As Viacom Falls, Analysts Question Company’s Entire Premise, Rethink The Split

imageThe deep slide of Viacom (NYSE: VIA) stock says a lot about how fast Wall St. can turn on a company. Last week, we wrote about Rich Greenfield’s analysis, calling for Sumner Redstone to take the company private via leveraged buyout. And this weekend, Bernstein analyst Michael Nathanson called out the company’s original sin, the manner in which it was separated from corporate sibling CBS (NYSE: CBS). A report titled A Bad Plan, Poorly Executed starts off by saying: “Let the record show that we never liked the idea of splitting Viacom and CBS.” I didn’t see his report back then, though either way, the following statement rings true: “While old Viacom was languishing, the notion of creating CBS for the value’ crowd and Viacom for the ‘growth’ guys felt naively simplistic.”

Not only have the stocks done poorly, but classifying certain companies as “growth” or “value” is best left up to mutual fund managers looking for a marketing hook to justify their existence (“Are you retiring soon? Transfer into our no-load value select fund“). CBS hasn’t been satisfied being no-growth (see: its various internet purchases) and Viacom’s growthiness isn’t a permanent state.

As evidence that the companies have destroyed shareholder value by separating, Nathanson cites the brewing premium cable battle. Viacom is building a competitor to CBS-owned Showtime, while CBS is getting into film: “So, rather than secure value by finding a middle ground, both groups go off and use incremental capital to develop businesses that already exist


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