* Q3 adjusted EPS $0.55 vs estimates of $0.54
* Redstone says no more sales of Viacom shares
* Redstone voices support for Dauman
* Shares little changed after hours
(Adds executive comments, byline)
By Paul Thomasch
NEW YORK, Nov 3 Viacom Inc VIAb.N, owner of
MTV Networks and Paramount movie studio, reported a 37 percent
drop in third-quarter earnings, further evidence major media
companies are suffering from an intensifying advertising
Viacom Chief Executive Philippe Dauman cautioned that the
advertising market remained under pressure in the early weeks
of the fourth quarter, backing up comments by other media
executives who have pointed to a downturn in spending from
automotive, financial services and retail companies.
"During the third quarter and beyond, Viacom, like every
company, had to adjust to the realities of a serious economic
downturn," he said. "There was a general pullback in spending
by marketers as they responded to lower consumer spending."
Viacom's advertising troubles were compounded by poor
ratings for two of its key cable networks, MTV and VH1, which
executives said they planned to jump-start with new series and
more viewer-friendly features, such as games and comment
Its film division, which holds Paramount studios, also
suffered without smash-hit "tent pole" movies in the third
quarter, such as last year's "Transformers."
Viacom's troubles were largely expected, however, since it
warned last month that its earnings would fall well-short of
forecasts for the quarter and full year. Its actual third-
quarter results on Monday were in line with revised forecasts.
In addition to the advertising slump, Viacom is also facing
tough questions about its controlling shareholder and executive
chairman, Sumner Redstone, who has run into a debt issue at his
privately held National Amusements.
In recent weeks, Redstone has been forced to sell about
$230 million of his stock in Viacom and CBS Corp (CBS.N), the
other key component of his media empire, to fund debt related
to National Amusements.
Since those sales, Redstone has pledged he will not divest
any more shares of Viacom or CBS -- although that leaves
unanswered how National Amusements plans to pay about $800
million in debt coming due next month.
Redstone repeated that pledge on Monday, calling Viacom
"the love of my life," and saying he was optimistic that
National Amusements would reach a new agreement on its debt
with its banks.
Redstone, who has sometimes been known to have a short fuse
with top executives of his companies, also voiced his support
for Dauman during the call with investors.
"I assure you there is no management team in the media
business that has done a better job of positioning their
company to weather the storm and more important in a way to
seize the inevitable opportunities that will emerge as the
economy recovers," Redstone said.
The company's shares closed 1.1 percent down at $19.99 on
the New York Stock Exchange on Monday and were little changed
after hours. The shares have declined over 50 percent so far
Viacom's results for the quarter showed net profit fell to
$401 million, or 65 cents a share, from $641 million, or 96
cents a share, a year earlier.
Adjusted earnings from continuing operations were 55 cents
per share. Before the warning, Wall Street expected Viacom to
earn 61 cents a share, but since then, analysts have lowered
expectations to 54 cents, according to Reuters Estimates.
Viacom, which also owns Nickelodeon and Comedy Central,
said revenues rose 4 percent to $3.4 billion as some of its
troubles were offset by stronger affiliate revenue, the DVD
release of "Iron Man" and sales of its hit Rock Band video
In a boost to its video game efforts, Viacom announced a
deal last week that will let is use songs by The Beatles in a
custom video game similar to "Rock Band."
(Visit blogs.reuters.com/mediafile/ for more coverage
at the Reuters MediaFile blog)
(Reporting by Paul Thomasch; editing by Jeffrey Benkoe and