Mixed Q3 for CBS Corp.

But Redstone still lauds Moonves

UPDATED 8:27 p.m. PT Nov. 1, 2007

NEW YORK -- CBS Corp. reported a higher third-quarter profit Thursday despite an expected slight revenue decline, and president and CEO Leslie Moonves said he would like to use cash for more acquisitions of higher-margin businesses in the future.

Asked about his cash usage preferences, he said "investing in higher-margin businesses ... would be my first priority" as his team continues to rebuild the company into a more growth-oriented enterprise and sell off noncore assets. CBS also will continue to return cash to shareholders via quarterly dividends and potential stock buybacks, Moonves said.

The news came after CBS shares hit a 52-week low of $27.94 intraday before closing down 1.5% at $28.26. The stock's previous low was $28.16.

CBS Corp. and Viacom chairman Sumner Redstone again lauded Moonves during a conference call Thursday despite the recent decline in the company's stock price, which has led some to suggest their relationship could sour. The stock has fallen amid analyst downgrades as Wall Street has expressed fear about future ratings and advertising trends, among others.

However, Moonves recently extended his employment contract through 2011 in a pact that sees his cash salary lowered and his compensation tied more closely to the company's stock performance (HR 10/17).

During the call, Redstone introduced his CBS CEO as "my very good friend, the incomparable Les Moonves."

Moonves spent a lot of time defending the broadcast network business, saying it has as of late been "subject of some confusion" and pessimistic predictions.

After the market close, CBS Corp. posted a quarterly profit from continuing operations of $340.2 million, up 5%. Operating income before depreciation and amortization edged up fractionally to $757.6 million.

Revenue declined 3% to $3.3 billion, driven by a 12% radio unit decrease and a 3% drop at the TV unit, partially offset by a 9% increase at book unit Simon & Schuster and a 3% gain in the outdoor division.

Based on the results, CFO Fred Reynolds reiterated his full-year targets for CBS Corp. based on its results for the first nine months of the year.

Third-quarter TV unit revenue dropped to $2.1 billion, dragged down by lower television license fees and ad revenue. Advertising revenue fell 4%, with CBS citing recent TV station sales and the absence of UPN as reasons. TV OIBDA rose 4% to $476.1 million.

Moonves said scatter advertising market rates are running about 35% ahead of upfront levels, arguing that this is a sign that advertisers understand the continued importance of broadcast networks in a changing environment. In the previous quarter's call, he had highlighted second-quarter scatter market ad rates were up in the double digits for the CBS network, and third-quarter scatter looked "very strong."

He said ad momentum is strong across the board, including in the financial services category.

Asked about his take on the fall TV season that has seen CBS cancel "Viva Laughlin" after only two episodes, Moonves shrugged off any concerns, saying winning some and losing some is simply a way of life for all in the industry.

CBS Radio's quarterly revenue came down to $445.7 million because of station sales and continued ad sluggishness. Adjusted for station sales, revenue was down 7%. Radio OIBDA was 19% lower.

But Moonves said a recent management restructuring and format changes by the new leadership should position the radio unit for a better 2008.
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