* Fiscal Q2 adj EPS 44 cents beats estimates by a penny
* Revenue up 5 pct to $9.43 billion on strength of cable
* Warns of weakness at Fox network, SKY Italia, Australian
By Jennifer Saba
Feb 6 Rupert Murdoch's News Corp on
Wednesday reported higher quarterly revenue and profit on strong
growth at its cable assets including its Regional Sports and FX
But the rosy quarterly figures - revenue and profit beat
expectations - masked troubles at three of News Corp's
properties, most notably Fox.
The "fourth network," as Fox is sometimes called, has seen
ratings weaken, with more softness at "American Idol" and
"It's no secret (Fox) had a tough fall," said News Corp
President and Chief Operating Officer Chase Carey on a call with
analysts, pinning the blame on both programming and a sports
line up that fell short of expectations.
Carey, for instance, specifically cited the fact that the
San Francisco Giants' World Series sweep of the Detroit Tigers
deprived Fox of three high profile nights of live event
News Corp's other trouble spots were overseas, with SKY
Italia experiencing a drop off in subscribers because of that
tough economy and declines at its Australian newspapers - the
early seeds of the News Corp empire.
Carey said Sky Italia's performance so far this year is
tracking $100 million below expectations and $150 million lower
than last year's performance. He said News Corp plans to take
$200 million out of the unit's cost base over the next two to
Shares of News Corp, whose global assets also include The
Wall Street Journal and film studio Twentieth Century Fox, fell
3 percent in after-hours trading after closing at $28.22 on
The media conglomerate said revenue rose 5 percent to $9.43
billion for the quarter that ended in December. Analysts were
expecting revenue of $9.28 billion, according to Thomson Reuters
News Corp is preparing to separate its faster growing
entertainment assets from its newspapers, a move that has been
greeted with enthusiasm from investors who have driven up the
stock almost 50 percent year-over-year.
Some details about the new publishing operations have been
released, including naming Robert Thomson, a Murdoch confidant
and the former top editor at The Wall Street Journal, as CEO.
More financial information is expected to be released in the
next month or so and the split is still on track to be completed
by the end of the year, News Corp executives said on the call.
Beyond that, however, no other information about the split was
provided and analysts did not ask any questions about it.
Despite the problems in Australia, the division that
operates the company's newspapers and book publishing assets
reported an operating income increase to $234 million from $218
million in the same period a year ago, credited in part to the
launch of the Sunday edition of its British tabloid The Sun.
ON MALONE, THE LA DODGERS
Murdoch was once again absent from the earnings call but his
son James Murdoch, the company's deputy chief operating officer,
fielded questions including the latest cable news out of Europe.
Rupert Murdoch's long-time rival John Malone on Tuesday
inked a deal through his Liberty Global to buy British
cable group Virgin Media - a potential threat
to News Corp's dominance in pay-TV in Europe and its BSkyB
network in the U.K.
But James, who also serves as a director at BSkyB,
downplayed any competitive threat.
"Across Europe we compete as well as work with Liberty
Global. I don't think there is really a big change to the
landscape there. We're pretty pleased with momentum and pleased
with the strategic position of the business," he said.
Indeed, News Corp's cable assets have turned in strong
growth and this quarter was no exception. Operating income
increased 7 percent to $945 million. Advertising revenue at its
domestic cable channels rose 8 percent.
"You are getting a massive out performance of growth at the
cable group and we think that is compelling," said RBC Capital
Markets analyst David Bank.
Also attractive is News Corp's ambitions of expanding its
sports programming. The company recently took a 49 percent stake
in the network that airs the New York Yankees baseball team and
snapped up a regional sports network in Ohio, Bank noted.
News Corp's moves to acquire sports programming rights is
widely believed to be the prelude to its launching a national
sports network to compete with Disney's ESPN.
On that point, Carey sheepishly said that while News Corp
hasn't made an official announcement, "you could call it the
world's worst kept secret."
"We think sports is in a huge arena that has room in it to
build really attractive businesses," he added.
Carey also took the opportunity to take a shot at Time
Warner Cable, saying that company's recent deal for the
television rights to the LA Dodgers, reportedly valued at $6
billion-$7 billion, was "too rich for our blood."
News Corp said that net income was $2.38 billion or $1.01 per
share, compared with $1.06 billion or 42 cents per share in the
same period a year ago.
Excluding special items including costs related to the phone
hacking scandal in the U.K., earnings per share was 44 cents,
ahead of analysts' estimates by a penny.