Viacom co-COOs Eyeing New Acquisitions After Split

Nov 1, 2005  •  Post A Comment

Viacom co-Chief Operating Officer Leslie Moonves said Tuesday he will consider acquiring certain cable and new media assets once CBS splits from Viacom, as long as the purchases are within CBS’s core business.

The media giant is set to split into two separately traded public companies later this year, with Mr. Moonves becoming CEO of CBS Corp., which will include Viacom’s two broadcast networks, Showtime, Infinity Broadcasting and Simon & Schuster–considered low-growth companies that produce lots of cash.

The remaining assets, including Paramount Pictures and MTV Networks, will form the new Viacom, which will be headed by co-COO Tom Freston and which is being viewed by the investment community as a growth company.

Despite most of Viacom’s cable assets going into the Freston-led company, Mr. Moonves made clear that if it makes sense to purchase a cable property, he would do so under the right conditions.

“I don’t see us competing [with the new Viacom],” he told Wall Street analysts during Viacom’s third-quarter earnings conference call. “There will be no music channel or kids channel. The cable business is a very good business.”

Meanwhile, Mr. Freston said it’s likely that the new Viacom will also look to make acquisitions that allow his operations to expand into new markets and new platforms. He said the company continues to focus on building its broadband brands, and predicted having alliances with 50 wireless companies worldwide by the end of the year.

The executives’ comments came as Viacom announced that it swung to a third-quarter profit of $708.5 million, compared with a year-earlier loss of $487.6 million. Revenue advanced 10 percent to $5.9 billion.

Much of the improvement was driven by gains at Viacom’s cable and film operations, which offset declines at its television operations. The cable operation reported an 11 percent increase in operating income to $682 million, while revenue advanced 15 percent to $1.6 billion. The main growth drivers were advertising revenue increases and gains in affiliate fee revenues. The company also reported strong revenues on ancillary sales.

The television operation, meanwhile, reported a 19 percent decline in operating income to $376 million, while revenue fell 2 percent to nearly $2.2 billion. The company blamed the decline on difficult comparisons with a year ago, when the syndication operation received a huge boost from the sale of “CSI” into syndication.

The decline was strong enough to offset a 7 percent increase in advertising revenue. Also affecting the TV division’s results was a $19 million charge related to its sale of two TV stations in the quarter.