Cable Growth Paces Viacom

The company posts a slide in operating income, though, as taxes hit it hard.
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Viacom (VIAB) - Get Report posted strong first-quarter numbers Tuesday, led by a solid gain at its cable networks unit.

For its first quarter ended last month, the New York media giant earned $585 million, or 36 cents a share. That's down from the year-ago continuing-operations profit of $618 million, or 36 cents a share. But on an apples-to-apples basis, excluding a tax-related gain in the previous-year quarter, latest-quarter earnings rose to 36 cents a share from 29 cents a year earlier.

Revenue jumped 5% from a year ago to $5.6 billion, led by a 19% gain in cable network revenue. Advertising rose 5% from a year ago as well. Cash flow fell 2% from a year ago to $828 million as taxes rose.

Analysts surveyed by Thomson First Call had forecast a 31-cent-a-share profit on revenue of $5.42 billion.

Viacom also reaffirmed 2005 guidance, saying it "is on track to deliver mid-single-digit growth in revenues and operating income and high-single-digit growth in earnings per share."

In an early morning statement, the company pointed to its strong cable growth and shrugged off worries about its showing on the TV front.

"Viacom is off to a very solid start in 2005, highlighted by the continued extraordinary performance of our cable networks operation, which recorded 19% gains in revenue and 20% growth in operating income in the first three months of the year," CEO Sumner Redstone said. "Outdoor posted double-digit operating income gains of 20% on mid-single-digit revenue growth, and radio continued to show top-line improvement reflecting our targeted station and programming investment strategy to drive future growth. Although television revenue and operating income declined in the first quarter because of the absence of the Super Bowl and political ad spending, CBS is going into the upfront advertising season with the strongest ratings and demographic mix in over 10 years, which bodes very well for us for the rest of 2005 and into 2006."

The latest numbers come as Wall Street awaits

an update on the company's disassembly dance.

Redstone prompted roars of approval last month by saying he would take a look at splitting up the company. But the stock settled back down soon afterward, leaving Viacom holders in familiar territory: awaiting a move that will finally set the stock moving ahead again.

On Tuesday, he said the company continues to explore its options.

"We continue to explore the separation of Viacom into two new and focused entities that could better position our businesses for continued growth and enhance shareholder return," Redstone added. "We are diligently working to determine and resolve all the issues raised by the proposed transaction and expect to complete the analysis in the second quarter."

After a decade of leaders extolling the effectiveness of media consolidation, so-called asset bundling seems to have fallen out of favor. Analysts generally applauded Viacom's plan to look at a splitup, and some went so far as to say the company's move could point to a new trend.

Viacom closed Monday at $34.16.