It was the shot heard 'round Wall Street. Mel Karmazin has left the building.
Karmazin is no slouch in the ego department. Depending on what you believe from articles in the press, he's aggressive, intolerable, hard to please, ready to terminate at a moment's notice for even slight underperformance, and so on. Make no mistake, however -- he's sharp, smart, and full of ambition. How else can you explain Viacom's nice earnings performance as of late?
Well, I suppose there are a lot of ways to explain something like that. Oftentimes, it is the environment a person is working in and not necessarily the person himself that holds the most influence. I'm not saying that's the case here, but I'd like to make an important point: Events like these create a lot of emotional hype, which can induce misgivings in the mindset of a long-term shareholder. The question is: Does Karmazin's departure significantly affect the future of Viacom? My answer: Probably not.
Leadership is bound to change in any long-term holding. As far as I am concerned, the situation of a company -- and its stock -- shriveling up in response to the resignation of its CEO or COO is rare, so long as the company in question is fundamentally viable to begin with. Of course, exceptions exist for any theoretical rule, perhaps one being Berkshire Hathaway
The where-will-Mel-go-now game is being played by everybody. Take your pick. The speculation has him going to, thus far, Disney
I don't currently own shares in Viacom, but if I did, I wouldn't be worried right now. From my perspective, things seem to be fine. Sumner Redstone is a fine steward, and as long as he doesn't get distracted by playing too many video games, he'll navigate the choppy waters that always flare up when an event such as a major defection occurs. In fact, there's a wealth of opinion out there that theorizes that this event could serve as a positive catalyst for the stock. So far, the reality is that the stock hasn't suffered too badly on the news.
What are your thoughts on Mel's decision? Is it a bad thing or will it strengthen his former employer? Post your musings on the Viacom discussion board.
Fool contributor Steven Mallas owns shares of Disney.