The French Rejection

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Investors also fret that Diller or not, Vivendi's TV-distribution outlets in the U.S. aren't strong enough to compete with larger rivals like Fox, Disney and Viacom. The USA Networks' two cable channels (Sci-Fi is the second) reach a combined 157 million households. But Messier paid lavishly to reach those viewers. At USA, ratings declined 9% after the network lost WWF wrestling to Viacom's tnn and mtv. Vivendi's stake in EchoStar, which is merging with DirecTV, provides for five channels, with as many as 18 million subscribers, assuming the deal goes through. But without a major network to air its shows, Vivendi won't generate the big back-end syndication fees that, say, a Viacom can. "Foreign buyers don't like getting USA Networks shows--they want shows that aired on NBC or CBS," says an industry insider.

Vivendi's CFO, Guillaume Hannezo, says the company's top priorities are to lower the debt ratio and restore investor confidence. Last week Vivendi made some progress, striking a deal to sell a business- and-health publishing unit for $1.07 billion. Hannezo says the company beat its targets for cost reductions in 2001, saving more than $250 million. "The cost synergies are obvious," he says. "And the revenue synergies are beginning to happen."

Messier, for his part, has repeatedly stressed that he will focus on operations this year. That will entail restoring morale and profitability at Canal Plus. It's a beloved French asset but a dog, losing $440 million last year. With Lescure's ouster, Messier got a bit of what he wanted: Vivendi's stock rallied. The incoming chief--Xavier Couture--is known as a proponent of trash TV, which reaped big profits for his former TV station, tf1.

Messier often points out that Vivendi made its revenue targets last year, and hit its earnings predictions--before those big charges. But this is the Enron Era. Big companies with complex finances and fuzzy growth prospects won't be getting a warm welcome from shareholders, no matter how big a splash the CEO can make.