Eye bucks Street retreat

On verge of merger, CBS growth surges

NEW YORK — CBS Corp. posted stunning first-quarter growth across all its businesses Tuesday, winding down its tenure as an independent, public company with a bang.

“It’s pretty cool, because we really do have a great deal of momentum. If you’re going to go into a merger, that’s good timing,” CBS CEO Mel Karmazin told Daily Variety. He rarely grants interviews, but was feeling magnanimous at the company’s last earnings report before the TV, radio and outdoor advertising powerhouse merges with Viacom.

Federal regulators could sign off on the merger in a matter of days. Federal Communications Commission staffers have recommended approval of the merger, if the company meets nationwide ownership limits by selling off enough television stations within a year to bring its coverage under 35% of the country. Currently, the merged companies would own stations ocvering 41% of the country. The companies have proposed allowing two years to meet the 35% cap.

The FCC staff has also recommended allowing the merged companies to keep the UPN weblet. The full commission could still amend or reject the staff report.

Karmazin says he’s had no time to get nostalgic about CBS’s final days. “I’ve been so anxious to get this deal done I haven’t been thinking about it nostalgically.” It might be different “if I were leaving and the assets weren’t going to be there,” he added. Instead, the businesses will all melt into a bigger pot, as when Karmazin brought his radio company Infinity Broadcasting to the CBS fold several year ago. Now, CBS assets will mingle with powerful MTV Networks, Paramount and Viacom’s other units.

Karmazin will be chief operating officer with oversight of day-to-day operations at the merged entity. And if he and Viacom chairman-CEO Sumner Redstone get along as swimmingly as they’ve promised to, he’s the likeliest successor for the top job.

Meanwhile, at CBS, revenue jumped 36% to $2.4 billion and cash flow soared 85% to $517 million for the period amid continued red hot ad markets — impressive increases for a company as big as CBS.

TV revenue rose 28% to $324 million with cash flow of $233 million —up from $128 million the year before. Radio and billboards, housed in Infinity, saw revenue jump 66% to $789 million and cash flow soar 92% to $326 million.

Will the Viacom/CBS combo finally get radio and outdoor advertising the respect they deserve — and which Wall Street has certainly acknowledged? Karmazin hopes so. “For most of my life, the only thing lower than anyone in the radio business was a circus clown. If you weren’t in the movie business or TV, you didn’t even get invited to the C-list parties,” he joked.

Deal ready to close

He said the companies will formally close their deal — and likely unveil their new corporate and management structure — the day after formal FCC approval.

Looking ahead, Karmazin doesn’t see the buoyant ad market letting up. If anything, the pace will quicken in the third quarter as political advertising kicks in.

TV results include syndication giant King World, acquired last year, plus the results of several new stations. CBS noted that TV numbers held up against tough comparisons from the year-ago quarter.

Advertisers eager

Drug, automobile and financial service companies drove advertising. Scatter market prices are up sharply, he said, and CBS is seeing keen advertiser interest in next month’s upfront. “A number of advertisers have been approaching us about doing deals” ahead of time, he said, noting that one “very substantial advertiser” is interested in doing a five-year deal.

He also said that Joe Abruzzese, president of sales for the CBS Television Network, recently set up a separate division to handle TV movies and miniseries as part of a strategy of focusing sales on specific product.

In radio, dot-coms continue to be big advertisers. But despite recent market turmoil that has devastated many Internet stocks, he emphasized that Infinity hasn’t lost “a single dollar from a dot-com not being able to pay their bills.”

CBS did take a $75 million non-cash loss in the first quarter to realize its proportionate share of red ink on its Internet equity investments.

That knocked the company to a net loss of $38 million compared with a $387 million profit the year before. However, the 1999 quarter included a one-time gain of $366 million from asset sales, including corporate aircraft.

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