Viacom Profits From DreamWorks Boost

Acquisition of the studio helped secure an earnings beat, but organic growth issues remain.
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said Thursday that its fourth-quarter earnings surged on its acquisition of DreamWorks, but its underlying business showed signs of weakness.

The media giant, which owns cable networks such as MTV and film studios such as Paramount, reported net income of $480.8 million, or 69 cents a share, compared with the $129.5 million, or 17 cents a share, it reported in the same quarter a year ago.

Excluding one-time items such as severance and restructuring costs, Viacom reported earnings of 65 cents a share.

On its top line, revenue was up 32% to $3.59 billion.

Analysts had expected earnings of 58 cents a share on revenue of $3.15 billion, according to consensus estimates reported by Thomson First Call.

'Facing Challenges'

"The results were good and their long-term guidance remains the same, but there are some questions about the strength of their core business," says Andrew Baker, analyst with Cathay Financial. Baker does not own Viacom shares, and his firm had no investment-banking relationship with the company.

Baker points to the company's worldwide advertising revenue, which gained 6% during the quarter to $1.26 billion.

"That's weaker than most people expected," he says.

The company's media networks business recorded a 4% gain in revenue to $2.08 billion, but a big chunk of that growth came from acquisitions and new digital initiatives.

On a conference call with analysts following the release, Viacom chief executive Philippe Dauman said that online traffic to, where clips of its top show

The Daily Show

are available, was up more than 90% after the company demanded that


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YouTube remove its content from its Web site.

At its filmed entertainment business, Viacom said revenue doubled for the quarter to $1.57 billion, but $560 million of that came from last year's acquisition of DreamWorks film studios.

On the conference call, Dauman said the company expects to record low-double-digit percentage gains in earnings over the next three years.

"I will be the first to say we are facing challenges," Dauman said.

Dauman replaced former Viacom CEO Tom Freston last September, in the first in a string of high-level departures from the company's executive ranks. Its chief financial officer, Michael Dolan, left at the end of the year, followed by Paramount Pictures' head of production, Gail Berman, and MTV Networks President Michael Wolf, who will step down next year.

Last month, MTV laid off nearly 250 employees as part of a restructuring effort to focus the business on the growth potential of digital media.

The quarter capped off Viacom's first year of separation from


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, the broadcast media conglomerate. Viacom posted adjusted operating income of $2.86 billion for the year, up from last year's $2.6 billion.

Shares of Viacom were recently down $1.04, or 2.6%, to $38.52.