Turnaround Time at Regrouped Viacom

Wall Street awaits details of the splitup as the big media companies continue to struggle.
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Wall Street can't wait to see Sumner Redstone and his henchmen turn around media battleship

Viacom

(VIAB) - Get Report

.

The New York company is due to post second-quarter earnings Thursday morning. The report comes as Viacom plans to split into a pair of companies, one targeting growth investors and the other aimed at value players. The company is expected to announce the terms of the much-anticipated breakup on Thursday.

The split is part of a theme running through the big media industry lately, as underperforming conglomerates struggle to explain just what it is that's so good about being huge. On Wednesday, rival

Time Warner

(TWX)

posted a weak quarter, sending its shares lower. Like Time Warner and other media bigwigs, Viacom has seen its shares drop sharply in the past couple years.

The breakup has been building for a while. In June the Viacom board rubber-stamped Redstone's splitup plan. The new growth side will be refashioned into a Tom Freston-led Viacom company consisting of MTV Networks, Paramount Studios and a host of cable outlets and new-media enterprises. The Leslie Moonves-led CBS company is to include all CBS assets, along with the media company's outdoor advertising and radio units.

In the meantime, Merrill Lynch media analyst Jessica Reif Cohen sees generally weak results across the filmed-entertainment sector for all big media. A research note from Merrill out Monday says Viacom is vulnerable where TV industry trends are concerned. "Second-quarter results are unlikely to show significant strength given softness in the television market, a trend that seems to have worsened in second quarter, particularly in the local market," said Reif Cohen in her note. "Growth is also likely to slow somewhat at the cable networks due to continued investment in programming."

Wall Street has taken little note, however, that the CBS network's prime-time ratings under Moonves continue to thrive. Last year the network was No. 1 with viewers aged 25-54, and it would have taken the 18-49 mantle were it not for

News Corp.'s

(NWS) - Get Report

Fox, whose gains were largely driven by the Super Bowl broadcast. Overall, CBS led in households and viewers.

Merrill expects Viacom to make 45 cents a share for the second quarter on $5.7 billion in revenue. Analysts are expecting 46 cents per share on $5.7 billion in revenue.

At Viacom, recent developments include the $160 million acquisition of Neopets, a popular online platform that the company hopes will be an effective promotional and ad driver among younger users. Neopets is a gaming- and animation-driven Web site based in Glendale, Calif.

One element that has largely slipped below the radar screen is the inclusion of cable network Showtime on the CBS side of the fence. Showtime has been a little flat of late, especially as the subscription-based channel has taken a back seat to rival

Time Warner's

(TWX)

HBO.

Showtime is a slightly more mature business than MTV Networks. And according to executives familiar with the decision to group it with the CBS Network and stations, the channel doesn't fit with the Viacom basic cable networks such as Nickelodeon, VH1 and MTV.

"The costs are aligned in terms of CBS, UPN and Showtime in terms of the expense of producing shows," says one insider who pointed out that Showtime can get help from CBS on the marketing side and that Showtime can help on the flip side in terms of its experience working with the cable companies. "The promotional ad vehicle is pretty meaningful. It wasn't working so well the other way -- this could be better in terms of a different type of transactional model, compensation and retransmission agreements."

The CBS Stations Group has a leadership vacuum after the departure of chief Fred Reynolds, who was set to become the CFO of the new CBS company. Veteran broadcaster Dennis Swanson is in line for the top stations job, though other names have been bandied about.

On the sports side, CBS insiders said that the network would focus on maintaining its current rights properties, including PGA golf, U.S. Open tennis, the NFL and NCAA basketball. While some consideration has been given to going after remaining NFL rights -- Viacom's Spike TV would be a natural fit -- people close to the cable operation say that it involves too much money for the male-oriented network. CBS also has no interest in the NHL, according to sources.

Comcast

(CMCSA) - Get Report

is said to be pursuing some NFL and NHL rights.

On Wednesday, Viacom was trading down 18 cents to $33.58.