Viacom to cut 850 jobs in response to downturn

LOS ANGELES (AP) - December 4, 2008 Viacom, which owns MTV Networks, BET Networks and Paramount Pictures, said the cuts are a response to the global economic downturn and not related to the debt problems at the theater chain.

"Viacom's announcement today has absolutely no connection to the financial difficulties of National Amusements," said Viacom spokeswoman Kelly McAndrew. "They are two separate companies."

Redstone owns a majority of Viacom through the National Amusements holding company, which has been trying to renegotiate $1.6 billion in debt, about $800 million of which matures on Dec.


Certain conditions of those loans are linked to the value of Viacom and CBS Corp. stock.

Redstone was forced to sell $233 million in CBS and Viacom nonvoting shares in October to stay in compliance with the lending terms.

Analysts said that, despite cost-cutting moves, the fear of further sales hangs over Viacom and CBS' share prices.

"Even though Redstone has sworn up and down he's not going to sell it, who knows until it's resolved?" said analyst Joseph Bonner of Argus Research Co. "You would normally think of a cost-saving issue as a positive. (But) there are a lot of different issues going on."

Redstone has steadfastly said he will not sell more Viacom or CBS shares, which could dilute his control of the two media companies. He is in talks, however, to sell some or all of National Amusements' movie theaters and its interest in slot machine supplier WMS Industries Inc.

Last week he also sold his entire 87.2 percent stake in Midway Games Inc. for less than a penny a share to generate an estimated tax loss of around $600 million for National Amusements.

In Thursday's announcement, Viacom said it also plans to write down the value of some programming and other assets. But it maintained it has a "strong balance sheet and substantial cash flow."

The job cuts, write-offs and suspension of some raises in 2009 are expected to generate pretax savings of $200 million to $250 million next year. Viacom will take a restructuring charge of $400 million to $450 million, or 42 cents to 48 cents per share, before taxes in the current quarter, which ends Dec. 31.

"The changes we are making in our organization and processes will better position Viacom to navigate the economic slowdown and generate sizable efficiencies that will help us to drive our business as the marketplace stabilizes and conditions improve," President and Chief Executive Philippe Dauman said in a statement.

Last month, Viacom reported that its third-quarter profit fell 37 percent as film studio Paramount Pictures' theatrical revenue fell more than one-third and global ad revenue declined 2 percent.

The company was also hindered by lackluster ratings at MTV, which decreases the flow of ad revenue.

The company faces other problems such as the threat of a strike by the Screen Actors Guild early next year.

Bernstein Research analyst Michael Nathanson maintained an "outperform" rating on the stock, noting the cutback "provides a cushion to Viacom's bottom line" against a potential further ad slowdown.

He added the cut to programming assets was a concern.

"The sizable programming write-down raises questions about the current management's ability to effectively program their cable networks to drive ratings - an ongoing investment controversy for Viacom," he wrote.

Viacom shares slipped 11 cents, or 0.7 percent, to close at $15.90 Thursday after initially rising as high as $16.70.

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