[opendtv] News: News Corp. Loss Shows Trouble at Dow Jones
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Fri, 6 Feb 2009 10:10:19 -0500
News Corp. Loss Shows Trouble at Dow Jones
By TIM ARANGO
Published: February 5, 2009
It seems that even Rupert Murdoch isn't immune to the downturn
battering media companies.
The News Corporation, the media empire controlled by Mr. Murdoch,
said Thursday that it lost $6.4 billion in its second quarter as
profit fell sharply at its television and movie units. The company
also took a large write-down of $8.4 billion, about $3 billion of
which reflected a decline in the value of the company's newspaper
unit, which includes Dow Jones, the publisher of The Wall Street
Journal. Many media analysts believed that News Corp. overpaid when
it bought Dow Jones just over a year ago for about $5 billion, and
the write-down indicates that it lost significant value.
The announcement followed a huge write-down at another conglomerate,
Time Warner, last month and a sharp decline in earnings at the Walt
Disney Company this week.
Excluding the write-down, the News Corporation had income of $320
million, or 12 cents a share, significantly below the Wall Street
expectations. Analysts had forecast earnings of 19 cents a share,
according to Thomson Reuters.
Total revenue was $7.9 billion, compared with $8.59 billion a year
earlier and the $8.4 billion analysts expected.
Mr. Murdoch, the chairman and chief executive, said the economy had
deteriorated faster than anticipated in the last three months.
"Our results for the quarter are a direct reflection of the grim
economic climate," he said. "While we anticipated a weakening, the
downturn is more severe and likely longer-lasting than previously
thought."
He also suggested job cuts were in the offing, saying, "We are
implementing rigorous cost-cutting across all operations and reducing
head count where appropriate."
Among the company's assets are the Fox broadcast network, Fox News,
the 20th Century Fox movie studio and newspapers like The New York
Post and The Wall Street Journal, as well as the social networking
site MySpace.
Reflecting a sharp downturn in advertising across the broadcast
television industry, the company had its steepest drop in the
television unit, where income fell to $18 million, from $245 million
a year earlier. The company's television stations had a 44 percent
decline, "reflecting a significant overall weakening of the local
advertising markets despite increased political advertising
revenues," the company said in a statement. The film division had
income of $112 million compared with $403 million a year earlier.
One bright spot was cable networks, including Fox News. The division
reported income of $428 million, up $91 million from the period a
year earlier. Fox News increased its operating income by 32 percent.
When times were better, Wall Street was more willing to ignore Mr.
Murdoch's affinity for newspapers and high-priced deals like the
acquisition of Dow Jones.
But the company has been punished by the market more than most of its
peers. The News Corporation is down 52 percent over the last six
months, and 70 percent off its 52-week high. The stock closed
Thursday at $6.94, up 33 cents. (The earnings report was released
after the stock market had closed.)
Time Warner, Viacom and Disney are all down less than the News
Corporation, while CBS is down more, off 65 percent over the last six
months.
Mr. Murdoch declined to comment on the status of talks over a new
contract for Peter Chernin, the company's president, whose deal
expires in the summer. Mr. Murdoch said the talks were "private" and
"confidential." Last quarter, he described them as "constructive" and
"friendly."
In recent weeks, some Wall Street analysts who cover the News
Corporation have lowered their earnings forecasts for the company.
For example, on Jan. 23 Anthony DiClemente at Barclay's Capital
dropped his estimate for the company's 2009 earnings by 22 percent.
Another analyst, Michael Nathanson of Sanford C. Bernstein & Company,
suggested this week seeing the company in terms of good assets and
bad assets.
"The potential rescue of financial stocks by placing assets into
'good banks' and 'bad banks' has captured our imagination," he wrote.
"Why couldn't media companies follow this strategy?"
Rich Greenfield of Pali Research also picked up the theme, writing,
"our fear is that News Corp. is so committed to its existing
businesses that it will be willing to sustain businesses that slip
into negative profitability for years." The New York Post loses tens
of millions of dollars a year.
Mr. Murdoch remains sanguine about newspapers, saying, "I'm extremely
happy with all our newspapers." He is trying to cut losses at The
Post and said Thursday that it would combine its back office with The
Journal's to save about $7 million a year.
Also on Thursday, in a concession to sharply lower advertising, The
Journal eliminated about 25 newsroom jobs - the paper declined to
give a precise number - out of roughly 760. The cut is minor compared
with the shrinkage at most newspapers. But it stands in contrast to
Mr. Murdoch's talk in 2007 of a significant newsroom buildup and his
expansion since then in the ranks of Dow Jones Newswires.
The Journal's reduction includes 14 layoffs and an unspecified number
of buyouts. The largest number of positions eliminated was in the
group of reporters and editors who cover fashion and retailing.
Richard Pérez-Peña contributed reporting.
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