• by Wayne Friedman , October 10, 2008

Viacom says a now-expected 2% drop in worldwide advertising revenue for its TV networks and other properties will significantly affect its third-quarter earnings.

Viacom Chief Executive Philippe Dauman said in a statement: "Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets."

That reality pushed down the company's stock 18% to $16.50 on Friday.

Now Viacom expects between 53 and 55 cents a share in net earnings. Analysts have been estimating that Viacom would post 67 cents a share for its third quarter, which ended in September.

Viacom says most of the bad ad results resulted from U.S. ad activity, noting that there will be a 3% decrease for its cable TV networks. (It owns MTV Network, BET, Comedy Central and Nickelodeon.) The better news comes from an 8% increase in international ad revenues.

Sister company CBS Corp. also had its share of bad news, saying it will take a $14 billion charge because of the troubled advertising market. This sent its stock down 20% on the day to $8.10 a share.

In regard to the sharp drop in the financial markets, many companies--including media companies--have seen their market values dip well below their book values. This requires companies such as CBS to write down the difference.

CBS said it now expects its third-quarter earnings to be between 42 and 44 cents a share, compared to 51 cents a share in the same period a year earlier. Analysts were expecting CBS to get $3.4 billion in revenue for the third quarter.

Viacom will report third-quarter results on Nov. 3; CBS will do the same Oct. 30.