CBS Over The Moon About Acquisitions
CEO Moonves Wants To Pursue New Media, Outdoor Purchase
By Mike Farrell -- Multichannel News, 3/1/2008 8:52:00 AM
CBS CEO Les Moonves is on the acquisitions hunt, telling analysts on a quarterly conference call last week that the broadcasting giant may tap into its healthy cash reserves to fund growth.
CBS, which includes the CBS Television Network, premium cable network Showtime and cable sports channel CBS College Sports Network (the former CSTV) among its assets, reported a 3% decline in revenue in the fourth quarter. Cash flow was up 4% to $824 million.
On a conference call with analysts last Tuesday, Moonves said that CBS will likely grow through acquisition, most likely in the new media and outdoor advertising space.
CBS has usually used its cash reserves to pay dividends to shareholders. While that remains the priority — and Moonves said the dividend could possibly rise again this year — he said there is plenty of powder in the broadcaster's arsenal to fund a deal or two.
Moonves added that prices of recent deals appear to be more attractive than in the past.
That didn't calm at least one analyst, who wrote in a research report last week that combined with an increasingly weak advertising market, the possibility of a large purchase only adds to the uncertainty.
“With the prospect of continued anemic growth in its core businesses, we continue to be concerned about the risk of sizable acquisition activity with uncertain returns — further reducing the probability of incremental shareholder return initiatives in 2008 or 2009,” wrote Goldman Sachs media analyst Ingrid Chung in a research report.
Moonves added that CBS was unaffected by the recent writers' strike, adding that the work stoppage forced the programmer to rethink the way it does business. The strike saved CBS between $60 million and $75 million in production costs, Moonves said. He added that the broadcaster will drastically reduce its budget for pilots.
While Moonves tried to remain upbeat — he stressed that the advertising market is still healthy and that scatter pricing is about 30% above the upfront — other analysts showed some concern about possible large acquisitions and the overall health of the ad market.
CBS issued guidance of 3% to 5% cash-flow growth for 2008 and declined to give revenue-growth projections. That was below some analysts' estimates, forcing a handful to trim their own forecasts for the company.
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