Viacom Shakes Off Ad Slowdown, but Stock Remains Leaden
A funny thing is happening on the way to the ballyhooed ad slowdown: The big media companies keep posting record ad revenues.
Boosted in part by its huge hit Survivor on CBS, Viacom (VIA - Get Report), the world's third-biggest media company, Tuesday posted a 22% jump in cash flow. The company pushed past analysts' estimates by 4 cents amid strong ad sales at CBS, MTV and its radio stations.
Viacom, which completed its deal to acquire CBS earlier this year, said profits fell 65% on higher expenses from that deal.
Net income fell to $33.4 million, or 2 cents a share, from $96.7 million, or 16 cents a share, a year ago. Pro forma cash flow, a key financial measure for media companies, rose to $1.45 billion from $1.18 billion, also well ahead of analysts' projections. Pro forma revenue rose 7% to $5.97 billion from $5.58 billion.Analysts surveyed by First Call/Thomson Financial projected a loss of 2 cents per share.
'Phenomenal'"As you can see from our phenomenal results, the Viacom/CBS merger is working absolutely brilliantly," said Mel Karmazin, Viacom's chief operating officer, in a conference call with analysts and reporters. Karmazin said Viacom should be able to sustain 20% growth rates into 2001, a strong sign of confidence amid
'Dumbfounded'Despite the apparent good news from Viacom, the stock continued dropping in late morning trading Wednesday, falling 88 cents to $55.63. "I'm totally dumbfounded," Moran says. He blames lingering concerns among investors regarding a potential recession and an ad slowdown for the stock's Wednesday woes. In fact, he says he expected Viacom to hit $60 a share after this morning's announcement. He rates the stock a buy; his firm hasn't done any underwriting for Viacom. Others remain skeptical. "As far as I'm concerned, Time Warner and Viacom can say all the positive things that they want, but they will still have tougher comparisons next year," says fund manager Hal Vogel. Thus far, the big players like Viacom and Time Warner do appear to be benefiting from a so-called flight to quality by advertisers, while ad-dependent new media companies like DoubleClick (DCLK) and Yahoo! (YHOO) are
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