Viacom Exec Changes: What The Street Thinks; Hint: Not On Same Page As Redstone

So much for Sumner Redstone’s contention that CEO Tom Freston had a problem with Wall Street. It’s not that simple, as witnessed by the market’s reaction today — VIA.B was down nearly 5.4 percent at last check — and that of individual analysts. From a few client notes:
Spencer Wang, Bear Stearns: “We are surprised by this announcement and somewhat disappointed as we view Tom Freston as a very strong operator with a very solid track record.”
Jessica Reif Cohen, Merrill Lynch: “This change is unexpected and is not likely to be well received by the Street or the creative community. … Mr. Dauman and Mr. Dooley, both of whom currently serve on Viacom’s Board of Directors, are confidants of Viacom Chairman Sumner Redstone, but do not have significant experience in running a major entertainment company. Furthermore, they were deeply involved in Viacom’s attempts to turn around Blockbuster, which was not successful. We think this move is likely to be regarded as an attempt by Mr. Redstone to reassert himself in an operating role, a development that is not likely to be warmly received in the investment community, in our view.”
Aryeh Bourkoff, UBS: “We believe that the CEO replacement is clearly designed to bolster the management of the company’s assets and brands as
it seeks to more effectively migrate its content over to other mediums, namely digital. … Today’s announcement also indicates that Mr. Redstone is still firmly in control of Viacom.”
Kathy Styponias, Prudential: “In our view, transitions in management are not typically good for stocks, at least not in the near term.” But she said industry contacts told her they expect Viacom to be a better-managed company. She also sees a potential overhang from acquisitions. “We think the more aggressive stance on acquisitions will likely be viewed by negatively by investors (even though it may be the right stance to take given the ever-changing media landscape.”
Update: The Journal (sub. req.) has more analyst react.

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