Viacom’s Freston on Greenfield’s Hot Seat

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Pali Research media analyst Richard Greenfield, never accused of being a shrinking violet, pulled no punches in a recent research report on Viacom, writing that either the media giant must begin living up to the hype surrounding its split with CBS in January or start looking for a new CEO.

Greenfield -- who has a “buy” rating and a $51-per-share 12-month price target on Viacom stock -- started off his seven-page tome, issued Monday, by eating a little crow.

“Since initiating on Viacom stock in February 2006 with a buy rating, we have been ‘dead’ wrong, with the stock now down 15% year-to-date (versus a 1.4% gain for the S&P 500),” Greenfield wrote. In contrast, CBS stock is up 4.5% this year.

Greenfield maintained his “buy” rating on the stock, adding that he believes Viacom’s underlying assets are worth far more than its current stock price. But he added that his rating was also based on the belief that the pure-play Viacom would find new distribution outlets and turn around its struggling Paramount Studios division. That hasn’t quite yet happened.

In his report, Greenfield wrote that Viacom has been hamstrung by management’s inability to articulate its strategic vision and its failure to execute that vision. Greenfield’s three-point plan to revive the struggling stock: get back to basics, focusing on unique and creative content; exploit any and all distribution platforms for its content; and force CEO Tom Freston to take charge.

“If Mr. Freston cannot swiftly reorient Viacom, [chairman] Sumner Redstone and the board need to find a new CEO and/or consider selling the company to someone who can dramatically remake the management structure of Viacom,” Greenfield wrote. “Viacom needs to be streamlined, and fast.”

Despite those rather harsh statements, Viacom stock managed to gain 61 cents each (1.75%) to close at $35.41 per share Monday.

Viacom spokesman Carl Folta declined to comment on the report.

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