Viacom Making the Right Moves

Viacom Inc (VIA) announced their Q4 results last month end. If there were any fears of economic slowdown having hit the media industry, Viacom’s results surely wiped them out.

Compared to the previous year, Q4 revenues of $4.25 billion recorded an impressive 19% increase and beat market expectations of $4 billion. The increase was visible in both their key segments: Media Networks which grew by 18% and Filmed Entertainment which grew by 19%. Their Net Earnings increased by 16% and EPS by 29% to $0.84 beating market expectations of $0.82.

For the year 2007, revenues grew to $13.42 billion, recording an 18% growth over previous year’s $11.36 billion. Filmed Entertainment revenues grew by 28% over the year and Media Networks grew by 12%. For the year, their Net Earnings increased by 4% and EPS increased by 10% to $2.41.

The management gave an outlook of low, double-digit annual growth in EPS for the years 2008 – 2010.

For the quarter, the company expended $591 million in repurchase of 14.2 million shares. For the year, they have repurchased 52.5 million shares at a total cost of $2.16 billion.

The management asserted that its ad revenues are earned from relatively recession resistant industries such as movie studios, fast-food restaurants, games and beverage companies. The three month long Writers Guild of America strike helped direct more ad revenues towards the Media Entertainment section.

I have written about Viacom’s digital strategy earlier and in my Web 3.0 series, I covered Viacom at length. A prior discussion of its acquisition prospects highlights teen social media, music and teen fashion as areas to look into.

Their digital focus was visible with Viacom announcing key tie-ups during the quarter. They entered into a revenue sharing and content licensing alliance with Microsoft on advertising, content distribution, event promotion and gaming. Their Nickelodeon group tied up with Hertz Corporation to offer portable, pre-loaded, touch screen media players which would be available at select locations for the car rental’s customers.

To improve their ad revenue, they ventured into shorter, catchier ads called “Pods” which, according to the Nielsen Media Research, are able to capture more viewer attention.

To expand their reach on the Web, they formed alliances with several online video sites so that users can view their MTVN content online. Being Vertical focused, they launched a new platform that allows advertisers to reach African-American communities through focus on entertainment and lifestyle content relevant to the community.

Viacom seems to be doing a lot of the right things. The blow-out results for the quarter have rewarded these moves. The stock, however, has been volatile.

Personally, I like Viacom’s portfolio of media businesses, and would basically ignore the short term whimsical stock gyrations.