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Stocks V / Viacom, Inc.


Subject:  Marketwatch Article Date:  9/27/2006  3:14 PM
Author:  tenshuma Number:  309 of 312

Dauman, as CEO of Viacom is staring down a decline in cable advertising growth -- the biggest part of its business -- as well as weakness in its motion picture unit. However, for investors, the focus is clearly on the Internet at a time when some are asking whether the company has failed to fulfill expectations that Viacom would come out of its split from CBS Corp. with higher quality growth assets.

Tom Freston, the company's former chief executive, was ousted partly because Viacom failed to make a bid for MySpace, the popular social networking Web site that has been such a boon to News Corp. at the end of 2005, Viacom shares are down about 16% -- but before Dauman's appointment on Sept. 5, the loss was 24%.

News Corp. shares have risen 25% since the beginning of the year, with much of that momentum coming from Wall Street's positive perception of MySpace. Time Warner stock is up about 6% over the same span.
"The new management at Viacom will be judged on which Internet acquisitions the executives have their sights on," said Aryeh Bourkoff, entertainment analyst at UBS Securities, who has a neutral rating on the shares.

"The sense is that they'll be small, fill-in acquisitions," Bourkoff continued, "but given the need for a change from Tom Freston, the issue will be whether they can catapult the company into the Internet era, and if not, will that be an overhang?"

On Monday, Viacom said it's slashing the salary of Executive Chairman Sumner Redstone, cutting his cash and salary bonuses while linking the majority of his compensation to "superior shareholder returns."
Viacom said Redstone and the board's compensation committee are extending the equity-driven approach to compensation and incentives adopted by the company in recently announced employment agreements with Dauman and Thomas Dooley, Viacom's new senior executive vice president and chief administrative officer.

One reason Dauman was given the reins at Viacom is that he has been more attuned than many to the challenges and opportunities represented by digital platforms. For the past six years, he and Dooley ran DND Capital Partners, a venture capital firm that specialized in the media and telecommunications markets and kept a close eye on Web-based businesses.

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