Viacom Inc President Mel Karmazin may leave the third-largest media company next year because of a disagreement with Chief Executive Officer Sumner Redstone, shareholders said.
The departure of Karmazin, 58, would be a further blow to the third-largest media company's stock, investors and analysts said.
Viacom shares have fallen about 27 percent in the past year amid slower profit growth and speculation about feuding between Karmazin and Redstone.
"It's very important to investors that Mel stays around," said Angela Kohler, a fund manager at Federated Investors, the 104th-largest institutional holder of Viacom Class B shares with 1.6 million as of September.
Redstone, 78, and Karmazin agreed to end any bickering after directors told them a feud hurts Viacom's shares, people familiar with the company said. Yesterday, the New York Times reported that Verizon Communications Inc President Ivan Seidenberg led Viacom's outside directors to get the executives to reconcile.
"I don't think it alleviates the entire concern," said Michael Florin of United States Trust Co, the company's 55th-biggest holder of Class B shares with 3.32 million as of September. "If he goes away, the stock goes down."
Viacom's Class B shares rose US$0.49 yesterday to US$39.99. They've fallen 47 percent from their all-time high of US$75.88 reached Aug. 4, 2000.
When Karmazin, who boosted CBS's shares 20 percent in a year and half running the company, sold the broadcast network to Redstone they agreed on a contract that keeps Karmazin as president until May 2003 and Redstone became chairman and CEO. All division heads report to Karmazin.
"Both want to run the company," said Mark Greenberg, portfolio manager at the Leisure Fund at Invesco Funds Group Inc, the 112th-biggest holder of Class B shares with 1.2 million. "I'd like to see them work together better." Greenberg said he'd like Karmazin to stay at the company.
During a special meeting Wednesday, Redstone told Viacom's board that he wouldn't renew Karmazin's contract and that Karmazin's hard-charging management style didn't fit with the company's corporate culture, the Times said, citing unidentified people close to the board.
Viacom spokesman Carl Folta yesterday said Redstone and Karmazin "continue to run this company today as they did yesterday." He declined to comment this morning. Redstone and Karmazine, who say they aren't feuding, declined to be interviewed.
Karmazin can't be dismissed as president unless 14 of the company's directors vote for his removal, according to his contract.
In an interview last year, Redstone declined to say whether he would renew Karmazin's contract when it expires.
"All this about Mel and me is just garbage," Redstone was quoted as saying in the Wall Street Journal. "The bottom line is that Mel is doing a fine job, and he and I get along well."
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