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THE DAY AHEAD: Stay tuned for the Viacom/CBS Net strategy

The hoopla about the Viacom/CBS merger Tuesday revolved around television, radio, cable, outdoor advertising and movie studios. But the growth is on the Internet and investors will have to tune in later for the strategy.

Officials paid lip service to the Internet as a major growth business, but were short on details on how the various Viacom/CBS Web properties would fit together.



The new Viacom: Future Web superstar?



Indeed the inventory of the Viacom/CBS Internet assets is impressive. CBS (NYSE: CBS) owns stakes in SportsLine USA (Nasdaq: SPLN), MarketWatch.com (Nasdaq: MKTW), Big Entertainment (Nasdaq: BIGE), Jobs.com, StoreRunner, Inc., Office.com, Inc., ThirdAge.com, Medscape, Wrenchhead.com and Switchboard Inc. CBS, which recognized the power of TV-Web synergies, has been the master of swapping promotion for lucrative stakes in high-flying .coms with no cash or stock outlay.

Viacom (NYSE: VIA) counts Nickelodeon (Nick.com) and MTV.com among its most powerful properties. The company recently launched a startup linking its music properties such as MTV.com, VH1 and SonicNet. Viacom also dropped hints that a spin-off was possible.

In traditional and new media, the combined company could see a synergy bonanza.

"My goal is to make Sumner's (Redstone) stock worth more than Bill Gates' stock," said Mel Karmazin, the current CBS chief who will become president and chief operating officer for the merged Viacom. Redstone will be chairman and CEO of the new Viacom and hand over the controls to Karmazin, who noted that .coms are going public just to pay CBS for promotion and marketing.

For those keeping track at home, Viacom/CBS has a long way to go before they catch up to Microsoft Corp.'s (Nasdaq: MSFT) nearly half a trillion market cap. And it will take a lot of synergy and .com magic to get to Microsoft's market cap. Sure Howard Stern, property of CBS' Infinity radio unit, can now bug Viacom's Paramount Pictures for a new movie deal, but Net synergies may not be that easy.

So what will this CBS/Viacom Net strategy look like? Is this going to be a Disney Go.com portal play or a Time Warner hodgepodge of properties.

The synergies may not come easy. For starters, CBS doesn't own Web properties directly. It owns chunks of a bunch of properties that might be ingredients of a portal. CBS' promotion-for-equity strategy is brilliant -- until you want to put it all together. Go.com suffered as Disney tried to meld the then-independent Infoseek with its own properties. Disney needed everything under one roof to get its other units jazzed about the Net.

The new Viacom could see the same problems Disney did. CBS has taken a holding company approach to the Net while Viacom has developed its own properties. NBC bought Xoom.com (Nasdaq: XMCM) and lumped it with Snap.com to create NBCi. The bottom line: Synergies are created when things are under one roof and the new Viacom has properties scattered all over the Web.

"I wouldn't be surprised if they put everything in one basket or a centralized portal," said Abhishek Gami, an analyst with William Blair. "But it might be harder for CBS."

Another possibility would be a Net holding company for CBS' investments and the Viacom brands. The new Viacom could also buy a Net property such as Lycos Inc. (Nasdaq: LCOS) in a long-shot move.

How the Viacom-CBS new media properties will be fused is anyone's guess. And it seems like officials are still guessing.

Redstone, who downplayed the Net in a conference at year ago, said he had "preliminary discussions" with new media fan Karmazin about a strategy. Redstone said there was no Net strategy in place because the merger courtship only lasted 10 to 12 days.

That's a few months in Internet time. Welcome to the Net Mr. Redstone.