(FROM THE WALL STREET JOURNAL 2/10/16)
By Keach Hagey and Lisa Beilfuss
Viacom Inc. Chief Executive Philippe Dauman fiercely defended his leadership as the media company on Tuesday reported quarterly results that stoked investor concerns and sent its shares tumbling.
Revenue and profit declined in the December quarter, dragged down by weak performance in Viacom's film and cable TV networks segments. The company also missed analysts' expectations for revenue and lowered its estimate for growth in subscription fees in fiscal 2016 to "the low mid-single digit" percentage range, down from previous guidance of "high single-digit" percentage growth.
Viacom shares fell 21% to $32.86 Tuesday, hitting their lowest point in more than five years.
During a tense conference call with Wall Street analysts, Mr. Dauman, who last week was named media mogul Sumner Redstone's
successor as executive chairman, addressed the criticism of the company as its stock dropped more than 50% in the past year.
"Our outlook and the facts have been distorted by the naysayers, self-interested critics and publicity seekers," Mr. Dauman said. "We will not be distracted or deterred as we build the bright future ahead of us."
Mr. Dauman added that "Sumner and I have a more than 30-year history side-by-side building his media empire."
Mr. Redstone, who Viacom executives said was listening in on the call from Los Angeles, is still the controlling shareholder of Viacom, with 80% of voting shares. He also is the controlling shareholder of CBS Corp.
The 92-year-old mogul is being sued by his former companion Manuela Herzer, who claims Mr. Redstone lacked mental capacity when he removed her as his health-care agent, the person who would make decisions on his health care if he is deemed incapacitated.
In a court filing Tuesday, Mr. Redstone charged that Ms. Herzer's true motivations are monetary -- because he also wrote her out of his will, depriving her of a $70 million inheritance.
Some of Viacom's critics on Wall Street have argued the company's board isn't sufficiently independent and that replacing Mr. Dauman, who is one of the most richly compensated executives in the industry, would boost the company's stock. Viacom has vouched for its board's independence.
When pressed by an analyst on what qualities the board saw in him and his performance to merit his new role, Mr. Dauman said that "some of the [stock] decline in the recent past was accentuated by a lot of noise that surrounded us." He declined to elaborate but added, "I think it's obvious to everybody what the noise is."
Viacom's results come amid unprecedented stress on the pay-TV business fueled by the rise of streaming media and cord-cutting.
Media stocks in general underperformed the broader market Tuesday, with Time Warner Inc., Scripps Networks Interactive and Discovery Communications Inc. all down at least 5%. Time Warner reports results on Wednesday.
Mr. Dauman said the company has tried to adapt to "significant industry disruption" with investments in content and technology.
The latest example was a deal announced Tuesday with Snapchat Inc. under which Viacom will sell advertising against the vanishing-messages app company's owned and operated content.
In the most recent quarter, Viacom reported a profit of $449 million, or $1.13 a share, down from $500 million, or $1.20 a share, a year earlier. Excluding certain items, earnings per share fell to $1.18 from $1.29.
Revenue slid 5.7% to $3.15 billion. Analysts had projected $1.18 a share on $3.26 billion in sales, according to Thomson Reuters.
Revenue in Viacom's media-networks business declined 3.5% to $2.57 billion, though there were bright spots. Improving ratings at some of Viacom's networks, including Nickelodeon, VH1 and BET, resulted in a 4% year-over-year decline in domestic advertising revenue, better than analysts expected and an improvement on the previous quarter's 7% decline.
Domestic subscription-fee revenue growth was flat, coming in under analysts' expectations, due in part to the timing of content-licensing deals with subscription video-on-demand services and the effects of AT&T Inc.'s merger with DirecTV on channel carriage fees.
The biggest shadow hanging over Viacom's stock, some analysts said, is the pending renewal of its distribution deal with satellite TV provider Dish Network.
In an unusual disclosure, Mr. Dauman said that Viacom has entered into a short-term extension with Dish as the companies work on a long-term renewal, warning "there may be short-term hiccups along the way but we firmly believe that we will ultimately reach an agreement that will be productive for both sides."
A Dish spokesman declined to comment.
Filmed entertainment revenue sank 15% to $612 million. Viacom pointed to softer theatrical and home-entertainment revenues, as well as a tough comparison to the previous year, which was buoyed by the strong performance from its "Teenage Mutant Ninja Turtles" film.