Redstone Defends Viacom’s Write-Down

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Viacom Inc. chairman and CEO Sumner Redstone railed against what he called Wall Street’s misinterpretation of the media giant’s recent $18 billion write-down, telling a group at an industry conference in Florida that Viacom did not pay too much for its assets.

Viacom stock has taken a hit since the media giant reported an $18.4 billion fourth-quarter loss last Thursday, primarily due to an $18 billion write-down of its radio and outdoor-advertising assets. Viacom shares dipped 96 cents each to $35.28 per share Feb. 24, rebounding slightly to $35.60 Feb. 25. The stock was down 44 cents to $35.16 in afternoon trading Monday.

Some analysts have said that the write-down was proof that Viacom overpaid for its Infinity Broadcasting Corp. radio and outdoor businesses, part of its 2000 acquisition of CBS.

At the Bear Stearns Cos. Inc. media conference in Palm Beach, Fla., Monday, Redstone said Wall Street has ignored several company assets that have appreciated since they were acquired by Viacom, such as King World Productions and Country Music Television.

“What is King World worth as against when we bought the CBS group? A lot more than we paid for it,” Redstone said at the conference. “What is Country Music [Television] worth? A lot more than what we paid for it. There are so many assets that we bought that if we wrote them up, they would exceed the amount of the write-down.”

Redstone added that when Viacom purchased CBS in 2000, radio was growing at a 29% annual clip and outdoor was growing at a 20% rate. “We did not overpay,” he added.

Redstone also appeared to put some blame for Viacom’s poor past performance squarely on the shoulders of former president and chief operating officer Mel Karmazin. While not naming Karmazin directly, he did say that past management’s practice of neglecting to invest in each business was a big reason for Viacom’s recent sluggish growth.

“Radio was cash-starved, and we couldn’t launch the gay-and-lesbian channel [Logo] because it would cost $30 million,” Redstone said. “That’s a channel that could be worth $1 billion. I actually intervened before the change in management.”
Karmazin resigned last year and is now president and CEO of Sirius Satellite Radio Holdings Inc. He was replaced at Viacom by longtime executives Tom Freston and Les Moonves, who now share the co-president and co-COO title.

Redstone said that aside from investing more in its core businesses, Viacom will be smaller -- it plans on divesting nonstrategic radio stations -- and more focused in 2005 and 2006.

When asked if Viacom’s decision to be a leaner company would rule out a major cable-network play, like Cablevision Systems Corp.’s Rainbow Media Holdings LLC networks, Redstone wouldn’t commit.

“I said we’d be smaller and I said we’d be better, mostly better,” Redstone said. “We’re not going to rule out any acquisition. I’ve negotiated with [Cablevision chairman Charles] Dolan for as long as I can remember. I’ve never been willing or able to make a deal with Dolan at the right price, and that was when he had Bravo, which was the best of what he had. We will continue to look at particularly cable-programming assets because they are the fastest-growing part of our industry.”

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