Investors Eye Changes at CBS With Optimism

Wall Street showed its approval Friday of a reorganization at CBS by driving up the languishing stock price of its parent, Westinghouse Electric Corp.

The stock jumped $1.75, to $18.75, on the New York Stock Exchange after Westinghouse announced that Mel Karmazin, chief of the company’s star CBS Radio group, would take over the troubled CBS television stations.

Peter Lund, president of CBS Television and Cable since 1995, resigned, as expected, after refusing to take a cobbled-down role as head of only cable and the CBS network. Those entities will report directly to Westinghouse Chairman Michael Jordan.

In addition to signaling approval of Karmazin, who did not return telephone calls, analysts seemed optimistic about the new fall prime-time schedule unveiled to advertisers in New York on Thursday by CBS Entertainment Chief Leslie Moonves. While the network is still last among the Big Four networks in key demographic ratings, it is attracting an increasing number of viewers at a time when its rivals are losing audience share.

Still, the CBS Television group has been stuck in a slow turnaround for the last two years. While the 14 CBS-owned TV stations logged a slight profit increase in the first quarter, ended March 31, their revenues fell 5.9% to $177 million, highlighting the historic weakness of the group.

By contrast, CBS Radio, which is the nation’s largest radio group with 77 stations, is the fastest-growing and most profitable sector of Westinghouse.

Known as a fierce competitor and an efficient radio operator, Karmazin became Westinghouse’s largest shareholder last year when he merged his Infinity Broadcasting Corp. into CBS Radio in a transaction valued at $4 billion. Karmazin, who sits on the Westinghouse board, has complained loudly to the directors about the spending at CBS and the lagging stock price.

As head of the new CBS Station Group, Karmazin is expected to rely on the same formula that distinguished Infinity.

“I would think you’ll see a rather quick turnaround of the TV station group under Mel,” said Herb McCord, who sold his radio company to Infinity before forming the radio consulting group Granum Communications Corp. “Mel is known for raising revenues and cutting costs in the right places.”

McCord predicted that Karmazin would pump up station revenues by increasing their sales staff. He said when Infinity bought the WFAN radio station in New York, he increased the sales force from 12 to 30 people in a year.

While both CBS’ previous owner, Laurence Tisch, and Westinghouse’s Group W are known as big cost-cutters, they have also been criticized for penny-pinching on programming. CBS television stations have suffered in part because they lack strong programming in the key time period leading up to the evening news, where competitors like ABC and NBC dominate by virtue of talk show “lead-ins” hosted by Oprah Winfrey and Rosie O’Donnell, respectively.

McCord said that Karmazin believes in programming investment, having built radio stars out of Don Imus and Howard Stern at Infinity. Some analysts speculated Friday that Karmazin would make a run at a high-visibility program, like the talk show being assembled by TV star Roseanne and King World Productions, to take on Rosie and Oprah in the late afternoon.

But some CBS executives fear that retirement and health-care benefits could become targets. Some at CBS have been puzzled that Karmazin has refused to integrate CBS Radio, declining, for instance, to share such corporate overhead expenses as human resources, claiming they are unnecessary.