A HOUSE DIVIDED AGAINST

itself cannot stand. But a media conglomerate seeking to split in half for profit's sake could give investors a chance to make more money.

That's the goal, anyway.

The proposal unveiled last week by Sumner Redstone, chairman, chief executive and patriarch of Viacom, to divide the company into a cable network and movie studio operation on the one hand and a broadcast network, radio and outdoor advertising business on the other, prompted a brief little pop in share prices. But the announcement, which marks a dramatic reversal from the company's 2000 purchase of CBS, now seems to prompt as many questions as kudos.

Just how investors might win in this scenario is unclear. The strategy would create two vastly different companies, one focused on growth and the other on predictability. The growth company would be under the MTV-Paramount Pictures umbrella, and would include the basic cable networks within the MTV Networks franchise MTV, MTV2, VH1, Nickelodeon, Nick-at-Nite and Comedy Central plus BET, along with Paramount Pictures. That company would likely be headed by Tom Freston, co-president of Viacom.

The second company, likely to be headed by Les Moonves, the other co-president of Viacom, "will house the units perceived to have reasonable but more mature growth characteristics," according to James Goss, an analyst at Barrington Research in Chicago. That would include broadcast television businesses and stations, led by the CBS and UPN networks and major-market television stations, as well as television program production and syndication efforts including CBS King World, the Infinity Radio and Outdoor businesses, Simon & Schuster's trade publishing business, the Showtime/Movie Channel pay cable television businesses and the Paramount Parks theme park operations, he says. (Goss owns shares of Viacom; Barrington doesn't have an investment-banking relationship with the company.)

What Wall Street analysts and legions of investors want to know is whether the rough sketch of the Viacom cleaving is the best possible plan. It would certainly offer investors a chance to tailor their holdings to their investment philosophies, with growth-oriented investors opting for cable and movies, and value investors backing the proposed CBS-Infinity-outdoor advertising entity.

"The bottom line of this is that what they're proposing is an attempt to create two different types of investments," says Goss. "One is focused on rapid growth, and one is a more conservative type of growth company."

According to Goss, the cable group saw growth in earnings before interest, taxes, depreciation and amortization, or Ebitda, of 13.9% last year, despite Paramount's 6.3% loss for 2004, and is expected to see Ebitda growth of 14.8% this year. For the broadcast group, those numbers are 4% and 7.6%, respectively. Goss says it's too early to discern the value of each of the proposed companies because not enough details about their capital structures have been released.

While a split-up might juice some investors' portfolios in the near term, Wall Street analysts wonder about the future implications of Viacom's self-rending in an age of very large media groups, such as

Time Warner

Walt Disney

"Over the long term, we are not convinced splitting what we view as the optimal mix of assets is the best strategic move," writes Goldman Sachs analyst Anthony Noto in a Wednesday note. While he says Viacom's stock could climb near $40, it won't go higher, he says. "The split should widen investor interest, but the overall valuation will be based on fundamentals of each segment, which we believe are not likely to change in the near term." (Noto doesn't own shares of Viacom; Goldman does investment banking business with the company.)

Noto says big media rivals Disney and Fox shouldn't contemplate similar breakups, because they "have the optimal mix of assets (broadcast network, TV stations, cable networks, film production and TV production)," which would result in "above average growth and returns." Time Warner "is a candidate to split up its business either into multiple securities or to sell its parts."

Bear Stearns analyst Raymond Katz is also bearish on the move. He points out in a Wednesday research note that "value unlocked is not value created; the latter is done through execution... We believe this is a tacit admission that the benefits of the CBS merger have not been realized, and indeed, raises issues in general regarding all entertainment consolidation." (Katz owns shares of Viacom; Bear Stearns has an investment-banking relationship with the company.)

But others take a more upbeat view of fragmentation for the entire industry. Spencer Wang, an analyst at J.P. Morgan, writes in a Wednesday note that "Breaking up is fun to do." He calls the plan "right on target with our entertainment thesis for industry deconsolidation," and compares it favorably to Liberty Media's plans to spin off Discovery, and the potential reverse merger of Time Warner Cable into Adelphia. (Wang doesn't own shares in those companies; J.P. Morgan has an investment-banking relationship with Viacom.)

The deconsolidation theme is seconded by Merrill Lynch analyst Jessica Reif Cohen, who writes that the move "may have been encouraged by the performance of pure play entities, for example Pixar and DreamWorks Animation, which has contrasted sharply with the general malaise that has hung over large media conglomerates for the last several years." (Cohen or a member of her research team owns Viacom shares; Merrill Lynch has done investment-banking business with the company during the last 12 months.)

In other words, the opinions on this proposed breakup are, well, split.