Viacom considering splitting the company

Posted | Contributed by supermandl

Frustrated with a languishing stock price, media conglomerate Viacom Inc. - which owns Paramount's Kings Island theme park in Mason - said late Wednesday that it is considering a plan to split into two companies to allow investors to value its businesses separately.

Read more from AP via The Cincinnati Enquirer.

Jeff's avatar
This is why if I ever took a company to IPO I would cash-out immediately. If you're public, there's this irrational requirement for every segment of your business to be a growth machine, or the shareholders get annoyed and the price drops. Everything is about quarterly results and I think that kind of short-sightedness prevents companies from ever becoming something great and lasting.
Well...I'm sure you'd wait until after your 180-day "freeze" period after your IPO <g>.

Expecting 20% annual growth (in stock price & revenue) is a ridiculous in a mature industry. That kind of mindset is actually why the AOL-Time Warner merger occurred, and simultaneously erased billions in share holder value...

If Viacom is like most when they spin off units, the expected lower performer usually gets saddled with the majority of debt, to free up the other side's balance sheet.

Unfortunately, there is usually a mandatory holding period before pre-IPO shareholders can sell. Worse, if you are an "insider" (an officer of the company) your sales must be publicized---it looks bad when the founder dumps his stock. ;)

But your observation is right on. Quarterly results are, but should not be, the sole metric of success.

Here is the fools take on it all.

Jeff's avatar
I think the term "synergy" can be such a corporate cliche, but hello... it certainly works for Disney. The Paramount chain's renewed interest in film tie-ins to attractions has really made the parks more exciting, especially PKI. Tomb Raider was brilliant, and Italian Job Stunt Track is looking to be a winner as well. I'm more aware of the MTV and Nickelodeon brands because of their placement in the parks. It all ties together.

Someone at Viacom needs their head examined.

I think this whole situation seems really strange. It's almost as if Viacom is doing things out of desperation. Yeah, their stock price has been kept down recently, but none of the media stocks are doing that great. (Disney is performing the best, and even now it's only back to 1997/98 levels...) I know Viacom posted a loss for FY 2004, but it wasn't a "real" loss, but rather a write down of goodwill of their radio assets. Cash flow and EBITDA still look pretty good.

I still don't think Viacom is nearly as good as their competitors at taking advantage of synergy, but at least the mechanisms for doing so were in place. Disney is certainly a lot better with that aspect (of course, they pretty much invented the concept for media companies...) I think NBC/Universal is pretty good at synergy as well. I haven't been to the parks since NBC took over, but they've done an outstanding job of leveraging the network (NBC) and cross-promoting their cable assets (Bravo/USA/Telemundo and the news channels), to the point where they've pretty much merged into one entity. At least 75% of my TV viewing is spent watching NBC/Universal assets...*** This post was edited by JZarley 3/19/2005 9:45:19 AM ***

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