million, or 22 cents per share, compared to a year-ago profit of $652.4 million, or 37 cents per share.