Redstone: Blockbuster Spinoff Is On Track

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Viacom Inc.'s cable networks helped to pump up itsthird-quarter earnings by 27 percent, the company said last week.

Companywide revenue for the quarter was $3.33 billion, upslightly from $3.3 billion in the same period last year. Net earnings for the period hit$110.9 million, or 16 cents per share, up from $86.4 million (10 cents) in the previousyear.

In the nine-month period, earnings were $239 million, or 33cents per share, compared with a loss of $133 million (25 cents) in the year-ago period.Revenue rose 6 percent to $9.3 billion, and cash flow rose to $1.5 billion from $1 billiona year ago.

At the cable networks, revenue rose 15 percent to $752.6million and operating cash flow hit $285.1 million, up 22 percent. Chairman SumnerRedstone told analysts in a conference call that the cable segment, driven by MTVNetworks, is on track to post operating cash flow of more than $1 billion this year.Revenue at MTVN rose 17 percent and cash flow rose 22 percent.

In the video segment, revenue was up 13 percent to $1.1billion, driven primarily by growth at Blockbuster Entertainment Inc.

Blockbuster, which went public in August, should be spunoff entirely from Viacom after the first of the year. Although some published reports saidViacom might be rethinking that strategy, Redstone said the spinoff was on track -- theprice is right.

"It remains our intention to split off Blockbusterfrom Viacom sometime after the first of the year," Redstone said. "Having saidthat, we will not give it away. I believe that the market ultimately becomes rational.Blockbuster is not a sick child -- it's a booming, thriving business, picking upmarket share as we speak, with some very significant strategic initiatives to be announcedsoon."

CBS Corp. chairman Mel Karmazin had told analysts that thespinoff may be on hold. Blockbuster's sluggish stock price -- about $14 per share,after going public at $15 -- and growing cash flow at the unit has caused Karmazin toreconsider the sell-off.

Viacom is buying CBS. After the deal closes, Karmazin willbecome CEO of Viacom, with Redstone remaining chairman.

Cash flow at Blockbuster for the third quarter was up 28percent to $129 million. For the nine-month period, cash flow was $373.2 million, up froma cash-flow deficit of $100.4 million in the previous year.

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