NEW YORK (Reuters) — Viacom Inc. on Feb. 24 posted a massive quarterly loss after $18 billion in charges for writing down the value of its radio and outdoor advertising businesses in the face of a soft radio market and heightened competition.
Radio ad sales have faced competition from media outlets including the burgeoning satellite radio industry and Apple Computer Inc.’s iPod, the popular digital music device that is cutting into mainstream radio’s audience.
Wall Street analysts said Viacom’s 2005 outlook for mid-single digit revenue and operating income was conservative and likely designed to build confidence in the new management team.
Paul Kim, an analyst at Tradition Asiel, called the 2005 outlook the “low baseline of expectations.”
“This year is a stepping stone to our ultimate growth path, and we are willing to make a sacrifice over a few quarters for the long-term benefit of our core assets,” Viacom co-president Les Moonves said in a conference call with analysts.
The New York-based media conglomerate said fourth-quarter net loss was $18.44 billion, or $10.99 a share, compared with a net loss of $385.4 million, or 22 cents a share, a year earlier.
Excluding extraordinary items, the company said it had a profit of 42 cents per share, topping an average Wall Street estimate of 39 cents a share, according to Reuters Estimates.
Revenue rose 6% to $6.3 billion, falling short of analyst estimates of $6.42 billion.
The company’s shares fell 74 cents, or 2.1%, to close at $35 in Feb. 24 trading on the New York Stock Exchange.
The company also said it was in the early stages of auctioning off its chain of Famous Players movie theaters and was considering selling its theme parks business, saying neither business was a core asset.
The company’s cable and television units powered the revenue growth for the quarter, helped by higher CBS-TV ratings for hit shows such as “CSI” and the strength of cable networks like MTV and Comedy Central.
But the Infinity radio unit and the Paramount film studios have been two of Viacom’s lagging businesses in recent months. At Infinity, which lost controversial but popular radio host Howard Stern to satellite radio, Viacom has vowed to prune some of its stations to focus on the top 20 radio markets.
Paramount has suffered under the weight of recent box office flops such as “The Stepford Wives” and “Alfie.” It recently hired veteran Hollywood talent manager Brad Grey to run its movie studio.
Operating income at the entertainment unit, which includes Paramount, Simon & Schuster publishing and theme parks, fell 20% on a 9% decline in revenue.
“The one thing I hope they’ve learned is acquisitions are bad for them,” Fulcrum Global Partners analyst Richard Greenfield said.
Redstone told analysts the company has no major purchases in sight, but was considering smaller “tuck-in” deals. Viacom has said recently that it was mulling acquisitions in the videogame market.