Chairman Sumner Redstone says newly appointed CEO Phillippe Dauman will be more aggressive in pursuing digital opportunities than outgoing CEO Tom Freston. “If we don’t move quickly, we will be left behind,” Redstone says.
Viacom Chairman Sumner Redstone said this morning that the decision to oust Tom Freston as CEO of the company was based on the sagging stock price and the board’s belief that he was not moving aggressively enough in digital media.
The move had been in the works for weeks, Redstone told securities analysts on a conference call shortly after the early morning announcement.
“It was a very difficult decision,” he said. “On the one hand, we love Tom. We appreciate his great contribution to the company. On the other hand, being very realistic, the board felt that not enough was being done. We weren’t moving ahead as entrepreneurially and as aggressively as we should.
“The fact that the stock didn’t move after good earnings suggested to the board that Wall Street may have lost confidence in that management team,” Redstone said.
Replacing Freston are two longtime Redstone business allies who helped build Viacom as top executives. Phillippe Dauman, 52, was named president and CEO; Thomas Dooley, 49, becomes senior executive vice president and chief administrative officer.
Redstone said that Dauman and Dooley served as his lieutenants in the late 1990s during Viacom’s most successful period. Since leaving the company, he said, they have run a private equity firm that exposed them to the types of new media companies that could help Viacom grow.
“Phillippe will emerge not only as talented, but also as a highly agressive and entrepreneurial executive who will not let opportunities pass and let our competitors ever beat us to the trophy,” Redstone said.
Redstone dismissed the suggestion that Freston’s was forced out because he had allowed News Corp. to snag MySpace.com. With enormous appeal among teens and young adults, the community Web site would have complemented MTV nicely.
Viacom has made a good start in moving its content into digital media, Redstone said. “But it’s only a start. Phillippe and I see much more opportunity and we intend to move quickly to seize it. …If we don’t move quickly, we will be left behind.”
Viacom split into two companies at the beginning of this year. CBS, head by Les Moonves, took the broadcasting assets, while the new Viacom, headed by Freston, hung on to most of the cable programming assets. Redstone is chairman of both companies.
Since the split, CBS stock has been rising, while Viacom’s has been foundering. The difference did not go unnoticed by the Viacom board, Redstone said.
When he was last teamed with Dooley and Dauman, Viacom stock “actually tripled,” Redstone said. “The comparison with then and what was happening now certainly influenced the board.”
The board sees Dauman and Dooley as “more aggressive, more entrepreneurial, more go-and-get-it kind of guys,” Redstone said.
Echoing Redstone, Dauman promised a more agile and aggressive company that would grow the company through existing businesses and through acquisitions. ÃƒÂ¢Ã¢â€šÂ¬Ã‹Å“We are on the right track, but we need to move to the fast track.”
“We have enormous opportunities internally,” Dauman said. The goal will be to focus Viacom’s “unbelievable array of creative talent” on digital media, he said.
Dauman also said that he and Dooley are “more plugged into” startup companies that could help Viacom grow. “We want to identify them earlier than we have been able to do in the past. We will enter into partnership opportunities with them. If necessary, we will bring them inside.”
But, at the same time, Dauman said not to expect any “major acquisitions” right now. “I’m looking at small, financially prudent deals that will complement what we are doing.”
Redstone was less equivocal than Dauman, saying Viacom “will seek out every sensible deal, whether it is in the digital space or otherwise, and we are determine not to let it get out of our hands.”
Dauman endorsed the heads of Viacom’s principal operating divisions, saying that he had spoken with MTV Networks’ Judy McGrath, Paramount’s Brad Grey and BET’s Debra Lee. “I think they are great executives, leading important businesses for us,” he said.
Redstone bristled at the suggestion that the Dauman-Dooley team is a short-term fix. “There is nothing here that requires a short-term fix. The company it in good shape, he said. “It just could be better managed, in our opinion, and better moved ahead.”
Redstone reassured the analysts that there was never any talk of putting CBS and Viacom back together again. “Viacom with new management will clearly work,” he said. “When you see [Viacom’s stock] rising as least as fast as CBS’s, the split will be vindicated.”
Dauman said that he and Dooley are taking a smaller salary than Viacom would normally pay its top executives and have tied much of their compensation to the stock price. To underscore their commitment, he said, he and Dooley have invested $5 million and $4 million, respectively, in Viacom stock.
“We believe in it,” Dauman said. “We believe we can turn this company into a leader, a winner in the new era. I think we can do very well. It is definitely a growth company.”
In defending the decision to split Viacom, Redstone reminded the analysts that he had said it would take a least a year to evaluate the performance of the company and the wisdom of the split.
The board’s evaluation of Freston as CEO took just nine months.
Wall Street was unimpressed by the management change. The stock closed Tuesday at $34.97, down 5.4% for the day.