Sour Notes at MTVN

Amid a multitude of layoffs and structural changes, Viacom‘s media nets segment reported Thurs a 7% increase in Y-over-Y ’06 rev to $7.24bln, led by an 11% jump in affil rev to $2bln. Not too shabby, but "a great deal of our [4Q rev] growth was due to… acquisitions," CFO Thomas Dooley said during an earnings call, and "domestic ad revenues (+4%) came in lower than we expected, primarily because of ratings shortfall at Nick at Nite and TVLand and, to a lesser extent, at MTV." Pres/CEO Philippe Dauman confirmed speculation of troubled waters across the nets. "Without question, we are passing through a period of substantial transformation," he said. "That is precisely why we are putting an intensified focus on execution in all areas." Restructuring will cost $70mln this year, Dooley said, of which $50mln will be charged against Q1 results. But there is some sweet music, as strengthening 1Q domestic ad sales growth and continued success in the digital space—Viacom expects to deliver $500mln in digital rev by year’s end—are providing optimism. As MTVN‘s 4Q digital ad rev rose nearly 60% and the number of digital advertisers grew 60% in the Q, MTV.com‘s unique visitors in Jan surged 55% Y-over-Y, and Comedycentral.com was up a whopping 90%, said Dauman. Still, Merrill Lynch maintained its ‘neutral’ rating on Viacom shares, citing "the potential for further negative announcements" in the near term.