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September 14, 2006

Good News for VCs and Web 2.0 Companies: Viacom Looking for Small Acquisitions

posted by MR WAVETHEORY at 9/14/2006 10:17:00 PM
In a move that probably surprised some investors, Viacom Inc announced there probably won't be any big acquisitions on the horizon. Instead, it will take the venture route, investing in small, emerging businesses that could potentially complement its media properties.
Wariness of a big acquisition was underlined by the stock drop that followed Mr. Freston's ouster. Investors were put off when Mr. Redstone, on a Wall Street conference call, explained the firing by alluding to Mr. Freston's failure to acquire MySpace, the wildly popular social-networking Web site that News Corporation. purchased last year. The comments led many to believe Mr. Redstone wanted a big acquisition.

Messrs. Dauman and Dooley have taken pains to persuade Wall Street that they have no such plans. Instead, they have said, their investment focus will be similar to the approach taken by venture capitalists. That is, to invest in start-ups with new ideas or technologies that would bolster Viacom's core media operation -- before they take off.

In an interview, Mr. Dauman said he didn't see a "large transaction on the horizon" and would focus on investing in existing businesses. Any acquisitions would likely be small and in areas that complement existing operations in the areas of music, comedy, gaming and children's programming, he said. Viacom has recently bolstered its involvement in videogames with several purchases. But Mr. Dauman rejected the suggestion that Viacom might acquire a major video game maker such as Electronic Arts Inc.

It sounds like good news for Web 2.0 companies and for VCs investing in early stage companies.

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