Viacom Making the Right Moves

Viacom Inc (VIA) announced its Q4 results at the end of last month. If there were any fears of economic slowdown having hit the media industry, Viacom’s results surely wiped them out.

Compared to the previous year, Q4 revenues of $4.25 billion recorded an impressive 19% increase and beat market expectations of $4 billion. The increase was visible in both its key segments: Media Networks which grew by 18%, and Filmed Entertainment which grew by 19%. Its Net Earnings increased by 16% and EPS by 29% to $0.84 beating market expectations of $0.82.

For the year 2007, revenues grew to $13.42 billion, recording an 18% growth over previous year’s $11.36 billion. Filmed Entertainment revenues grew by 28% over the year, and Media Networks grew by 12%. For the year, its Net Earnings increased by 4% and EPS increased by 10% to $2.41.

The management gave an outlook of low, double-digit annual growth in EPS for the years 2008 – 2010.

For the quarter, the company expended $591 million in the repurchase of 14.2 million shares. For the year, it has repurchased 52.5 million shares at a total cost of $2.16 billion.

The management asserted that its ad revenues are earned from relatively recession resistant industries such as movie studios, fast-food restaurants, games and beverage companies. The three-month long Writers Guild of America strike helped direct more ad revenues towards the Media Entertainment section.

I previously wrote about Viacom’s digital strategy, and covered Viacom at length in my Web 3.0 series. A prior discussion of its acquisition prospects highlights teen social media, music and teen fashion as areas for the company to investigate.

Its digital focus was visible with Viacom announcing key tie-ups during the quarter. The company entered into a revenue sharing and content licensing alliance with Microsoft (MSFT) on advertising, content distribution, event promotion and gaming. Its Nickelodeon group partnered with Hertz Corporation (HTZ) to offer portable, pre-loaded, touch screen media players which would be available at select locations for the car rental’s customers.

To improve its ad revenue, the company ventured into shorter, catchier ads called “Pods” which, according to the Nielsen Media Research, are able to capture more viewer attention.

In order to expand its reach on the Web, it formed alliances with several online video sites so that users can view its MTVN content online. Being Vertical focused, the company launched a new platform that allows advertisers to reach African-American communities through focus on entertainment, and lifestyle content that is relevant to the community.

Viacom seems to be doing a lot of the right things. The blow-out results for the quarter have rewarded these moves. The stock, however, has been volatile.

Personally, I like Viacom’s portfolio of media businesses, and would ignore the short-term whimsical stock gyrations.

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Comments

[deefree]

This stock has been dead money for 10 years. What's the catalyst to get it moving? Video players in Hertz locations? you're kidding right?