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Viacom Profit Drops 65% Despite Ad Surge

October 26, 2000|From Bloomberg News

NEW YORK — Viacom Inc., the world's No. 3 media company, said third-quarter profit fell 65% on higher expenses and taxes. Cash flow rose 22% as ad sales at CBS, MTV and radio stations increased.

Net income fell to $33.4 million, or 2 cents a share, from operations profit of $96.7 million, or 16 cents, a year ago, Viacom said in a statement. Pro forma cash flow, a key financial measure, rose to $1.45 billion from $1.18 billion. Pro forma revenue rose 7% to $5.97 billion from $5.58 billion.

CBS, the No. 2 U.S. television network, generated higher ad sales in part from the hit show "Survivor." Viacom's cable channels such as MTV and TV Land and its big-city radio stations and billboards also benefited from ad demand. Viacom's ad sales outlook appears "equally bright," Chief Operating Officer Mel Karmazin said in a statement.

"Advertising has certainly held up well in a very tough environment," said Angela Auchey, co-manager of the Federated Large Cap Growth Fund, which owns Viacom shares.

That's significant, because Viacom gets much of its revenue from advertising, and some investors are worried that a slowing economy may hurt ad sales in the current quarter and in the first half of 2001.

"The most important thing, and obviously the main focus of investors, is ad revenue and whether there are any signs of weakness there," said Auchey.

Analysts had expected Viacom to have a loss of 2 cents a share, the average estimate of analysts polled by First Call/Thomson Financial. Forecasts had ranged from a profit of 2 cents a share to a loss of 8 cents.

Viacom shares dropped $2.25 to close at $54.25 on Wednesday in New York Stock Exchange trading.

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