Viacom cut its full-year profit forecast on Friday as the softening economy has clouded its ability to make accurate advertising projections. CBS also expects full year profit to fall in the mid-teens range and it will write down the value of its licenses by $14bn. Later, National Amusements, an entity that controls executive chairman Sumner Redstone's interests in Viacom and CBS, said it planned to sell $400m in aggregate of the two companies' non-voting stock to pay down debt to comply with its debt covenants.
The news triggered a 17.83 per cent decline in Viacom shares and a 20.12 per cent plunge in CBS stock, worse than the broader sell-off of US media stocks. "Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets," Viacom chief executive Philippe Dauman said.
Viacom's anticipated shortfall could continue into next year as the cable advertising market is seen declining in 2009 for the first time in history, according to UBS estimates. Separately, CBS is viewed as one of most vulnerable major media companies due to its reliance on local and national broadcast television advertising.
Viacom, which owns MTV Networks and the Paramount movie studio, says it now expects 2008 adjusted earnings per share from continuing operations to rise in the mid-single to low double-digit percentage range, down from an earlier three-year projection of earnings per share growth of low-double digits.