Viacom Shares Plunge, CEO Defends His Leadership

Philippe Dauman, Viacom CEO FBN

Viacom Inc. Chief Executive Philippe Dauman fiercely defended his leadership and the board's recent decision to name him executive chairman as the company on Tuesday reported a profit decline in its most-recent quarter.

Results were dragged down by weak performance in Viacom's film and cable-television networks segments. The company also missed analysts' expectations for revenue and cut its guidance for growth in subscription fees in fiscal 2016 to "the mid-single-digit" percentage range, down from previous guidance of "high-single-digit" percentage growth.

Viacom shares were down 13% in morning trading on the Nasdaq.

On a tense conference call with Wall Street analysts, Mr. Dauman, who last week was named Sumner Redstone's successor as executive chairman, addressed the criticism of the company as its stock has dropped more than 44% over the past year.

"Our outlook and the facts have been distorted by the naysayers, self-interested critics and publicity seekers," Mr. Dauman said. "We will not be distracted or deterred as we build the bright future ahead of us."

Mr. Dauman added that "Sumner and I have a more than 30-year history side-by-side building his media empire. He and the board of Viacom, believing in my abilities and character, have entrusted me with weighty responsibilities, none of which are inconsistent or incompatible."

Mr. Redstone is still the controlling shareholder of Viacom, with 80% of voting shares.

Viacom has been the target of an activist shareholder and an investor lawsuit that argue, among other things, that Viacom's board is insufficiently independent. The activist has also argued that replacing Mr. Dauman, who is one of the most richly compensated executives in the industry, would boost Viacom's stock.

When pressed by an analyst on what qualities the board saw in him and his performance to merit his new role, Mr. Dauman said that "some of the decline in the recent past was accentuated by a lot of noise that surrounded us." He declined to elaborate, saying only "If you haven't been listening, you don't know what the noise is. I think it's obvious to everybody what the noise is."

Mr. Dauman called 2015 "a challenging year operationally as we redesigned ourselves and adapted to significant industry disruption." The latest quarter reflected those challenges, he said, though he expressed optimism that investments in content and technology would begin to pay off.

The company unveiled one of those investments on Tuesday, announcing an expanded deal with vanishing-messages app Snapchat Inc. Under the deal, Viacom will sell advertising surrounding Snapchat's owned and operated content. Snapchat already carries content for Viacom-owned networks Comedy Central and MTV, and the media company is eager to connect with the young viewers with whom Snapchat is popular.

In the most-recent quarter Viacom reported a profit of $470 million, or $1.13 a share, down from $538 million, or $1.20 a share, a year earlier. Excluding certain items, earnings per share fell to $1.18 from $1.29.

Revenue slid 5.7% to $3.15 billion. Analysts had projected $1.18 a share on $3.26 billion in sales, according to Thomson Reuters.

The disappointing results came as revenue in Viacom's media-networks business declined 3.5% to $2.57 billion and as filmed-entertainment revenue tumbled 15% to $612 million. Viacom pointed to dwindling advertising revenue, softer theatrical and home-entertainment revenues and a stronger dollar for the weaker performances. The company was also up against a tough comparison in the film business, which was buoyed last year by strong performance from its "Teenage Mutant Ninja Turtles" film.