Conglom has post-breakup blahs

No profit for Viacom from split

In the first round of CBS vs. Viacom, score a tight one to Leslie Moonves.

Viacom’s profit performance was weaker in its first quarter as a standalone firm than it was during last year’s frame, when it was conjoined with CBS.

Viacom saw profit slide 9%, to $317 million, for the January-March period as Paramount and the international cable biz underperformed and debt increased.

Meanwhile, CBS recently announced that its profits were roughly flat at $227 million, a better showing — and possible evidence against the conventional wisdom that Viacom is the faster-growing operation.

Both companies saw revenue jump in their first quarter of independence: Viacom announced Thursday that it increased revs by 12% — a number that bests CBS’ growth of 4% over the 2005 figures — though if the effects of the DreamWorks acquisition are stripped out, Viacom’s increase amounts to the same figure of 4%.

Overall, numbers don’t yet make a conclusive case that the split was essential. Revenue and profit movement of single-digit percentages — in either direction — is common and may have occurred even if the companies remained together.

And Wall Street has been ambivalent about the separation. Since Viacom and CBS began trading separately in January, investors have dropped Viacom’s stock price about 4% while pushing CBS up roughly 2%.

On Thursday investors sent Viacom’s stock down 2% to $38.86, even as most analysts said revenue at Viacom and Paramount came in ahead of estimates.

Despite the mixed results, Sumner Redstone, chairman of the boards that control each company and the split’s architect, maintained he was “confident and totally committed to the path we have laid out.”

Par was a factor behind the profit slide. Operating income at the studio dropped 28% to $51 million as revenue from DreamWorks pics like “Munich” and “Match Point” still weren’t quite enough to redeem the division. All told, the slate rung in $174 million for the quarter, helping to send film revenue up 25%.

Execs also revealed company spent $17 million integrating DreamWorks with Par, a process Viacom CEO Tom Freston assured analysts was now complete.

Analysts were mostly pleased with the Par numbers, though; in a wry remark in the report of Jessica Reif Cohen at Merrill Lynch, she wrote “Filmed Entertainment — DreamWorks to the rescue (sort of).”

Freston said company also already “reaped the benefits” of deal as he looked ahead to distribution coin from DreamWorks Animation’s “Over the Hedge.” Film could face an uphill climb as it bows May 19, the same day as Sony tentpole “The Da Vinci Code.”

Freston took aim at those who would call “Mission: Impossible 3” a disappointment. He cited “terrific reviews” and focused on overseas, noting pic had “solid box office results of $118 million worldwide,” which he called the biggest global launch in the history of the franchise. Movie did open in more territories than previous two films.

On cable, growth in ad sales and domestic nets helped send category’s operating income up 8% to $621 million.

In the call, execs emphasized what they call “emerging networks” like Logo and mtvU, which they said would be the big cablers of the future, as well as new platforms. Freston said iTunes downloads for shows from Viacom nets recently exceeded the 4 million mark.

Freston is one of the first execs to talk about the cable-telco wars as beneficial for content companies, calling the added competish a revenue “driver” as the entrants increase prices to carry networks.

Company also flexed muscle on youth-oriented and nontraditional content. While it’s not the player News Corp. has become, Viacom recently bought Xfire, an instant message service aimed at gamers, which Freston called a “bull’s-eye against our multiplatform strategy,” to join other new-media properties Neopets and iFilm.

Freston also expressed optimism for new cable shows like BET’s “Vince Young: Next Level,” a reality skein about the Tennessee Titans’ rookie quarterback. Curiously, it’s an example of what would have at one time been considered synergy; most of the Titans games will air on CBS.

And Freston affirmed value of nets like Comedy Central, despite the high-profile departure of a key performer who lately has turned up everywhere. “Despite the loss of Dave Chappelle, Comedy Central grows as a creative powerhouse,” Freston said.

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