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Friday, February 12, 2010

Redstone Says Viacom is Viable


Billionaire chairman expects a good year for the media conglomerate, after beating fourth-quarter estimates.Billionaire Sumner Redstone is optimistic about Viacom’s future. The entertainment conglomerate’s quarterly revenues may be falling faster than anyone anticipated, but cost cuts and strength in DVD and Blu-ray releases helped push profits up well ahead of expectations.

Early Thursday Viacom ( VIA - news - people ), led by billionaire chairman Redstone, worth $2 billion, according to Forbes, said it earned $694 million, or $1.14 per share, in the fourth quarter, compared with a year-earlier profit of $173 million, or 28 cents per share, when the firm booked a $454 million charge related to layoffs. Results were helped by a favorable impact from foreign exchange and lower interest expenses. Excluding those items, Viacom earned $1.09 per share, easily beating analysts’ consensus call of a profit of 88 cents per share. Analysts typically exclude one-time items when forecasting earnings estimates.Redstone said Viacom’s performance was extraordinary despite last year’s “economic challenges,” and that the entertainment company is “well positioned for success, not only today but long into the future.” Viacom owns media properties including the MTV and Nickelodeon cable networks, as well as movie studio Paramount Pictures.

It’s been a volatile market for media and advertising-dependent firms as a struggling economy led many to cut costs drastically. In the last three months of 2009, Viacom said worldwide revenues generated from advertising declined 3% to $1.3 billion, while U.S. advertising revenues fell 4%. Rival Time Warner ( TWX - news - people ) said last week that its fourth-quarter advertising revenues fell 6.3% year-over-year to $1.5 billion. (See "Movie Business Lifts Time Warner.")

"Domestic unemployment continues to be a serious concern for all marketers, but we do see growing signs of strength," said Viacom chief executive Philippe Dauman on a conference call with shareholders on Thursday. Viacom expects an improvement in ad revenue in the current quarter compared to the last, he added.

Despite Viacom's reported 2.4% drop in total quarterly revenues to $4.1 billion, investors seemed to like what they saw, pushing Viacom’s shares up 0.8%, to $30.50, in afternoon trading in New York. Viacom said revenues were pressured by lower sales of Rock Band videogames, fewer theatrical releases in its movie business and lower worldwide advertising revenues.