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News Corp. Suffers Staggering $6.4 Billion Loss

News Corp

RYAN NAKASHIMA   02/ 5/09 08:02 PM ET   AP

LOS ANGELES — News Corp., the global media giant controlled by Rupert Murdoch, said Thursday it lost $6.4 billion in its most recent quarter because of a massive write-down in the value of its assets.

The New York-based company, which owns The Wall Street Journal and the Fox broadcast network, also forecast a 30 percent drop in operating profits for the fiscal year to June from a year ago, when it earned $5.13 billion.

The forecast was a sharp downgrade from November when it expected "low to mid-teens" percentage drop for the year.

News Corp. shares shed 55 cents, or 7.4 percent, to $6.90 in after-hours trading.

Analyst David Bank of RBC Capital Markets said Wall Street was expecting the bad news given similar announcements by other media companies.

"It was bad, but it wasn't out of left field," Bank said. "It was probably more of a confirmation of what we expected rather than a new set of information."

Murdoch, the chief executive who controls more than a third of the company's shares, blamed the bleak outlook on falling advertising revenue and the impact of weak consumer sentiment on DVD and book sales.

He told analysts the results were "a direct reflection of the recession that is deeper than anyone predicted" and called it the worst global economic crisis News Corp. had seen since its founding more than 50 years ago.

"We are doing everything we possibly can to position ourselves to emerge stronger when the economy returns to some semblance of normalcy," he said.

News Corp. also said it had cut 800 positions across its Fox properties, including the 20th Century Fox movie studio, in moves that it expected to save $400 million a year. The Wall Street Journal said Thursday it is cutting about two dozen newsroom positions.

Murdoch added that the company was aiming to save more than $10 million a year by combining the backroom operations of its newspapers in Australia, and at The Wall Street Journal and New York Post, while renegotiating distribution contracts in the U.S.

News Corp.'s second-quarter loss amounted to $2.45 per share. In the same period a year ago it had net income of $832 million, or 27 cents per share.

Excluding the write-down, which amounted to $6.7 billion after taxes, the company said net income in the three months to Dec. 31 was $320 million, or 12 cents per share.

Revenue fell 8.4 percent to $7.87 billion.

Analysts polled by Thomson Reuters had expected, on average, earnings of 19 cents per share on revenue of $8.39 billion.

Movie and TV studio revenue fell 25 percent to $1.49 billion, and operating profit sank 72 percent to $112 million. Key film releases such as "Marley & Me" and "The Day the Earth Stood Still" drove up marketing costs, while last year's holiday quarter had a better home-video release slate, including "The Simpsons Movie" and "Live Free or Die Hard," the company said.

Newspaper revenue grew 6 percent to $1.51 billion but operating profit slipped 9 percent to $179 million. A $59 million profit contribution from The Wall Street Journal publisher Dow Jones & Co., which News Corp. bought in December 2007, was offset by lower ad revenue in the U.K. and Australia.

Revenue from the television division, which includes the Fox TV stations and Fox network, fell 17 percent to $1.27 billion as local ad revenues shrank despite higher political ad sales. Operating profits plunged 93 percent to $18 million, from $245 million a year ago.

Cable network programming revenue grew 10 percent to $1.36 billion, led by Fox News Channel's coverage of the U.S. presidential race.

Direct broadcast satellite revenue fell 3 percent to $922 million, magazine and insert revenue grew 4 percent to $284 million, and book publishing revenue from HarperCollins fell 25 percent to $305 million.

Revenue from other sources, including the social networking site MySpace, fell 7 percent to $743 million. The "other" group swung to a $38 million operating loss from a $23 million gain a year ago, hurt partly by the cost of launching MySpace Music.

News Corp. also said Thursday it increased its cash holdings by $800 million to about $4.5 billion after reducing its stake in digital technology company NDS Group Ltd. in a going-private transaction.

Murdoch said that was enough cash to make debt payments for seven years.

Analyst Laura Martin of Media Metrics said the hefty amount of cash meant Murdoch might go looking to buy other assets.

"As soon as Rupert's sure he doesn't need (the cash) I expect him to make a clever acquisition," she said.

Responding to a reporter's question, Murdoch said that didn't include the debt-strapped New York Times Co. His history running tabloid papers had already ruffled feathers when he bought The Wall Street Journal.

"I have no desire to be a bigger public enemy or target," he said.

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Filed by Julie Satow  |