CBS selling radio stations as shares lag

Shares hit 52-week low

Shares of CBS Corp. shares hit a 52-week low Thursday after the company posted 1% increases in second-quarter profit and revenue but lowered its full-year outlook amid a sluggish U.S. economy that has started to really impact the media sector.

TV advertising revenue for the period fell 6%, worse than Wall Street had expected, because of weakened local station ad trends and lower primetime ratings. Radio revenue slumped 10%.

To boost its financial growth, CBS Corp. said it will sell 50 of its radio stations in midsize markets to focus on big markets that have performed better and use the proceeds for stock buybacks. CBS operates 140 stations in the U.S.

Management said it also will continue to look for cost-cutting opportunities across the board.

"Yes, the economy is tough right now," president and CEO Leslie Moonves said during a conference call. "But we're managing our businesses effectively."

Still, CBS Corp. reduced its 2008 estimates to unchanged operating income and a low single-digit percentage gain in operating income before depreciation and amortization. It had projected 3%-5% growth for both metrics.

In another move to boost its growth rates, CBS recently acquired CNet to become a top 10 online player in the U.S. and expand in the fast-growing digital space. Moonves touted the deal as taking the new CBS Interactive to a new level and said the integration has worked "extremely well" in the early going. "We like the upside of the new CBS Interactive," he said.

Management forecasts that the CNet deal will add at least two percentage points to revenue and profit growth rates going forward and will be earnings accretive this year. CBS Interactive will bring in revenue in the $650 million range this year and $1 billion in three years, execs said.

Moonves also said CBS has been in more talks about retransmission deals with some major TV distributors and characterized them as going well.

CBS posted a second-quarter profit of $408.4 million, which includes the sale of its stake in the Sundance Channel, on revenue of $3.39 billion.

TV revenue rose 2%, but operating income fell 16%. Higher license fees and affiliate revenue made up for the ad softness. Moonves said auto ads have been hit hardest, but higher political ad dollars are helping somewhat.

CBS Class B shares closed at $16.36 after setting a new 52-week low of $16.14 earlier Thursday. CBS stock appears to be a very attractive "buy" at these levels, but only for long-term holders who don't mind waiting out the recession, Miller Tabak analyst David Joyce said.

CBS chairman and controlling shareholder Sumner Redstone said he's ready to wait. "The economy is in the midst of a slowdown," he said, his voice hoarse from laryngitis, but CBS is "very well positioned" over the long term.
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