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Investors Like What They See at CBS, Push Shares Up 10%

October 30, 1998| From Associated Press

NEW YORK — Wall Street gave Mel Karmazin a warm welcome to the throne at CBS Corp.

CBS stock jumped 10% Thursday on news that Karmazin, the company's president, will replace the retiring Michael Jordan as chief executive at the start of next year. Shareholders were also encouraged by CBS' shrinking third-quarter loss and plans to forge ahead with a spinoff of part of its powerhouse radio business.

"People are generally excited about Mel taking the reins," said James Marsh, a broadcasting analyst at Prudential Securities.

CBS on Thursday reported a $43-million third-quarter loss, citing expenses to cover layoffs and other cost-cutting measures at its network. The loss was smaller than its $162-million shortfall in the same period last year, which was due to losses from Westinghouse industrial businesses that have since been shed.

CBS shares jumped $2.63 to $28 on the New York Stock Exchange.

The recent quarter's loss was the equivalent of 6 cents per diluted share, down from a loss of 26 cents a share last year. But excluding the restructuring costs, CBS earned $3 million from continuing operations, reversing a $19-million loss and slightly exceeding analysts' expectations.

Revenue rose 23% to $1.58 billion from $1.29 billion.

Operating profit from CBS' radio and outdoor advertising group jumped 59% to $157 million. But restructuring costs in its TV division sent operating profit plunging 90%. The TV group includes the network, 14 company-owned stations and the CMT and TNN country music cable channels.

Karmazin has been with CBS since the beginning of 1997, when the former Westinghouse Electric Corp. bought his Infinity Broadcasting, the radio company behind stars such as Howard Stern and Don Imus.

While Jordan's planned departure came sooner than analysts had expected, Karmazin already had been tapped as his successor and has been running the company's day-to-day operations since being named president in April.

Since the addition of Karmazin and Infinity, CBS' radio business has been booming and the company has slashed 450 jobs in an attempt to return its flagship TV network to profitability.

After Karmazin came aboard, CBS stock rose from just under $20 a share to around $35 before the broader market tumbled in mid-July. With Karmazin as the company's biggest individual shareholder, other investors are confident he will find a way to achieve higher returns.

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