Highlight's from Universal Music's quarter

Vivendi Universal (ticker: V) reported results on March 10, 2005 for
the fourth quarter and year end 2004. After three years of losses, Vivendi posted a profit, largely due to strength in its Universal Music business (Vivendi owns 92% of Universal Music).  In light of Warner Music's IPO plans, below are some highlights and conference call quotes on Universal Music's quarter.

Results 4Q04 vs. 4Q03 (in Euros):

• Revenue: 1,760M vs. 1,691M (+4%)
• Operating Income: 294M vs. 108M (+172%)
• Operating margin: 16.7% vs. 6.4% (+1,030bps)

Results 2004 vs. 2003 (in Euros):

• Revenue: 4,993M vs. 4,974M (0%)
• Operating Income: 338M vs. 70M (+383%)
• Operating margin: 6.8% vs. 1.4% (+540bps)

Quick comments:

• Universal's market share increased to 24.7%, a level the company believes to be the highest market share ever by a record company
• The company benefitted from best selling albums from Eminem and U2
• 1Q05 is off to a good start:  Fifty Cent's new album is #1 having sold 1+ copies in its first week

Conference call quotes:

We also have to understand the subscription models for music downloading…and we have to manage intellectual property. This is all defensive as we have to fight piracy, and offensive as one of the ways that we will leverage our assets is by selling…the rights to intellectual property….

…we have decided to be paid for the clips now. And we have other ideas. So we struggle on the piracy side….we are gaining market share…

…I know that Warner will go with the [IPO]. At this point we are not interested in doing that, in spite of advice from our bankers…

….We do not want to plan ….as if there was growth in the market. We do hope there will be growth in the market…..we just want to say that even if the market….could be declining this year, we will want to grow our profits. If the market does not decline we will grow the profits even more…as we have a growing market share.

….we see the substitution of downloads and new business models to declining typical record sales, maybe the decline is ending. But we see that there is a substitution.

(Quotes are from the CCBN StreetEvents transcript.)