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Paramount didn't follow Warren Buffett's advice: Morning Brief

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A few days removed from Warren Buffett's annual party in Omaha, I am left thinking of this quote from one of the CEOs atop the billionaire investor's long-time holdings.

"His advice to me was to be transparent. He may not like what you are going to tell him, but as long as you are not surprising him you will be OK," American Express Stephen Squeri told Yahoo! Finance.

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Execs at media giant Paramount — where Buffett is a 15.3% holder after building an initial stake in Nov. 2022 — must not have gotten that sage advice from the OG investor.

And that calls into question what the Oracle will do next with his ownership stake.

Last week, Paramount — which has made major progress on the streaming subscriber front with Paramount+ — surprised the heck out of investors like Buffett.

Paramount posted a first quarter direct to consumer business loss of $511 million. A year ago, Paramount's direct to consumer business lost $456 million.

That's a lot of losses for a business like Paramount+, which had 60 million subscribers exiting the first quarter. But it underscores how costly it is to produce content such as the hit Paramount show Yellowstone while also staying sharp on pricing to compete with fellow streamers Netflix, Disney, Amazon, etc.

It's just a brutal business to be in.

The fact ad revenue in Paramount's traditional TV business is under pressure in part to macroeconomic conditions only amplifies the losses at the streaming business.

"Paramount is still moving through a difficult combination of heavy investments to try to offset structural decline in a weak cyclical top-line environment," said Macquarie Research analyst Tim Nollen in a client note.

Nollen maintained an under-perform rating on Paramount's stock.

The company then surprised investors again — such as Buffett — by slashing its quarterly dividend to $0.05 from $0.24.

Buffett loves dividends. He loves collecting the big fat checks from a Coca-Cola and aforementioned AmEx.

Now he stands to collect smaller quarterly checks from Paramount, provided he still owns the stock.

Buffett is likely to release a 13f filing early next week disclosing movements in his vast stock portfolio. If Paramount isn't in there — or the stake has been reduced — Paramount investors could feel more pain.

Buffett didn't exactly voice support for the company at the Berkshire Hathaway annual meeting.

“It’s not good news when any company cuts its dividend dramatically," Buffett told a packed CHI Health Center.

No it's not, Warren.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com

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