Viacom Details Split Plans

Viacom Inc. reported second-quarter earnings that were flat compared with the same period a year ago, when the company still owned the Blockbuster video unit. Excluding that and other discontinued operations, earnings rose 6 percent.

Viacom also provided some more detail on its plans to split into two separately traded companies. The company expects to complete the split in the first quarter of next year, creating a growth company based on its cable networks including MTV and VH1, and another one centered on its broadcast television group including CBS.

"In the 21st century, large is no longer in charge," Sumner Redstone, the company's chairman, CEO and controlling shareholder told investors in a conference call. "Leverage will belong to the nimble and the swift."

For the three months ending in June, Viacom earned $753.8 million, unchanged from the same period a year ago.

Per-share earnings rose, however, to 47 cents from 43 cents due to a smaller number of shares outstanding. The per-share earnings were a penny above the forecasts of analysts surveyed by Thomson Financial.

Revenues rose 10 percent to $5.88 billion from $5.35 billion primarily on gains in its cable networks unit and its entertainment division, which includes its movie studio.

The company also said it expected both revenues and operating income to grow in the mid-single digits.

Excluding the effects of discontinued operations in both periods, which includes the Blockbuster unit which was split off in the fourth quarter of last year, Viacom's earnings from continuing operations rose 6 percent to $762.2 million from $717.2 million in the same period a year ago.

The results were led by a 14 percent gain in both revenues and earnings for Viacom's cable networks unit. Television earnings fell 16 percent on a 1 percent decline in revenues due to the absence of licensing fees in the year-ago period from "Star Trek: Deep Space Nine" and other shows. Radio earnings edged up 2 percent on a 1 percent gain in revenues.

Entertainment, which includes the Paramount studio, swung to a loss of $12.6 million from earnings of $57.1 million a year ago despite a 24 percent jump in revenues. The company cited higher costs for prints and advertising, and the timing of film releases and the recognition of associated expenses.

Viacom's board voted on June 14 to split Viacom into two separately traded public companies, one centered on MTV and the company's other cable networks including VH1 and Nickelodeon; the other company will include CBS and Viacom's radio and outdoor advertising holdings.

On Thursday, Viacom also presented additional details on how the split will work. The cable networks company will not initially pay a dividend, focusing instead on growth, while the TV-centered company will pay a relatively high dividend.

Viacom executives say the split is aimed at allowing investors to choose between the two different types of assets, the cable networks seen as being more appealing to growth investors, while the high cash flow aspects of the TV and radio businesses would appeal to investors seeking stability and yield.

The split also resolves the looming issue of who would succeed Redstone, who is 82 years old, as CEO.

The cable networks company, which will keep the Viacom name, will be headed by MTV's longtime chief Tom Freston, while the other company, to be called CBS Corp., will be led by television veteran Les Moonves. Redstone will continue as chairman and controlling shareholder of both companies.

Both men currently hold the title of co-president and co-chief operating officer, and before the split-up had been announced they had been seen as competing to succeed Redstone as head of the entire company.

"Consolidation was a necessary and positive trend in the evolution of these businesses," Redstone said on the conference call. "But we have entered a new era of rapid technological change and global competition. Bulk will not ensure success."

The split essentially undoes the merger between Viacom and CBS, which was announced in 1999. Viacom had also made a number of other acquisitions over the years, including the Paramount movie studio and the Blockbuster video rental chain.

However, investors have soured on the stocks of large media conglomerates recently, seeing few advantages of owning widely different types of media businesses under one roof. Viacom split off Blockbuster last year, and radio giant Clear Channel Communications Inc. said in April it would spin off its live entertainment business.