Viacom Cuts Growth Forecast on Ad Drop

Oct 10, 2008  •  Post A Comment

Viacom said it expects lower earnings growth than it had forecast earlier in the year.
The company, which owns cable networks including MTV, VH1, BET, Comedy Central and Nickelodeon, said its earnings growth for the year will be in the mid-single to low-double digits for the 2008. Earlier this year, Viacom said it was aiming for low double-digit growth.
Shortly after the earnings announcement, Sumner Redstone’s National Amusement Inc. said it will sell $400 million of its non-voting stock in Viacom and CBS in order to lower the company’s debts and adhere to credit agreement covenants. The sale accounts for an estimated 20% of Redstone’s stake in Viacom and CBS.
Earnings are being impacted in the third quarter by a decrease of 3% in domestic advertising revenues, which will be partly offset by an 8% increase in international ad revenues, resulting in an overall decline of about 2%, the company said.
“Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets,” Viacom president and CEO Philippe Dauman said in a statement “At the same time, we are moving quickly to adapt to the changing environment and will take appropriate steps to secure new efficiencies that will enhance our long-term earnings growth prospects.”
Mr. Dauman said that the company is “fundamentally strong with powerful brands and leadership positions in attractive and growing media segments around the world. We have a strong balance sheet and we continue to generate significant cash flow, which are important attributes in this time of economic uncertainty.”
Viacom stock was trading at $17.95 at midday, down $2.14 from yesterday’s close.
(Editor: Baumann)
(Update: Added paragraph three. 1:48 p.m.)

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