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Meltdown at Viacom

Viacom’s shares crashed a worrying 21.5 per cent on February 9th following on from a troubling set of results and not helped by recent succession worries.

Analysts at MoffettNathanson Research summed up the day by bluntly saying “All of our hoped-for catalysts appear to be gone”. A report to clients stated that they had expected – or hoped for – a recovery in Viacom’s ratings and advertising growth. They had expected harmony to have broken out between Viacom and Dish and an end to that particular spat.  None of these challenges have been cured. Indeed, Viacom seems to be accepting that US cable and satellite carriage fees are now going to skew lower.

Indeed, the succession worries over the end of Sumner Redstone’s reign is about the only positive news to have emerged these past weeks.

“For the last two years, Viacom has been the classic value trap – a stock with seemingly attractive valuation with arguably conservative earnings assumptions. However, fast forward to today and it’s clear that the stock was cheap for a reason after further significant earnings cuts. We have clearly put too much trust in the old playbook; the game has changed,” states MoffettNathanson.

Newly-appointed CEO and Executive Chairman Philippe Dauman, in a very tense call, told analysts that that he was totally focussed on getting Viacom’s stock and valuation back to where it was. However, he seemed to have forgotten that he has been running the company for the past number of years, suggested a number of somewhat cynical analysts. He claimed the facts were “distorted and obscured by the naysayers, self-interested critics and publicity seekers.”

The news might not have been helped by a report that Redstone’s former girlfriend Manuela Herzer looks like she might receive $50 million in a cash payout, plus ownership of Redstone’s $20 million Beverly Park home.

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