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[CBS  Loading...      ()   ] reported a 1.1% increase in second-quarter net income and .6 percent growth in revenue over the year ago quarter.

But the stock traded down on the news, Wall Street focused on CBS' outlook, which is increasingly negative, revealing greater weakness in advertising markets.

The company lowered its 2008 operating income projections from 3 to 5 percent growth, to a rate in the "low single digits." CBS, of all the media companies, is most exposed to the advertising industry, and its results reveal the advertising downturn to be even worse than analysts previously thought.

Here's how the divisions broke down. Radio is particularly weak, posting a 10 percent drop in revenue and a 16 fall in operating income, suffering from a radio industry-wide decline in ad spending. CEO Les Moonves announced that the company plans to sell 50 of its midsize-market radio stations, using the revenue to buyback stock. This is part of a plan to focus on the larger radio stations, where the company has mixed up formats, resulting in better ratings and revenues.

CBS TV business, including the network and Showtime, had a 2 percent increase in revenue, while earnings dropped 12 percent. Advertisers are pulling back, and CBS was particularly hurt by automotive, retail, and finical companies pulling back on their commercial spend. But on the conference call the company emphasized that political advertising will help results and that cost-cutting post-writers strike is helping as well. They also noted how strong the Showtime cable network is, adding 10 percent more subscribers.

The billboard business continues to be strong, revenue up 7.7 percent for the quarter, while operating income dropped 20 percent.

CBS' internet division is clearly a top priority -- next quarter the company will report a separate interactive segment, hoping to grow the division from $600 million in annual revenue to $1 billion in the next three years. CBS' recent $1.8 billion acquisition of CNET was clearly the topic at hand. Moonves said he expects it to add at least two percentage points to revenue and profit growth rates in 2008.

CBS is suffering from the terrible ad market, but you can't deny that the company has a 6.5 percent dividend yield, and a very strong balance sheet. BMO Capital Markets analyst Lee Westerfield told me today, that with that kind of cash on its balance sheet it's well positioned to weather the economic storm. I guess my question is: what will the media landscape look like when the storm's over?

Questions?  Comments?