Viacom Loses $18 Billion in Fourth Quarter

Feb 28, 2005  •  Post A Comment

Viacom reported last week that it swung to a huge fourth-quarter loss as an $18 billion impairment charge related to the revised value of the company’s outdoor and radio businesses outweighed strong gains made at its cable and TV operations.

The company reported a fourth-quarter loss of $18.4 billion, compared with a year-earlier profit of $385.4 million. Excluding the charge, Viacom said, it would have posted a 10 percent increase in profit to $1.3 billion. Revenue for the three-month period rose 6 percent to $6.3 billion.

For the year, a combination of the impairment charge and a $56 million severance charge related to last year’s management shakeup led the company to post a loss of $17.5 billion, compared with a profit of $1.4 billion a year ago. Revenue rose 8 percent to $22.5 billion.

Driving much of the revenue growth at the company were the cable and television businesses. For the year, the company’s cable networks, which include MTV, Comedy Central and BET, posted a 17 percent revenue increase to $6.6 billion and a 16 percent rise in operating income to $2.5 billion, largely due to a strong surge in advertising revenue and increases in affiliate-fee revenue.

Meanwhile, the company’s television operation, which includes CBS, UPN and the television station group, reported a 10 percent increase in 2004 revenue to $8.5 billion and a 25 percent increase in 2004 operating income to $1.2 billion. Driving much of the growth was higher advertising revenue, including a combined $116 million in revenue from CBS’s airing of the Super Bowl last year and from political advertising.

Despite Viacom’s posting of a massive loss, Chairman and CEO Sumner Redstone said the company’s underlying fundamentals are healthy enough to keep the media giant growing well into the future.

“What’s clear is that our core businesses are strong and getting stronger,” Mr. Redstone told investors during a conference call to discuss the results. “We have a great deal of confidence and optimism as we move into 2005, which I promise you will be remembered as a year of the reinvention of Viacom.”

To that end, Mr. Redstone repeated his interest in making what he described as “tuck-in” acquisitions, or deals that would enhance the company’s current portfolio. He stressed the company is not interested in making major acquisitions but is interested in picking up some cable channels if they become available.

One group of channels of interest might be the properties owned by Cablevision’s Rainbow Media unit. Cablevision confirmed last week that it is exploring strategic opportunities for the three national cable networks-AMC, WE: Women’s Entertainment and Independent Film Channel-including a possible sale.

Mr. Redstone also told analysts that he plans to sit down with Viacom’s board to discuss the company’s credit rating, which at present is A-minus, as part of an overall deliberation over the company’s financial flexibility.