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We initiate coverage for Viacom Inc. (NASDAQ:VIA) with an Outperform recommendation. Viacom is a leading entertainment content company that operates primarily in the U.S. and Europe. The company’s third quarter 2009 financial results were significantly above the Zacks Consensus Estimate.

Effective cost control measures have helped the company to counter slump in the advertising business. Strong demand for on-line video games and management strategy to focus on smaller slate of films also helped the company to grow its top-line. Despite facing an extremely challenging economic environment, Viacom has been able to increase its consolidated operating income by 14% year-over-year.

Effective cost cutting measures coupled with solid performance by motion pictures were the primary reasons for this strong performance. Viacom benefits from a well-balanced asset mix with entertainment content as its core. The company enhanced its brands worldwide through the creation and acquisition of hit programming, new channels, successful motion pictures and other forms of entertainment, including video game offerings.

An improving economic outlook, together with Viacom’s disciplined management, highly complementary mix of assets, and a healthy financial position, continue to make us optimistic about the company’s future growth prospects.

Source: Viacom Initiated with Outperform Rating