(Reuters) - Paramount Global wrote down the value of its cable networks by nearly $6 billion and announced Thursday it would cut 15% of its workforce, as the media conglomerate navigates the decline of the cable television business.
The reductions are part of Paramount's efforts to cut $500 million in costs ahead of its merger with Skydance Media and will affect roughly 3,200 people, based on the number of workers at the end of last year.
Paramount's shares rose 5% after hours, however, as the company handsomely beat Wall Street's profit expectations and its streaming business reported its first quarterly profit in three years. The stock has lost almost a third of its value so far this year.
The company's Paramount+ and PlutoTV services reported an operating income of $26 million in the second quarter, compared with a loss of $424 million a year earlier.
"It's crunch time for streaming businesses and Paramount delivered some promising numbers," said Third Bridge analyst Jamie Lumley.
Paramount is the second media conglomerate in as many days to adjust the value of its cable TV assets to reflect the impact of declining ratings, which translates to lower advertising revenue. Warner Bros Discovery announced a $9 billion charge on Wednesday, citing the uncertainty of fees from cable and satellite distributors and sports rights deals.
The pending Skydance merger forced Paramount to reassess the value of each of its units, based on deal's implied enterprise value of the company. This impairment dragged the company into an operating loss of $5.3 billion for the second quarter.
"Paramount's and Warner Bros Discovery's writedowns this week add nails to linear TV's coffin," said Emarketer television and streaming analyst Ross Benes. "Paramount’s best chance for an exit is through Skydance. The longer they wait, the less the company will be worth."
Paramount's adjusted operating profit, which excludes the impairment, exceeded Wall Street targets, with income of $867 million, or 54 cents a share. That topped the consensus estimate of 12 cents a share, according to LSEG.
The job cuts are expected to lead to charges of $300 million to $400 million in the third quarter, Paramount executives said on the investor call. The company is looking at a variety of additional cost-reduction plans, CFO Naveen Chopra said.
Second-quarter revenue fell 11% to $6.8 billion. That missed analyst forecasts of $7.2 billion for the quarter ended June 30.
The television unit, which includes prime time's top-rated network, CBS, as well as the company's cable networks, reported quarterly revenue of nearly $4.3 billion. The 17% decline in revenue from a year ago reflects lower ad revenue and fees paid to license its shows. Operating income for the group fell 15% to $1 billion.
Paramount's film business reported a loss of $54 million, despite releases like "IF" topping the box office in its domestic debut, and "A Quiet Place: Day One" recording the best financial performance for the horror franchise.
