Redstone Feels Holders’ Pain

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New York— Viacom Inc. chairman Sumner Redstone told the audience at the media giant’s annual shareholders meeting last Thursday that the decision on whether or not to split the company into two separate publicly traded operating units will be made by the end of June.

Viacom proposed splitting the company in two units — one headed by co-chief operating officer Tom Freston and including its growth assets (the cable channels and Paramount Pictures movie studio), and one headed by co-chief operating officer Les Moonves and including its more mature properties (CBS, Showtime Networks Inc., Infinity Radio and Infinity Outdoor) — in March.

At the annual meeting, Redstone reiterated that the split is an effort to boost Viacom’s stagnant stock price.

“We are as frustrated as you are by the disconnect between our operations and the price of the stock,” Redstone said. “Since we announced the possibility of splitting, our stock is up significantly — and all we said is that we’re considering it. We have high hopes that we will see an increase in the stock price [after the split].”

Viacom’s stock price — which closed May 26 up 9 cents, at $35.34 — ticked up after the March announcement, but later settled down. The stock price is down about 5% since the beginning of the year and is far below the mid-to-high $40 trading range it enjoyed in 2003.

Later, Redstone responded to a shareholder’s question with a virtual guarantee Viacom’s stock price will be up next year.

“A year from now, the stock will be higher,” he said.

Redstone said that despite Wall Street’s ambivalence, Viacom has performed strongly, reporting its best quarter ever in the first three months of 2005.

“We have a great deal of confidence as we move into the second half of 2005, which I assure you will be a compelling year for Viacom,” Redstone said.

Moonves was encouraged by the continued ratings growth at its CBS Television Network, and added that the radio division, a sore spot for the company for several quarters, is beginning to turn the corner. Radio revenue was flat in 2004, but ticked up about 2% in the first quarter of this year.

Freston was equally enthusiastic about Viacom’s cable networks. MTV Networks, which includes MTV: Music Television, Nickelodeon, Nick at Nite, Comedy Central, Black Entertainment Television and others, reported double-digit revenue and operating income increases in 2004. Freston said he has high hopes for Viacom’s newest channel launch — Logo — and will reap even greater returns as it more aggressively sells its film and content library via DVD.

There was one moment of levity when a young boy — 12-year-old shareholder Joshua Block — stepped up to the mike. Block, who said this was just his second annual meeting, reminisced to the 2004 gathering, when Redstone characterized his relationship with then-COO Mel Karmazin as “OK.” Since Karmazin resigned last year, less than a month after the meeting, the young shareholder wondered whether things were still OK with current management.

“Everything was OK,” Redstone said regarding his relationship with Karmazin. “But only OK. We wanted the world to be better. I think that with Tom and Les, the world is better.”

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