Viacom shake-up continues; interim CEO Tom Dooley is out

Viacom Inc.’s leadership was thrown into question Wednesday as the company announced that interim Chief Executive Thomas Dooley would step down and that its financial performance was worse than previously thought.

The surprise move, which came just one month after Dooley was appointed, was one of several announcements by Viacom’s board in an attempt to shore up investor confidence at the media company that is under pressure to improve results.

Viacom also said it was ditching a controversial proposal to unload a piece of its struggling movie studio Paramount Pictures and that it would slash its dividend.

Wall Street has been watching for clues about Viacom’s direction since a messy battle for control broke out in May. On Wednesday, the company conceded that its financial performance would fall short of expectations — Paramount is on track to lose $450 million in the current fiscal year. Viacom also owns cable TV channels, including Comedy Central, MTV and Nickelodeon.

Viacom’s board said it would look internally and outside for its next leader to replace Dooley, took the top job Aug. 18 on an interim basis with high hopes that he would be given a chance to turn things around. Though widely respected within the company and on Wall Street, his tryout lasted four weeks.

“After a great deal of reflection and thoughtful consideration, I have decided this is the right time for new leadership to build on our progress and success and take Viacom into the future,” Dooley told employees in an email. He said he would leave Nov. 15 to allow for a smooth transition.

The management upheaval follows a tumultuous period for Viacom in which the ailing Sumner Redstone, 93, and his daughter, Shari, openly clashed with former Chief Executive Philippe Dauman. The fighting ended last month when Dauman, a longtime nemesis of Shari Redstone’s, exited as part of a legal settlement.

Dauman agreed to leave the company but, as a condition for his departure, he demanded that his longtime lieutenant, Dooley, be given a chance to run the show. The settlement also paved the way for five new members, identified by Shari Redstone, to join Viacom’s board.

The newly expanded board met two days last week to discuss next year’s budget and for new directors to get up to speed on the company business. Following those meetings, Dooley continued conversations with Shari Redstone and other board members about his future, according to knowledgeable people not authorized to comment on board matters. After Dooley informed them of his decision to leave, the board met Tuesday to accept his resignation.

Dooley — who started at Viacom 36 years ago — was viewed as part of the old guard. He was one of the first people who met Sumner Redstone after the mogul prevailed in his hostile takeover of Viacom in 1987. Dooley stands to benefit from a generous golden parachute, which is believed to be more than $50 million, that he negotiated earlier this year. He also will receive nearly $4.4 million to stay on through Nov. 15.

Investors have been demanding improved results. Viacom’s stock has continued to slide since Dooley was elevated to the top job. Shares closed down 0.3%, or 11 cents, Wednesday to $36.05. The stock has fallen about 50% in the last two years.

Viacom plans to consider internal candidates, including Robert M. Bakish, chief executive of Viacom’s international TV network portfolio, and Wade Davis, the company’s chief financial officer, company insiders say. Outside executives mentioned include former Walt Disney Co. executive Thomas Staggs, Jeffrey Katzenberg, who sold his DreamWorks Animation to NBCUniversal earlier this summer, and Jonathan Miller, a former News Corp. and AOL executive who is a partner at Shari Redstone’s investment firm, Advancit Capital. Board members are looking for a candidate knowledgeable about international channels and digital media, one person said.

“Whoever it is will be spending a lot of time and money to turn [Viacom] around,” Wells Fargo Securities media analyst Marci Ryvicker said in a report.

Analysts say whoever is selected as CEO should shed light on whether Shari Redstone plans to reunite her family’s nearly $40-billion empire — Viacom and CBS Corp. — into a single corporate entity. Both companies are controlled by the family’s investment vehicle, National Amusements, and were separated in 2006. Picking an insider to run Viacom would point to a Viacom-CBS reunification, said prominent media analyst Michael Nathanson.

“The problem for investors, and for analysts, is that we don’t know what National Amusements’ ambitions are,” Nathanson said in an interview. “I still think this company needs to be merged with CBS,” he said. “It needs scale, it needs to be run by a programmer and it needs a broadcast network to protect the Viacom cable channels.”

Shari Redstone has a strong relationship with CBS Chief Executive Leslie Moonves, who is widely respected as one of the most savvy programmers in Hollywood. Should CBS take over Viacom, Moonves likely would run the combined operation.

However, since an escalation of the talk of a Viacom-CBS reunification, CBS’ stock has tumbled more than 10%. “CBS shareholders are nervous,” Nathanson said.

Moonves has built CBS into a broadcast juggernaut, and trying to revive Viacom’s television channels could tarnish his legacy.

Last week, Moonves tried to downplay such talk. “We are not in active discussions for anything like that,” Moonves said at an investor conference. “We are never going to do something that is bad for the CBS shareholders.”

Viacom’s other alternative is to paddle on its own in choppy waters as cable TV channels lose value as consumers increasingly turn to online video streaming sites.

Viacom said Wednesday that it would cut its dividend in half to 20 cents a share. Analysts had been expecting the company to slash its dividend to conserve cash to meet looming debt payments — and some analysts said Wednesday’s action, which would free up $300 million, did not go far enough.

Credit agencies have warned that Viacom faces a downgrade because it might not have the capacity to meet upcoming debt payments, including a $400-million payment due in December.

Viacom said it would take a write-down of $115 million because it anticipates an upcoming release, believed to be “Monster Trucks,” will lose money.

“The steps we are taking will make the company financially stronger and more flexible and will position Viacom to take advantage of future growth opportunities,” Viacom’s new chairman, Tom May, said.

Viacom reduced its guidance for quarterly earnings, in the range of 65 cents to 70 cents a share, for the current fiscal period.

“While there is more work to do, the actions announced today are an important first step towards realizing the value of Viacom’s exceptional assets and positioning the company for the future,” Shari Redstone said. “I also want to thank Tom Dooley for his service and his willingness to stay on through this transition period.”

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UPDATES:

4:40 p.m.:This article was updated with additional details. The article was originally published at 8:15 a.m.