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Mild wins for Viacom twins

Street greets stox warmly

Sumner Redstone, Leslie Moonves and Tom Freston rang the opening bell at the New York Stock Exchange Tuesday, and the NYSE returned the favor by ringing up shares of CBS and Viacom on their first day as separately traded companies.

With Redstone and other moguls eager to goose their media-stock prices, many watched as shares in the two entities engaged in a game of one-upmanship. Each jumped nearly $2 by early afternoon but eventually settled down, with Viacom gaining more than CBS, closing up $1.54 to $41.54. CBS ended the day with a gain of 70¢ at $26.20.

But observers cautioned against reading too much into the spikes, saying prices could be driven up in the early days of trading by hedge-fund managers and other short-term investors who could quickly quit the stock.

And with the companies holding off on a road show so they could make their January deadline for the stock issue, long-term investors could sit out the early days, which would yield an unrepresentative picture.

“It’s like watching the election returns and seeing the precincts from Maine come in,” said one insider of the early stock results.

Freston’s Viacom includes studios and cable networks, while Moonves’ CBS encompasses the Eye net, radio, theme parks, outdoor advertising, books and pay TV net Showtime. Redstone serves as chairman of both companies.

While there’s been speculation that a newly sovereign Moonves would be looking to make deals — CBS recently bought College Sports Television for $325 million — the exec played down that possibility. “We might be interested if it really works with something we already have,” Moonves told Daily Variety. “But I doubt you’ll see a major acquisition in the near term.”

Instead, Moonves said that for the new CBS, revenue is likely to come from filling new distribution pipes with existing material. The company, he said, plans to embark on a gang of VOD deals along the lines of its recent pact to make episodes of “CSI” and “Survivor” available for a fee through Comcast.

Despite criticism from some affiliates, Moonves said the strategy was sound. “What some people aren’t getting is how all these deals are additive,” he said.

The split was announced in June as a way of creating greater valuations than as a combined company, with the ownership of each share of Viacom turning into half a share in both companies.

But one exec said upping the stock price was only one aspect of the strategy. “What this has done is unwind the holding company and bring them back to legitimate operating companies. Neither Tom nor Les are financiers. They’re not empire builders. These are people who spent 25 or 30 years running companies.”

As a result, there could be more fertile opportunities for the synergy that has sometimes eluded congloms. On the Viacom side, insiders said this could mean, for instance, BET and Paramount co-productions, or new distrib partner DreamWorks Animation feeding content to Nickelodeon.

Those kinds of arrangements may be trickier to pull off at CBS, with books, theme parks and outdoor advertising all mixed in with the broadcast and radio engines. But observers do expect a lot more cooperation among Showtime, Paramount Television and CBS.

The cleaving of Viacom will be watched closely by Wall Street and competitors as a gauge of the wisdom for breaking up congloms. Not all experts are convinced.

Longtime media analyst Hal Vogel cited the human and financial costs of reorganizing units and, in some cases, creating two departments where there once was one. “Everyone’s thinking about (splits) these days, but it’s not necessarily the solution to the problems these companies have,” he said.

CBS did get good news on Tuesday from Prudential, which initiated coverage by pegging share price at $30, about 20% higher than its opening-day tag.

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