Karmazin Uncertainty Fells Viacom Stock

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Despite relatively good operating results for the fourth quarter, Viacom Inc.
stock took a hit Wednesday due to the continued uncertainty surrounding
president and chief operating officer Mel Karmazin's employment contract.

Viacom reported fourth-quarter revenue growth of 12 percent and cash-flow
growth of 42 percent, fueled mainly by strong results at its cable and broadcast
networks.

But the company's stock dipped as low as $35.10 per share Wednesday -- down
$2.43 each, or 6 percent -- before rallying to $36.55, down 98 cents, in 4 p.m.
trading.

In a conference call with analysts, chairman Sumner Redstone said he and
Viacom's board of directors are working with Karmazin to hammer out an
agreement.

"Mel and I understand and we're highly sensitive to the fact that a timely
resolution is desirable, but we believe it is better to get it right," Redstone
said on the call.

"Mel and I are working cooperatively with a committee of independent Viacom
directors to reach a resolution as soon as possible," he added. "In the
meantime, we continue to work together as we always have for the benefit of
Viacom and its shareholders, while not losing sight of our mutual desire to
resolve any possible issues quickly."

Viacom stock has come under pressure as Karmazin's employment contract -- set
to expire at the end of the year -- comes to a close.

Redstone has said publicly that he would like to reduce some of his COO's
powers. Karmazin, according to some press reports, has said in the past that he
would not accept any changes to his authority.

Although they tried to make nice during the conference call, the differences
between the two executives appeared to come out.

Asked by an analyst whether Viacom would pay a dividend, Karmazin quickly
replied that he would rather use the company's cash flow for acquisitions and to
internally grow the business.

Redstone piped in that while he agreed with Karmazin, Viacom's independent
board members are currently evaluating the possibility of issuing dividends.

Karmazin also touted the increase in the company's cash flow since he came on
board as part of the 1998 merger between Viacom and CBS. He said that in 1999,
Viacom had free cash flow of about 8 cents per share, increasing to $1.46 per
share in 2002.

"This may have been the best merger of all time," he added.

But the COO was contrite when it came to Viacom's stock price, which dropped
7 percent in 2002.

"Others will tell you we suck less than everyone else," Karmazin said, adding
that the Standard & Poor's index dropped 23 percent and the NASDAQ was down
31 percent for the year.

"But Viacom investors shouldn't be interested in that," he added. "You bought
our stock for one reason -- to have it go up. We disappointed you in 2002. We
hope to make it up in 2003."

Later, Karmazin said he would sell about $10 million of his personal holdings
in Viacom stock, related to options he received 10 years ago. He added that the
sale -- which represents about 2 percent of his total holdings -- is necessary
to pay tax obligations related to those options.

At the company's cable networks, revenue rose 16 percent in the quarter to
$1.35 billion while cash flow was up 10 percent to $580.6 million.

Strong advertising revenue at its MTV Networks and Black Entertainment
Television divisions, coupled with a 9 percent boost in affiliate fees, helped
to drive the growth.

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