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Vivendi Narrows Loss in 2nd Quarter

The boost comes from businesses in France as operating profit falls 25% for its U.S. entertainment group.

September 25, 2003|Richard Verrier | Times Staff Writer

Vivendi Universal narrowed its loss in the second quarter, but revenue gains came from its French-based pay-TV and telecom businesses, not the U.S. entertainment group expected to partner with General Electric Co.-owned NBC in the next few weeks.

Vivendi reached a preliminary deal with GE this month to combine its movie studio, theme parks and TV business with NBC's network and cable channels, creating an entertainment giant valued at more than $40 billion. Vivendi would have a 20% stake in the joint venture, which would be controlled and managed by NBC.

Vivendi executives reaffirmed on Wednesday that they planned to reach a final deal with General Electric by the beginning of October and that the merger would be completed by the second quarter of 2004.

After its sale to GE, Vivendi executives said Wednesday, the company's overall debt would fall to less than $6 billion by the end of 2004, compared with more than $35 billion a year earlier.

The businesses that were part of that deal, however, turned in mixed results in the second quarter.

Second-quarter operating profit at the Vivendi Universal Entertainment group dropped 25% to $323 million compared with a year earlier, Vivendi said. Analysts had forecast operating profit of $300 million for the unit in the three months ended June 30.

Although Universal Pictures had a banner quarter with the hit movies "Bruce Almighty" and "2 Fast 2 Furious" and brisk video sales from "8 Mile" and "The Bourne Identity," the studio was hurt by a decline in business at its theme parks.

It also has been hurt by a fall in operating income at its TV unit, which is spending more on original programming at a time when it has lost syndication revenue from the TV show "Just Shoot Me." The group also suffered from the declining value of the dollar.

Universal Music Group, which Vivendi is not selling for now, reported a loss of $16 million, contrasted with an operating profit of $163 million a year earlier, reflecting the industry's struggles with rampant online piracy and falling sales.

Vivendi's games unit reported an operating loss of $32 million, contrasted with $40 million in profit a year ago.

The company's overall net income in the quarter narrowed to $359 million, compared with $13.2 billion a year earlier, when Vivendi was hit with whopping goodwill charges that reflected how much the French conglomerate overpaid for its media assets. Adjusted revenue fell 14% to $7 billion in the quarter.

Chief Executive Jean-Rene Fourtou said at a news conference in Paris that he expected Vivendi's operating profit to rise more than 20% this year and that he hadn't decided whether to split the company into separate media and telecom companies.

"We have two big pieces," Fourtou said. "I have not reached a conclusion.... There is a real financial and fiscal synergy in remaining as we are."

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