Profits for Viacom Inc. (VIA-B) increased by 80 percent for the quarter, most of that coming from their successful film "Transformers" and solid growth in cable advertising.
Even with the profit coming from the sale of their Famous Music publishing unit, the company still exceeded analysts' expectations by a big margin. Analysts expected the company to reach a 59-cent average, and exploded past that, reaching 65 cents a share when even excluding the Famous Music profits.
Overall sales increased to $3.27 billion for the quarter, with net income coming in at $641.6 million, equal to 96 cents a share. That was a huge increase from last year which ended with net income of $456.8 million, or 50 cents a share.
Their Paramount studio division garnered a profit of $71.7 million, in contrast to a loss of $7.8 million last year. Sales grew by 57 percent, reaching $1.3 billion; most of that related to the performance of "Transformers." The film was the number 3 film domestically this year. Worldwide it has reached $702.4 million in sales.
Paramount also accounts for 16 percent of market share this year, making it the Number 1 studio in Hollywood this year.
Of course the popularity of "Transformers" also translated into brisk DVD sales, as the first week it sold 8.3 million units of the film, and another 190,000 in HD DVD format.
Advertising for the company's media networks was also strong for the quarter, with sales growth reaching 8.8 percent. Operating profit, as a result, grew by 2 percent. Most of that was related to their international cable channels. There was also a 7 percent increase in advertising sales along with a 14 percent increase in fees to their affiliates.
Fred Moran, an analyst with Stanford Group Co. in Boca Raton, Florida, said concerning the advertising strength in their media networks division: "The media networks have been aided by focusing on young viewers and not having to rely on advertisers in home building, real estate and financial lending."
CEO Philippe Dauman mentioned the company is prepared if there is a writers strike, and they have a strong "pipeline of movies that are already produced," if that happens.
A major concern over the long haul is if Steven Spielberg will resign with the company next year when his contract comes up. If he were to leave, he would leave with the Dreamworks brand. That would be a big blow to Viacom, and is something they should take care of ASAP.
There's also the issue of the tension between Sumner Redstone and daughter Sherri that has to be resolved for the long term health of the company. Another issue that shouldn't be allowed to sit on the back burner for long.
The quarter was great for the company, but they must address and resolve the last couple issues, especially the Steven Spielberg one, if they want investors to feel good about going forward with the company. If they lose Spielberg, they will lose a huge revenue stream that will be difficult to replace any time soon.
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