Viacom strongly denied a report that Sumner Redstone, the company's chief executive, stood up in a board of directors meeting last week and said that under no circumstances would he renew the contract of Chief Operating Officer Mel Karmazin, whose pact expires at the end of 2003.
Last Friday, the company went so far as to issue a press release to calm panicky investors, which quoted the two executives as saying they "are looking forward to working together productively in the ensuing years."
But one well-known and widely respected analyst had this take: "Sumner thought he had the horsepower to force Mel's resignation at the board meeting. Redstone will attempt another run in a few months."
When Viacom agreed to buy CBS two-plus years ago, Redstone said he felt like he was "seduced" by Karmazin. In fact, in order to consummate the transaction, Redstone agreed to give Karmazin complete operating control of Viacom.
Apparently, the thrill is gone. In fact, tensions between the two executives have been so evident lately that Merrill Lynch speculated about a change in top management (read: Karmazin's departure) and its negative implications. That report prompted a $5-plus drop in Viacom's stock, which has already lost about $10 and 25% of its value over the past two months.
Last Wednesday, Viacom's outside board of directors had a little talk with Karmazin and Redstone and told them to stop the bickering. Karmazin let it be known that he intended to fulfill his contract. In effect, the board last week backed him up.
Last week, Viacom's stock was relatively stable. In late- afternoon trading, the stock was at $39.10, down just 50 cents on the week.