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Viacom Reports Better 4Q Earnings

Viacom Inc., owner of the CBS network and Showtime movie channels, reported a fourth-quarter profit Wednesday, turning around a year-ago loss thanks to strong growth in its cable network and TV businesses. The results exceeded Wall Street expectations, but investors reacted cautiously amid concerns about the company’s leadership.

For the three months ending Dec. 31, the media conglomerate earned $652.4 million, or 37 cents per share, compared with a loss of $42.5 million, or 2 cents per share, at the same time a year ago.

Those figures beat the 34-cent per-share forecast of analysts surveyed by Thomson First Call.

Looking ahead, the company said it expected to deliver mid-single digit revenue growth and mid-teen growth in earnings per share in 2003. The forecast reflects the anticipated costs of war coverage, and the effects a conflict might have on advertising revenues.

Also, in a conference call Wednesday morning, Viacom executives said they were working to reach a contract with Mel Karmazin, the company’s chief operating officer and president, but no solution has been reached. Karmazin and Viacom chairman and chief executive Sumner M. Redstone have clashed in the past, and rumors have been building for weeks that Karmazin, who is considered key to Viacom’s success by many on Wall Street, might walk if a satisfactory deal can’t be reached.

The uncertainty did not help the stock. In trading on the New York Stock Exchange, Viacom shares fell $1.80,or 4.8 percent, to $35.73.

Following the report, Merrill Lynch reduced its target price for the stock, saying aspects of Viacom’s quarterly performance were still below what the investment firm had projected. Merrill Lynch also expressed concern about the Karmazin situation.

Quarterly revenues were $6.78 billion, up 12 percent from $6.04 billion at the same time in 2001. The gains reflected advances in the company’s cable networks and TV divisions. Cable revenues for the quarter rose to $1.35 billion, from $1.16 billion in 2001; TV revenues for the quarter were $2.12 billion, compared with $2.0 billion at the same time the year before.

Viacom, which merged with CBS in 2000, also owns VH1, UPN, Simon & Schuster and other properties.

For the year, the New York-based company earned $725.7 million, or 41 cents per share, compared with a loss of $223.50 million, or 13 cents per share, in 2001. Excluding the effect of an accounting change, the company earned $1.24 per share for the year, besting the Thomson First Call forecast for full-year earnings of $1.21 on the same basis.

Full-year revenues were $24.61 billion, up from $23.22 billion in 2001.

Viacom also indicated it is considering offering a dividend to shareholders, but no final decision has been made.

The company sounded a bullish tone about the future, indicating future corporate acquisitions are possible and more growth is ahead.

“Our fourth quarter and full year results are yet another indication that Viacom has the right assets, the right management and the right strategy to continue to grow year after year,” said Redstone. “Our performance in 2002 is but a forerunner of what we expect to accomplish in 2003.”

Also Wednesday, Karmazin said he would be selling $10 million in company shares by the end of the month because some options he was granted 10 years ago expire then.

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