- Associated Press - Tuesday, May 3, 2011

LOS ANGELES (AP) - CBS Corp. produced a strong first-quarter performance and doubled its quarterly dividend in a sign that the television broadcaster believes it has recovered from the latest advertising downturn.

The company’s management on Tuesday credited the first-quarter gains to overhauling unprofitable businesses. CBS, which airs “Hawaii Five-O” and “CSI,” also has been trying to lessen its dependence on advertising by taking advantage of growing demand for CBS content streamed over the Internet.

As part of an effort to reduce its costs, CBS signed a 14-year contract to split rights fees with cable channels to carry the NCAA college basketball tournament played each March. The new deal was a key factor in CBS returning to a profit in the first three months of the year.

And a deal to allow online video company Netflix Inc. to stream older CBS shows like “Medium” over the Internet was the first of many that CBS is counting on to improve its results for years to come.

“We are clearly benefiting from the strategic actions we have taken to enhance and de-risk our business model, including diversifying our revenue streams and managing our cost structure,” CEO Les Moonves said on a conference call with analysts. He said selling shows in more profitable ways “positions CBS for success, not just for the rest of this year, but for many years to come.”

Net income in the first quarter came to $202 million, or 29 cents per share, compared with a loss of $26 million, or 4 cents per share, a year ago. Last year’s net income totaled 5 cents per share after excluding special items.

CBS was able to save money by sharing coverage of the NCAA college basketball tournament with Time Warner Inc.’s Turner Broadcasting. CBS didn’t say how much it saved, but Moonves said it was the first time that the NCAA’s “March Madness” tournament has been profitable in several years. CBS also didn’t have to pay to broadcast the Super Bowl, which was shown on Fox this year.

The combined effect of not carrying the Super Bowl and shifting some of the NCAA basketball tournament games to Turner did trim about $350 million from revenue. Still, growth in other parts of CBS’s advertising business helped limit the first-quarter revenue decline to less than 1 percent to $3.51 billion.

The results beat analysts’ expectations. Analysts polled by FactSet expected earnings of 19 cents per share on revenue of $3.46 billion.

The showing encouraged the New York-based company to boost its quarterly dividend to 10 cents per share from 5 cents. That will restore a portion of what stockholders lost when the company cut its dividend from 27 cents per share two years ago. The upcoming dividend is payable on July 1 to shareholders of record as of June 10.

Shares rose $1.26, or 5 percent, to $26.50 in extended trading after the results were announced. The rally lifted CBS stock to October 2007 levels.

Later this month, CBS will meet major advertisers in New York to sell its upcoming fall line-up. Moonves said he expects “double digit” percentage increases in ad prices from a year ago, helped by the fact that commercial time that hadn’t been pre-booked is now selling at prices that are 40 percent above the bulk buying period a year ago.

As to whether the popular sitcom “Two and a Half Men” will return as part of that line-up, Moonves said only that Warner Bros. is exploring different ideas on how to do the show. Speculation has swirled about who might fill the void left by Charlie Sheen’s firing two months ago, or whether the show is over for good.

Moonves said the company would start to see a “meaningful” revenue boost in the second quarter from its licensing agreement with Netflix, which has emerged as a rival to CBS’s pay-TV channel, Showtime. He said he expects the two-year deal to bring in “hundreds of millions of new dollars.”

The chief executive also hopes that satellite TV provider Dish Network Corp. will want to buy the right to stream older CBS content after Dish bought video-rental chain Blockbuster out of bankruptcy last month.

“Look, I don’t believe that Blockbuster was bought by Dish to be a bunch of stores selling cassettes. I think they are a place that wants our content,” he said.

Such alternative revenue streams are key to helping CBS escape advertising’s boom-bust cycle, said Edwards Jones analyst Robin Diedrich, who kept a “hold” rating on the shares.

“As those portions of the business continue to grow over time, I think the company and the story becomes more balanced. That would be one thing that would make us more favorable,” Diedrich said.

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