News Corp profit slides, Murdoch says worst is over
NEW YORK (Reuters) - News Corp posted a 47 percent drop in operating income on Wednesday as advertising revenue declined, but Chairman Rupert Murdoch said the worst effects of the recession are behind the media company.
"It is increasingly clear that the worst is over," he said, echoing executives at other media conglomerates such as Walt Disney Co and Viacom Inc. "There are emerging signs in some of our businesses that the days of precipitous decline are done," Murdoch said.
Profit and revenue slid in News Corp's fiscal third quarter because of lower ad sales at its television stations and newspapers. The company maintained its earlier forecast that operating income would fall 30 percent in fiscal 2009.
While still a decline, the outlook reflects stabilizing ad sales and "other bright spots" in different parts of the business, Murdoch said on a conference call with analysts to discuss News Corp's results.
News Corp reported third-quarter net income of $2.7 billion, or $1.04 a share, compared with $2.7 billion, or 91 cents a share, in last year's quarter. The results included a gain of $1.2 billion for selling an ownership stake in NDS Group Plc and a $1.2 billion non-cash tax benefit.
Operating income fell 47 percent to $755 million.
Revenue fell 15.7 percent to $7.37 billion, short of the average analyst forecast. The recession damaged the company's heavily advertising based-businesses around the world which include Dow Jones and The Wall Street Journal, the Fox TV network, and satellite TV network Sky Italia.
"The notion is that even though they missed, they missed on the divisions that have been generally underperforming anyway," said Miller Tabak analyst David Joyce. "The market's getting more confident that a rebound's starting to form."
Operating income in News Corp's television and newspaper segments fell more than 95 percent in the quarter, while cable network programing rose 30 percent.
To the relief of analysts displeased with Murdoch's portfolio of newspapers, he said he has no plans to buy more. He has been mentioned as a possible suitor for The New York Times Co.
Murdoch also dismissed buying Internet company AOL, which parent Time Warner Inc plans to spin off. "We've never really thought about it, to be honest," he said. "They're always talking ridiculous prices."
News Corp's "other" segment reported an operating loss of $89 million, due in part to lower ad revenues and higher costs for its MySpace music project.
Online social network MySpace has ceded ground to rival Facebook in terms of worldwide users. In the United States, Facebook has 54.5 million monthly unique visitors, compared with 76 million for MySpace, according to comScore data released in March.
MySpace is profitable, Murdoch said, but he wants to make it "really profitable." He said MySpace and Fox Interactive Media will undergo "major cost savings," but did not say if that would involve layoffs.
News Corp's papers are also working on digital strategies. Some of the company's general interest newspapers, beyond the subscription-based Journal, could begin charging for access to their websites in the next 12 months, Murdoch said.
His comments came on the day Amazon.com Inc released its Kindle DX electronic reader with a wide screen for reading digitally formatted newspapers.
Murdoch said NewsCorp is not an "appliance maker" and would not make its own digital readers.
Meanwhile, the publishing business has room to improve. Revenue will fall 22 percent at Dow Jones this year, and that he would find $200 million in cost cuts at the company by this time next year. Third-quarter ad revenue at the Journal was down 33 percent, Murdoch said.
Murdoch has been saving money through job cuts throughout News Corp. He said staff levels are down by about 3,000 so far, affecting "very few journalists or creative personnel."
He also has been shaking up executive ranks, putting that into action since Chief Operating Officer Peter Chernin said he would leave at the end of the company's fiscal year this June. Today's analyst and media call was his last.
News Corp shares were flat at $9.45 in after-hours trading.
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