Viacom Workers Brace for Layoffs

(Editor's note: This post was corrected from the original version.)
The bad news continues at Viacom, where layoffs -- long the subject of company-wide rumors -- are said to be imminent.

"That's the word on the street," says a source close to the company, who adds that the layoffs are expected on Wednesday. "It's been under-the-radar, people just talking behind closed doors."

"All the properties are down," this person adds. "They're not exceeding or meeting their margins."

Viacom spokesperson Carl Folta declined to comment on the rumors.

Adding fuel to the speculative fire is Viacom dismal performance of late. Its stock is down about 50 percent since last fall; MTV and other key divisions continue to underperform.

Chairman Sumner Redstone unloaded $233 million worth of stock in Viacom and its sister company, CBS, last week. That came as Viacom lowered its earnings estimates, citing the flagging global economic outlook.

One bright spot in Viacom's portfolio seems to be Nickelodeon. It has best been able to meet revenue goals as advertisers pull back. Within Viacom, Nickelodeon is viewed as a "safe bet with any advertiser," since the channel dominates kids' entertainment.

Elsewhere, ad sales employees throughout Viacom's online and TV divisions are being told that their competitors are more aggressive, while their own ad prices are too high. Big advertisers, cautious about spending in the fourth quarter, are asking instead about opportunities in the first quarter of 2009.

As a company hugely dependent on advertising, it's not surprising that Viacom is faring poorly in the current economic climate.

"Broadly, the entire national ad market is slowing due to the economy," says Rich Greenfield, an analyst with Pali Capital in New York. "It affected local advertising first, and now it's starting to filter through to national advertising. Viacom is getting hit a bit worse than others."

Greenfield points to a weak upfront a year ago and subpar ratings for many of Viacom's biggest TV assets, including BET, as possible culprits.

While saying he has no knowledge about the scope, or even existence, of potential layoffs, Greenfield adds that "it's certainly logical they'd be looking at revising their cost structure" after having reduced its earnings estimates.

Viacom chief executive Philippe Dauman has suggested that change is coming. "Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets," he said in a statement last week.

Certainly Viacom employees have gotten the message. "I'm out there looking at every opportunity hoping people will say, 'Let's give them another try,' " said one ad sales representative. "We'll see what happens tomorrow."

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