Tuesday, September 05, 2006

Skeletal executive presence cans Freston

This morning’s business blockbuster is the canning of Tom Freston, whose 20 years at MTV helped turn it into a cultural beacon. With its stock (VIA.B) down 18% since the corporate split between CBS and MTV at the beginning of the year, 82-year old Chair Sumner Redstone – who owns 5.7% of VIA.B and 71.2% of CBS -- must be disappointed with a corporate strategy that he thought would boost the value of his holdings.

But Sumner has failed to boost value when he created a one-stop shop for advertisers through his acquisitions of CBS and Paramount. And his idea of splitting up the company between CBS/Paramount and MTV has done little to help the value of his shares either (although CBS.B shares are up 10% since the beginning of the year). This is not to say that his acquisitions and spin-offs have not been beneficial – the investment bankers who did these deals no doubt reaped hundreds of millions in fees.

Meanwhile Freston, who was able to adapt MTV to rapidly changing tastes among viewers, will be replaced by a lawyer Philippe Dauman -- and an accountant -- Tom Dooley. Sumner’s skeletal executive presence is showing its impatience and its loss of skill at creating shareholder value.

With VIA.B down 6% in the wake of this morning's announcement, Sumner's holdings have lost another $106 million in the last couple of hours. Clearly investors see problems with this move that Sumner did not.


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