April 28, 2016 / 12:58 PM / in 2 years

Viacom narrows down bidders for Paramount stake to handful: CEO

(Reuters) - Viacom Inc (VIAB.O) has narrowed the number of bidders for a minority stake in its Paramount Pictures movie studio from more than 40 to a handful and expects to begin negotiations late next month, Chief Executive Officer Philippe Dauman told analysts on Thursday morning.

A woman exits the Viacom Inc. headquarters in New York April 30, 2013. REUTERS/Lucas Jackson

“There is strong interest from all around the world,” Dauman said on the company’s quarterly earnings call. He said he still expected to announce a deal by the end of June, and Viacom will use the proceeds to reduce its debt.

Ahead of the call, Viacom reported a higher-than-expected quarterly profit, but a drop in domestic ad revenue disappointed investors, who pushed the company’s shares down as much as 7 percent. The stock recovered somewhat and was down 2 percent at $42.92 by late morning.

The owner of networks including Comedy Central, MTV and Nickelodeon said domestic ad revenue fell 5 percent in the second quarter ended March 31, more than the 3 percent that analysts expected. This was the seventh straight quarter of declines.

Viacom executives attributed the drop to a reduction in the number of TV advertisements the company airs to boost ratings, a strategy it announced in November..

If Viacom had not reduced the number of ads, the decline would have been around analysts’ expectations at 3 percent, Chief Operating Officer Tom Dooley said on the call.

Viacom also said affiliate fee revenue fell 2 percent.

The company, like its peers, has struggled with ratings for its television networks as younger viewers, a key demographic for networks such as MTV, increasingly view content online or on smartphones.

This has led to an increasing number of consumers canceling¬†their cable subscriptions. This “cord cutting” threatens the revenue streams of media companies.

Viacom’s media networks business reported a 2.9 percent decline in revenue to $2.38 billion.

Filmed entertainment revenue fell 1 percent to $655 million in the quarter, but this was well above the analysts’ average estimate of $593 million, according to research firm FactSet StreetAccount.

The unit benefited from the success of The Big Short” and “Daddy’s Home.”

Total revenue fell 2.5 percent to $3 billion. Analysts on average had expected $2.98 billion, according to Thomson Reuters I/B/E/S.

Net earnings attributable to Viacom were $303 million, or 76 per share, compared with a year-earlier loss of $53 million, or 13 cents per share. Analysts had forecast a profit of 74 cents a share.

    Reporting by Jessica Toonkel in New York and Sai Sachin R in Bengaluru; Editing by Shounak Dasgupta and Lisa Von Ahn

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