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Juice For Viacom's Laggard Shares?

Merrill Lynch & Co. analyst Jessica Reif Cohen wrote in an Apr. 2 report that Viacom's first-quarter report will "mark an inflection point for the company's businesses and investor sentiment." Cohen is projecting a 12-month share-price target of $53.

Still, Viacom's dependence on advertising for the bulk of its revenues makes some investors skittish. Gordon Crawford of Capital Research & Management slashed his position in Viacom by tens of millions of shares recently, telling Redstone he didn't believe in the "ad recovery," the chairman recalls. But Redstone is confident Crawford will be back after he sees Viacom's latest performance. Karmazin is set to meet with the media investor in May.


For Henry Ellenbogen, an analyst at Viacom shareholder T. Rowe Price, "those things didn't move the needle one way or another." Both investors believe the company's trouble spots -- Infinity and Paramount -- will show better results in 2004. Add in strong performances at CBS and Viacom's bevy of cable channels, including MTV, Nickelodeon, and Comedy Central, and the stock should get a boost, they say.

Of course, beyond the numbers, another overhang on Viacom shares is the frequent reports of infighting between Karmazin and Redstone. Karmazin says the perceptions frustrate him. "I want to be at Viacom," he says. "Sumner is about to turn 81, and I know he's not going to change. And that's fine. The company has done pretty darn good under him. Is there anything that has surprised me from when I came four years ago until now? Zero."

Karmazin's big hope for the rest of the year is that investors pay less attention to what he sees as the peripherals at Viacom and more on the essentials -- like generating lots of free cash flow.
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