Investing Manager
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NEW YORK, March 20 ? Rumors of the global media conglomerate's demise may have been greatly exaggerated.
Viacom Inc.'s (VIAb.N) disclosure it might separate its high-growth cable networks from its mature television and radio broadcast stations to boost stock value sparked a short-lived run-up in Time Warner stock and widespread speculation that more splits were coming.
But days later few investors and analysts see seismic shifts in an industry that has spent decades bulking up.
''I don't think this is a signal there will be a sea change with how media gets distributed in the United States,'' said Matthew Sauer, senior vice president of Oak Value Fund, which owned Time Warner, Viacom and Comcast stock as of Dec. 31.
What is clear is that Wall Street is disenchanted with the long-held belief that housing diverse media businesses under one roof is bound to produce riches beyond what they could have achieved as stand-alone ventures.
Analysts prefer seeing companies sharpening their focus and pruning extra businesses.
That is how Liberty Media's (L.N) decision to split off Discovery Networks and expectations Time Warner Inc.(TWX.N) will split off its cable assets after buying Adelphia Communications Corp. (ADELQ.PK) are being interpreted.
''They'll try to disaggregate assets to highlight value,'' Tradition Asiel analyst Paul Kim said of media conglomerates. ''But, in essence, nothing really changes aside from nominal changes in corporate or capital structures.''
For Viacom, the separation could help fast-growing MTV get the market valuation that its industry-leading cable network deserves, Chief Executive Sumner Redstone says.
The cable unit could also use the public equity from a separate listing to increase scale by buying other cable networks, which Viacom has previously expressed interest in doing, analysts say.
But even Redstone was wary of pronouncing a trend. ''What we did might not be what others should do,'' he told Reuters on Wednesday, moments after the announcement.
''What one company does, doesn't necessarily mean another will do it,'' said Leo Hindery, managing partner of media investment firm InterMedia Advisors, echoing Redstone's comment.
Hindery, who as CEO and president of Tele-Communications Inc. helped Liberty Media Chairman John Malone build up the largest U.S. cable network, said the Discovery spinoff was a poor example.
Liberty's 50 percent interest in Discovery gave it no control over the company, which is known for its documentaries on wildlife and ancient civilizations, and Liberty had no access to Discovery's cash flow, making it little more than a passive investor, he said.
But pressure on media managers to explore further pruning or breakups could grow if Viacom is successful.
''If it generates the levels of stock appreciation at or above (Viacom's) levels, it would put pressure on other people to take a hard look at it,'' Frank Biondi Jr., former CEO of Viacom, told Reuters.
''Whether it's an epidemic of spins or sales is hard to call,'' Biondi added. ''I'd be surprised to see something quite as dramatic.'' |
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