Jordan to ankle, Karmazin moving up at CBS
NEW YORK — CBS Corp. Chairman and CEO Michael Jordan is leaving the company at the end of the year, allowing Mel Karmazin to complete his rocket-fast rise to power at the Eye a few years earlier than expected.Saying he had accomplished his goal of transforming CBS into a pure-play media company, Jordan, 62, announced Wednesday that he’ll retire on Dec. 31 — a move that contradicts Jordan’s public statements just six months ago that he had no plans to step down until at least 2001. Per the actions of the CBS board of directors, Karmazin — the radio whiz who joined CBS in January 1997 following the merger of CBS Radio and Infinity Broadcasting — will assume the post of CEO of CBS Corp. on Jan. 1, 1999, with a chairman expected to be elected sometime before that date. Karmazin, 55, had been the odds-on favorite to replace Jordan since April, when Karmazin was upped to president and chief operating officer of the company. Most industry observers, however, expected Jordan to stay with CBS for at least another two years. In a press release announcing his retirement, Jordan said that by the end of 1998, the company’s management team “will have delivered on my personal goal of changing the conglomerate that was Westinghouse into one of the finest media enterprises in the world.” Operations won’t change For his part, Karmazin said the change in titles wouldn’t make much difference in how things get done at the Eye. “I didn’t even want to put out a press release,” Karmazin quipped in an interview with Daily Variety, adding that he didn’t see his promotion as “anything other than Mike wanted to retire.” Indeed, since his promotion in April, “The whole operation (at CBS), except for a few (managers) reported to me,” Karmazin said. Karmazin also dismissed reports of tension between Jordan and himself, including a recent New York tabloid story claiming Jordan was becoming impatient with Karmazin and trying to limit his power. “Mike’s point of view and mine were in sync,” Karmazin said. “There hasn’t been one thing that I’ve wanted to do that hasn’t gotten done.” Jordan was unavailable for comment. Most industry analysts — and even some Eye web insiders — didn’t dispute Karmazin’s claims Wednesday, saying Jordan gave up effective control of CBS back in April. “Mike had been out of the loop for the past year,” one CBS source said. “Mel may have speeded up (Jordan’s exit), but it won’t make much of a difference.” ‘De facto’ CEO A close observer of the company recognized Karmazin as the “de facto CEO” since rising to president and chief operating officer last April, but was nonetheless surprised by the timing of Jordan’s resignation. “I don’t think this was even being contemplated weeks ago,” he said. Still, CBS watchers couldn’t help noticing that Karmazin, who as COO was billed as the day-to-day guy, had also assumed such chairman-like activities as setting strategic direction and even lobbying in Washington. One analyst joked about whether Jordan had a job at all. “He was a conglomerate type of guy, a financial engineer who said, ‘Let’s see what happens when we turn Westinghouse inside out.’ ” That sort of leadership may have served Westinghouse well while it was reinventing itself into the “pure-play media company” that CBS has become. But with its purity, the analyst continued, CBS has assumed “a more single-minded focus — programming and salesmanship are all it needs to succeed.” Slight loss expected While the timing of Jordan’s resignation may be premature, it’s probably no coincidence that its announcement precedes by just hours the release of CBS’ third-quarter results. Those results, slated for release today, are expected to include a slight earnings loss but a robust increase in cash flow (earnings before interest, taxes, depreciation and amortization). Jessica Reif Cohen, the media and entertainment analyst at Merrill Lynch, is projecting a 49% gain in cash flow to $312 million — driven by the company’s radio group and television stations. The CBS Television Network, in contrast, is expected to continue to drag on corporate results, almost to the degree that caused rumors of the network’s sale in recent months to resurface. If nothing else, the network is being blamed for restraining CBS stock, which gained 1% Wednesday to close at $25.38 a share but had traded higher than $35 a share as recently as July. ‘Mel’s M.O.’ “He’s impatient with the stock price,” one CBS source said in explaining the timing of Jordan’s departure. “That’s Mel’s M.O.: Produce or go. But he’s running out of people to point fingers at.” While sources say Karmazin’s moods fluctuate daily with the stock price, Karmazin said he’s still bullish on the network biz, citing “early signs of improvement at the network.” But Karmazin has every reason to be optimistic: With 10.8 million shares, or 1.5% of the total outstanding, he owns 10 times as much as Jordan and enough to make him one of CBS’ biggest individual holders. CBS’ plans to carve out Infinity Media Corp. by offering 20% of its radio-and-outdoor group to the public through a forthcoming public offering is heralded as another Karmazin-inspired plan to boost the stock price. “It’s obvious the radio valuation is much greater than the television valuation,” one analyst explained. “This mechanism is completely designed to put the spotlight on CBS’ radio assets. At the same time, it’ll provide an implied valuation of CBS’ TV assets, which could be exposed as extremely undervalued.” Karmazin said plans for the IPO “are on track” and would go forward “this quarter.” More buyer than seller As for industry observers who believe CBS will either be sold or team up with a studio partner within the next few years, Karmazin insisted neither scenario was on the horizon. “You are more apt to see us as buyers rather than sellers,” he said. Karmazin said that while he wouldn’t mind gobbling up another cable property to supplement the Eye’s CMT and the Nashville Network, “There’s no one who wants to sell.” Jordan has been a strong champion of CBS TV CEO Leslie Moonves, and some are speculating whether the sometimes tense relationship between Moonves and Karmazin will worsen after Jordan departs. But Karmazin has been pulling the strings for some time now; some observers say it’s unlikely much will change after Jordan leaves. “Mel is flamboyant,” said Alan J. Bell, president of Freedom Broadcasting, which owns several CBS affils. “He and Moonves are just different kinds of theatrical personalities. Mel’s a tough boss, and a demanding person, but he’s not crazy. If he wanted to change the relationship with Les, he didn’t need today’s announcement to do it. He’s always been the power behind the throne. Now he is the throne.” (Jenny Hontz in Los Angeles contributed to this report.)
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