After Tuesday’s annoucement that Tom Freston resigned as president and chief executive of Viacom you might be surprised that Wall Street did not immediately welcome the new leadership by sending the stock price up a few percent. After all, Viacom’s stock has been underperforming its corporate sibling CBS by more than 20 percent since the split last year. Instead the Viacom stock closed down 5.6 % on Tuesday. The reason for this is most likely spelled u-n-c-e-r-t-a-i-n-t-y. A word that Wall Street despises.

Freston is replaced by Philippe Dauman. Viacom also said it named Thomas Dooley to the newly created post of senior executive vice president and chief administrative officer. Mr. Dooley will report to Mr. Dauman, who will in turn report to company founder and executive chairman Sumner Redstone, who still controls both Viacom and CBS. So, now that we have the order of command straight, what can we expect from this new leadership duo? That is what Wall Street and everyone else wonders.

My Take: The drastic and daring move by Redstone to fire his old friend Freston must be seen as a symbolic move suggesting that a major strategic shift is ahead. It is not clear what that shift entails yet, which is why the market reacts the way it did on Tuesday.

So, let’s do a quick situational analysis: Dauman and Dooley are old pals of Redstone and were deputy chairmen at Viacom until leaving the company in 2000, shortly after it merged with CBS. After that they founded a private equity fund called DND Capital Partners, focusing on the media and telecommunications sectors with investments that included The Tennis Channel. Are they creative visionaries? It does not appear so. Are they skilled executives with an eye for financial deals? Yes. So if their background is in mergers and acquisitions and lately in private equity, not in media programming, does it not make sense that they are there to make deals? I would say so.

According to the Hollywood Reporter, Redstone said in a conference call this morning that when he ran Viacom together with Dauman and Dooley from 1996 to 2000, the company's stock tripled, marking the firm's best period ever on the market. Some Wall Street observers suggested that Redstone could look to take Viacom private as some have suggested in recent months amid weak stock performance. However, after the conference call - in which Dauman and Redstone both emphasized their desire to boost company shares in combination with investing their own money, as well as getting a performance-based compensation package - talk about a potential privatization deal subsided.

The bottom line is that the new leadership team seems to be hand-picked by Redstone to make deals. I think that they will aggressively pursue some hot media and Internet companies out there. But if that fails and the New Viacom stock keeps on lagging behind CBS, I don’t think that Redstone is a stranger to taking it private. He has shown these past weeks that he is all business and he will try to unlock value any way he can. After all, that was the reason he split Viacom and CBS in the first place.

http://biz.yahoo.com/bw/060905/20060905005560.html?.v=1