Bowing to the continued market turmoil, Viacom and CBS Corp. lowered their third quarter earnings guidance on Friday, citing the expected downturn in advertising spending in the coming months, among other factors.

Viacom shares dropped 17% Friday after the company lowered its full-year earnings estimates and predicted third-quarter earnings will come in at least 10% below previous expectations.

CBS said it will take a $14 billion non-cash goodwill charge in the third quarter that will mostly reflect the drop in book value of its TV and radio stations. The ad slowdown has been most acute so far on the local level. CBS said the move was in response to “the effects of the current financial crisis are likely to cause further declines in advertising spending.”

CBS’ shares sank 20% to close Friday at $8.10; Viacom closed at $17.10. Both stocks were well below their 52-week lows.

Viacom had earlier forecast flat worldwide ad revenue, but on Friday said those numbers will drop 2%. The domestic tally should slump 3%, offset by 8% growth in the smaller international ad biz.

That means full-year earnings will increase in the range of mid-single to low-double digits, the company said.

Just before the close of a wild day on Wall Street, as the market swung to positive territory after falling 700 points in the morning, Viacom shares were down 19% at $16.80.

“Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets,” said prexy and chief exec Philippe Dauman. “At the same time, we are moving quickly to adapt to the changing environment and will take appropriate steps to secure new efficiencies that will enhance our long-term earnings growth prospects.”

Affiliate and ancillary revenues grew at a double-digit rate in the third quarter, the company noted. Execs will elaborate on the revised outlook Nov. 3 during a conference call to discuss third-quarter results.

CBS said it was lowering its 3Q revenue guidance to 3% growth of the year-ago quarter, and projected earnings per share would come in between 42 cents and 44 cents per share, compared to 51 cents per share in the year-ago quarter. CBS reports its Q3 earnings on Oct. 30.

In semi-related Sumner Redstone news, the mogul said his National Amusements theater circuit will sell $400 million of its nonvoting stakes in Viacom and CBS in order to pay down debt.

Redstone is exec chairman of Viacom and CBS. National owns 46.8 million of voting shares in Viacom and the same amount in CBS. It has 23.4 million nonvoting shares in Viacom and 39.8 million nonvoting shares in CBS.