Viacom Posts Loss on Blockbuster Charge
Thursday October 28, 5:02 pm ET
By Seth Sutel, AP Business Writer
Viacom Posts Loss Third-Quarter Loss of $487.6 Million on Blockbuster Charge
NEW YORK (AP) -- Viacom Inc. took a $1.5 billion hit to its third-quarter earnings as it completed a split from the struggling Blockbuster video rental chain. Otherwise, its results were mixed, with higher earnings from television and cable networks but flagging results from its radio division, which recently lost top-rated shock jock Howard Stern.
Nonetheless, Viacom's shares rose after the company announced a larger-than-expected stock buyback program and boosted its dividend by a penny per share.
Viacom, whose array of media businesses includes CBS, MTV and the Paramount movie studio, posted a net loss of $487.6 million, or 28 cents a share, for the three months ending Sept. 30. That compared with earnings of $699.6 million, or 40 cents per share, in the same period a year ago. Revenues rose 4 percent to $5.48 billion from $5.26 billion a year ago.
The results were dragged down by charge to write down the value of Blockbuster, which formally separated from Viacom this month as part of a plan announced in February.
Earlier this year, Viacom took another $1.3 billion charge to reflect the declining value of Blockbuster Inc., whose video rental business has been undercut by cheap DVD sales and competition from the rent-by-mail service Netflix Inc. Blockbuster recently launched a similar service to compete with Netflix.
Blockbuster reported its own results on Wednesday and announced that Nigel Travis had resigned as president and chief operating officer.
Without the $1.5 billion charge this past quarter related to Blockbuster, Viacom's businesses performed fairly well in the quarter, with improved results from cable networks and broadcast TV overcoming continued weakness in its radio division.
Excluding the latest Blockbuster charge, earnings from continuing operations rose 12 percent to $722.6 million from $647.9 million a year ago. On a per-share basis, those earnings came in at 42 cents, a penny better than the estimate of Wall Street analysts polled by Thomson First Call.
The company also announced a share buyback program that could be worth up to $8 billion, well above the upper estimates of $4 billion to $6 billion that investors had been expecting, as well as an increase in its dividend to 7 cents per share from 6 cents per share.
The aggressive buyback program overshadowed the otherwise mixed results at Viacom's operating divisions, sending the company's widely traded "B" class shares up $1.02, or 2.9 percent, to close at $36 Thursday on the New York Stock Exchange.
Earnings from Viacom's cable networks division grew 13 percent on a 14 percent increase in revenues, which was driven by higher advertising results from the MTV group; earnings from broadcast television, which includes both CBS and the UPN network, rose 7 percent on a 5 percent gain in revenues.
Radio continued to be a sore spot for Viacom, where earnings tumbled 17 percent on a 4 percent decline in revenues. The company blamed weak advertising sales as well as higher expenses, including costs for talent.
Earlier this month the company lost a major radio talent when shock jock Howard Stern signed a five-year year deal with Sirius Satellite Radio Inc., the smaller of two rival radio satellite broadcasters.
While the loss of Stern alone won't have a major impact on Viacom's bottom line, it dealt another psychological blow to the radio industry, which has become unpopular with investors because of its sluggish growth prospects.
In a conference call with investors, Viacom's co-president and co-chief operating officer Les Moonves acknowledged that "clearly radio has had a rough year," but "we still think it's a great business."
Moonves said the company had come to feel that many of the stations were "starved" for programming and marketing spending, and that the company was focusing on turning around nine key stations with extra spending as it evaluates strategies for reviving the business.
For the first nine months of the year, Viacom earned $976.7 million, or 56 cents per share, versus $1.8 billion, or $1.02 per share, in the same period a year earlier. Nine-month revenues rose 9 percent to $16.23 billion from $14.88 billion.
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