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Viacom Sets $8B Buyback

In an effort to prop up the price, Viacom Inc. said it will spend $8 billion buying back its own stock.

The move is huge and Viacom could end up shrinking the number of shares outstanding by 10%. “This is an historic event,” Viacom Chairman Sumner Redstone told investors during the company’s earnings call Thursday morning. The company is also increasing its relatively small dividend by 17%.

The buyback is in response to investor unhappiness over media companies continually using their cash for acquisitions that don’t pay off (like Blockbuster Entertainment, a fizzled acquisition that Viacom spun off earlier this month.)

Some investors are instead clamoring for companies to show them some of the money, buying back shares, which shrinks their equity and hopefully increases the value of the remaining shares outstanding.

Viacom’s earnings for the third quarter were mixed.

Total revenue increased a mere 4% to $5.4 billion while operating income rose just 5% to $1.3 billion.

Cable networks were strong, with sales rising 14% and earnings jumping 13%. But despite the strength of the CBS network, revenues at Viacom’s broadcast division rose just 5% and earnings 7%.

That’s not very impressive given that CBS’ stations have been substantial beneficiaries of heavy political spending.

Infinity radio station revenues dropped 4% and operating income slid 17%.