Why Wall Street Snubs Viacom
The love affair between Mel Karmazin and Wall Street is on the rocks.
A year ago, investors held their collective breath as Mr. Karmazin, Viacom Inc.'s president, considered leaving the company. They viewed Mr. Karmazin as the most gifted manager in the media world, and fretted that his departure would send Viacom shares plummeting. Eventually, Sumner Redstone, Viacom's chairman and chief executive, bit the bullet, retaining Mr. Karmazin with a juicy contract on par with Mr. Redstone's hefty salary.
Fast-forward a year, and a different picture emerges. Today, Mr. Karmazin and other Viacom executives are working overtime to generate enthusiasm for Viacom shares. But investors are tuning him out. While they still give Mr. Karmazin credit, media investors are focused on continuing problems in the radio group he built and worries about Viacom's earnings next year. And they are concerned about long-term issues that could haunt the media titan, such as the embrace of digital video recorders.
"Mel Karmazin is definitively one of the foremost managers in media, but there have been several false-starts in radio," says Frank Bodenchak, who runs Edge Capital LLC, a New York media hedge fund, which owns Viacom shares. "Investors are watching to see if the radio industry -- and Viacom's radio under Mel's auspices -- can get back to above-average growth."
Adds Scott Black, president of Boston investment-advisory firm Delphi Management, which owns 293,000 of Viacom's Class B shares: "When Mel came over, he bragged early on that radio has sustainable earning power.... It really hasn't eventuated the way they planned."
At a media event last week, Mr. Karmazin acknowledged the problems connecting with investors. "I don't have an excuse.... Our stock has not performed the way Sumner and I thought it would perform and should perform."
In a statement last week, Mr. Karmazin expressed disappointment, saying he was as "frustrated as any shareholder that Viacom's operating success has not been reflected in the stock price. We're confident that over time, forward-looking investors will return their focus to performance."
How cold is Viacom? The stock is down over 9% in the past year -- and more than 13% so far this year, compared with a drop of 1% for the Dow Jones Industrial Average in 2004. The stock has been flat for three years. At 4 p.m. in composite trading yesterday on the New York Stock Exchange, Viacom's shares were down 39 cents, or 1%, to $38.69, below the 52-week high of $48.69.
Now short-sellers, who profit by betting on falling stocks prices, are zeroing in. More than 41 million of Viacom's B shares were sold short as of April 12, a significant increase from the 13 million a month earlier, causing a buzz on Wall Street. The stock now is among the most heavily "shorted" stocks on the NYSE.
A Viacom spokesman said: "We believe the unusual short position in the stock is based on a once-a-month snapshot. Various factors could account for the creation of such a short position, including hedges that have nothing to do with the stock or the company's fundamentals."
The short selling, and the stock's difficulties, have executives frustrated because they come on the heels of improved earnings. Viacom reported a 30% jump in first-quarter profit, excluding a tax benefit. Thanks to solid gains in cable and broadcast-television networks, the results easily topped analyst expectations. In fact, Viacom's CBS is the top broadcast network, with a prime-time average audience growing to 13.2 million viewers from 12.5 million last season. And it has made inroads on General Electric Co.'s NBC in the race for the coveted 18-year-old to 49-year-old demographic. And Viacom's cable channels, including MTV and Nickelodeon, remain cash cows. Messrs. Redstone and Karmazin have been telling investors to expect revenue growth of as much as 7% this year, amid a robust advertising environment.
Executives are so flummoxed by the investor reaction they have asked an adviser, Thomson Financial, to figure out where all the selling is coming from, according to investors.
Mr. Karmazin is taking the brunt of the abuse partly because he is more hands-on than Mr. Redstone, and because some investors have begun to shrug off the Viacom chairman, who is perpetually upbeat on Viacom's prospects. During a recent conference call with analysts Mr. Redstone was bullish as ever, saying "the [advertising] market's back and so is Viacom."
Why don't investors agree? Viacom's radio unit, Infinity Broadcasting, with about 180 stations, has been a drag, with its cash flow flat since 2001. The unit also is facing increasing scrutiny by the Federal Communications Commission over indecency issues. Radio faces growing competition from satellite rivals and some worry that it can no longer grow through large acquisitions.
It is crucial that Mr. Karmazin revive radio. The business is expected to contribute over $1 billion of Viacom's $6.6 billion in earnings before interest, taxes, depreciation and amortization (the figure the business uses for cash flow) in 2004. Its importance will grow after Viacom sheds its Blockbuster movie-rental unit, likely this summer. Blockbuster has been responsible for more than $700 million of Viacom's cash flow.
The problems are a mark on Mr. Karmazin, a radio-business veteran who ran Infinity when it was acquired by Viacom in 2000 and has vowed to turn the business around. Infinity showed signs of improvement in the first quarter, scoring a 3% gain in revenue and a 5% jump in operating income. And Joel Hollander, a radio veteran Mr. Karmazin named president of Infinity last year, is well-regarded. But some worry the problems will persist.
"March was the strongest month, and the second quarter may be the strongest for radio in years, but people are looking in the rear-view mirror" at the past two years' weakness, says Mr. Bodenchak, who is more optimistic.
While analysts expect Viacom's earnings to grow to $1.85 a share in 2005 from $1.65 in 2004, some investors say it may be hard for Viacom to improve much on this year's profit, since the U.S. election and the Summer Olympics will boost advertising this year. Others say Viacom has become too large to generate strong growth, a point Mr. Karmazin acknowledged last week. He said the company is "suffering from the law of big numbers.... [It is] harder and harder to grow big numbers."
Viacom also is suffering as consumers turn to personal video recorders, or PVRs, such as TiVo. The devices make it easy for consumers to record their favorite shows and skip over commercials. Some say the trend could lead to a downturn in advertising spending. Viacom is more exposed to swings in ad spending than other media companies. Forrester Research expects three out of four national advertisers to cut spending as PVRs hit the mainstream. And Sanford C. Bernstein & Co. predicts that PVRs could cut Viacom's operating cash flow by 9% in five years.
"The question is more what do they do three-to-seven years out than what they do today," says Bernstein & Co. analyst Tom Wolzien.
Some investors say it would be a mistake to bet on a big fall for Viacom from these levels, despite the problems. The stock is cheaper than competitors such as Time Warner Inc. and Walt Disney Co. in relation to expected earnings and cash flow, they note. And ad revenues keep rising for broadcast television, despite audience erosion.
Viacom could still hit $50 in the near future, argues Mr. Black, though it "is not way undervalued" at current levels.
维亚康姆股票遭冷遇
梅尔?卡迈逊(Mel Karmazin)和华尔街的感情遭遇挫折。
一年前，当维亚康姆(Viacom Inc.)总裁卡迈逊考虑离开公司时，投资者都屏息以待。他们一直将卡迈逊视为媒体领域最杰出的管理者，担心他的离去会使维亚康姆的股价大幅下挫。最终，维亚康姆的董事长兼首席执行长萨姆纳。瑞德斯通(Sumner Redstone)痛下决心，用与自己高额薪水相当的丰厚条件将卡迈逊挽留了下来。
时间稍纵即逝，局面发生了很大的变化。如今，卡迈逊和维亚康姆其他管理人士正在竭力唤起人们对公司股票的热情,而投资者却置之不理。虽然卡迈逊仍是他们倾慕的对象，但媒体投资者更关注的是困扰维亚康姆已久的诸多问题，并且对公司明年的收益前景颇为担忧。此外，他们对可能阻碍这家媒体巨头发展的一些长远问题也十分关切，如数码摄像机的流行等。 纽约媒体对冲基金Edge Capital LLC的经理人弗兰克?波登切克(Frank Bodenchak)说，卡迈逊无疑是媒体界出色的管理人士之一，但是，广播行业一直有些徒劳的尝试。投资者在观望是否广播行业能够恢复超过平均水平的增长势头。该基金持有维亚康姆的股票。
波士顿投资顾问公司Delphi Management总裁斯考特?布莱克(Scott Black)补充说，"当卡迈逊回心转意时，他曾夸口说，广播行业拥有持久的盈利能力。但最终，事情的发展并不像他们设想的那样。"该公司持有293,000股维亚康姆B类股票。
卡迈逊上周在一次媒体会议上坦言，"我没有借口，公司股票的表现不像萨姆纳和我认为的那样。"
卡迈逊在上周的一份声明中表达了他的失望情绪。他表示，维亚康姆成功的运营表现没有在股价中得到体现，这一点他和其他股东一样失望。他坚信，随著时间的推移，有远见的投资者将重新把目光转回到公司业绩上来。
维亚康姆究竟遭到了怎样的冷遇呢？该股在过去的一年中下跌9%以上，今年迄今为止跌幅超过13%，而道琼斯工业股票平均价格指数今年的跌幅仅为1%。该股三年来一直表现平平，周三收盘下跌39美分，至38.69美元，低于48.69美元的52周高点。
眼下卖空者盯上了该股。截至4月12日，维亚康姆B类股票的卖空数量超过4,100万股，远远高于一个月之前的1,300万股，引起市场的骚动。该股目前位居纽约证交所卖空数量最高的股票之列。
维亚康姆的某发言人表示，各种因素都可能导致这种空头状况的产生，例如和股票本身或公司基本面毫不相干的套期保值操作等。
虽然公司业绩改善，但股票却承受著极大的卖空压力，加之该股遭遇的诸多窘境，这些都使使维亚康姆的管理人士备感挫折。维亚康姆第一财政季度不包括税收优惠的利润增幅达到30%，轻松超越了华尔街分析师的普遍预期，这主要得益于公司有线业务和电视转播网业务的强劲增长。
实际上，维亚康姆的哥伦比亚广播公司(CBS)是全美第一大广播网，黄金时段平均收视人数从上一季的1,250万人增至1,320万人，在与通用电气(General Electric Co.)旗下全国广播公司(NBC)争夺18-49年龄段观众的竞争中也大有斩获。维亚康姆的MTV和Nickelodeon等有线电视频道仍然财源滚滚。广告市场也在蓬勃发展。瑞德斯通和卡迈逊一直在向投资者表示，鉴于广告业务形势大好，今年的收入增幅最高可达7%。 有投资者表示，公司管理人士对投资者的冷淡反应百思不得其解，不得不向顾问公司Thomson Financial求助，看看投资者心中到底在想些什么。
投资者对卡迈逊的指责比较多，不过这部分要归结为他参与的公司经营活动要比瑞德斯通多。另外，投资者对董事长瑞德斯通一贯乐观的言辞也越来越不以为然。就在最近与分析师召开的电话会议上，瑞德斯通一如既往地不无夸口地宣称，广告市场再度兴旺，维亚康姆也将共同繁荣。
那么，投资者为什么不买帐呢？维亚康姆拥有180家广播电台的Infinity Broadcasting广播子公司是一个不容忽视的拖累，该子公司的现金流状况从2001年以来就一直表现平平；因节目内容不当的问题，它还面临著联邦通讯委员会(Federal Communications Commission)对其越来越多的调查。此外，其广播业务还面临著卫星业务的竞争，有些人还担心广播业务已经不能凭藉大型收购交易来实现增长了。
卡迈逊能否重振维亚康姆的广播业务至关重要。维亚康姆2004财年利息、税项、折旧和摊销前利润(Ebitda)预计为66亿美元，而广播业务的贡献预计超过10亿美元。在维亚康姆按计划于今年夏季剥离电影租赁子公司Blockbuster后，广播业务的重要性还会加大。Ebitda是一个常用的现金流衡量指标。Blockbuster贡献的现金流超过7亿美元。
广播业务的处理是否得当对卡迈逊来说是一次重要的考验。他被公认是广播领域的元老人物，在Infinity 2000年被维亚康姆收购前，他一直执掌著Infinity。Infinity第一季度有改善迹象，收入增长了3%，营运利润增长了5%。由卡迈逊亲选、去年开始出任Infinity总裁的广播业资深人士霍兰德(Joel Hollander)也获得了广泛好评。但一些人担心，问题可能不那么容易解决。
波登切克较为乐观。他说，今年3月份是多年来公司广播业务最强劲的一个月，而第二季度或许是业务最强劲的一个季度，但人们似乎总是对过去两年的低迷状态念念不忘。
分析师普遍预计维亚康姆2005财年每股收益将达到1.85美元，高于2004财年的1.65美元。但部分投资者担心，今年有美国大选和夏季奥运会，这两大事件将极大促进广告市场的表现，但要在此基础上继续增长，对维亚康姆来说并不容易。还有人担心，维亚康姆规模太大了，很难实现高速度的增长。对此卡迈逊也有同感。他上周表示，公司遇到了规模扩大之后增速放缓的问题，现在实现大幅增长越来越难了。
消费者逐步转向TiVo等个人录像设备的趋势对维亚康姆也很不利。利用这些设备，消费者很容易录制自己喜欢的节目，而跳过商业广告。有人认为这会导致广告支出萎缩，而广告支出的变动对维亚康姆的影响要比对其他媒体公司的影响更大。据Forrester Research估算，随著个人录像设备的普及，全国每4位广告客户中就会有3位削减广告支出；Sanford C. Bernstein & Co.则预计，个人录像设备的流行会导致维亚康姆未来5年内的营运现金流减少9%。
分析师沃齐恩(Tom Wolzien)说，更重要的是维亚康姆未来3至7年内的业务计划，而非当前的经营状况。
一些投资者认为，虽说困难重重，但预计维亚康姆股价将大幅下挫的想法并不合理。根据目前预计的利润和现金流水平来看，维亚康姆的股价低于其同行，如时代华纳(Time Warner Inc.)和迪斯尼(Walt Disney Co.)等。而且，尽管观众人数逐渐被分流，但电视广告的收入一直在增长。
布莱克认为，虽然目前维亚康姆股价已算不得被低估，但仍有望在短期内升至50美元
