Viacom’s profit drops 16%; another top executive to exit

Viacom Inc. reported a 16% decline in third-quarter profit Thursday because of the $62-million price tag for firing former Chief Executive Tom Freston and a nearly one-third drop in summer box-office receipts at Paramount Pictures.

The earnings, which slightly exceeded analyst expectations, were announced in tandem with the departure of another top Viacom executive, Chief Financial Officer Michael Dolan, in what analysts said was an outgrowth of Chairman Sumner Redstone’s firing of Freston in September.

Thomas E. Dooley was named to replace Dolan, effective at the end of the year. Dooley is a longtime Redstone associate and former business partner of Freston’s successor as CEO, Philippe P. Dauman.

In a conference call with analysts, Redstone sought to keep the attention on his new team, praising them for their “entrepreneurial spirit.”

“It’s a new day,” Redstone said. “It’s truly a new day at Viacom, and I am extremely enthusiastic about what we see ahead.”

Nevertheless, traders dumped Viacom’s stock. The company’s widely held Class B shares fell $1.30 to $38.37.

Redstone and Dauman shed little light on Viacom’s strategy for growing their Internet operations to supplement media properties that, in addition to Paramount, include cable networks MTV, VH1, Comedy Central, Nickelodeon and BET.

In dispatching Freston, Redstone said he was frustrated with Viacom’s failure to acquire social networking site MySpace.com, which was instead bought by rival Rupert Murdoch’s News Corp. for $580 million.

But Dauman said the company had no major plans to follow News Corp.’s pursuit of high-profile websites. Instead, he said, Viacom planned to focus on Internet projects, including digital networks for adults.

“I don’t care what competition is looking at because I am looking at companies that really tie in to what we do best, and those companies want to be with us,” Dauman said.

Viacom’s quarterly profit fell to $356.8 million, or 50 cents a share, from $423 million, or 56 cents, a year earlier. Analysts polled by Thomson Financial had expected 48 cents a share.

The decline stemmed in part from disappointing box-office receipts. Such movies as “World Trade Center” failed to match Paramount’s year-earlier summer slate, led by Steven Spielberg’s “War of the Worlds.”

Corporate expenses were also a problem, more than doubling to $113.8 million from $44.9 million, largely because of the compensation charge for Freston’s severance package.

Over time, Freston is to receive even more -- an estimated $84.8 million -- when other stock-based compensation is included.

Viacom reported revenue at $2.66 billion, up 7% from $2.48 billion a year earlier. Much of that growth came from the company’s cable network holdings, at which sales rose 10% to $1.83 billion.

Harold Vogel, an independent analyst at Vogel Capital Management, said that although the company had largely strong results, Viacom’s reliance on advertising for long-term growth concerned him.

“Dependence on advertising is a very sharp sword. Even the tiniest slowdown shows up on the bottom line immediately,” Vogel said.

claire.hoffman@latimes.com