Viacom vamps but passes over Par

Other units take spotlight

A correction was made to this article on June 19, 2006.

Viacom chief financial officer Mike Dolan took an hour of questions from Wall Street on Wednesday without a single mention of Paramount on either side, even though Par is one of only two core assets Viacom took when it split from CBS Corp. early this year.

Since the split, Viacom shares have fallen more than 9%, while CBS is up about 1% year-to-date as of Wednesday’s close. Neither is burning up the market, but the so-called value company saddled with all those radio stations has thus far defied expectations by outperforming the sexy “growth” company.

At the Deutsche Bank media conference in Santa Monica, Dolan talked of cable investment, advertising, international expansion, digital strategy and licensing. He said investment bankers Viacom hired to identify its peers settled on ESPN and Discovery as the two companies most similar.

Talk about Wall Street-Hollywood dissonance. West Coast tongues rarely stop wagging about Paramount’s future, movies and management, along with how much longer Brad Grey will remain if the new slate disappoints or the Anthony Pellicano wiretap fog deepens.

But Par represents such a small percentage of Viacom’s profit that investors ignore it. They figure “it can’t get much worse, and there’s a bunch of upside if they get it right,” an analyst said. “From a swing factor perspective, if you’re going to be wrong or right on the stock, it would be because of cable.”

Last quarter, cable kicked in $621 million in operating profit vs. $51 million from entertainment, which is Par. Revenue split was $1.57 billion for cable, $825 million for the studio.

Dolan said that in response to investor complaints and Wall Street jitters on growth prospects for cable, Viacom will be breaking out the businesses in more detail in the second-quarter report.

“We are a hatchling. We are feeling our way how to communicate about the business to investors, and I think we have a way to go,” he said. “We will open the doors so you can have a better set of insights and can properly value the company.

“People have not appreciated how different we are. We don’t own TV stations, radio stations, theme parks. We don’t sit around talking about capex on roller coasters. We are content driven.”

Dolan said the cable biz will continue to scout for broadband online acquisitions and to deepen its international ties. MTV Networks is one of the true global brands, but “it’s not about the breadth of where we are, it’s about the depth of where we are,” Dolan said.

He added that a recent trip to China, India and the Middle East with Viacom CEO Tom Freston was “almost a religious conversion,” and he anticipated “a very concerted effort to double up in countries where growth is multiples of what it is in other parts of the world.”

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