Huffpost Media

Fox News Bright Spot In News Corp Quarterly Earnings

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LOS ANGELES — Media conglomerate News Corp. reported third-quarter earnings in line with lowered Wall Street forecasts on Wednesday, leading Rupert Murdoch to say "the worst is over" for his company's movie, TV and newspaper businesses.

"There are emerging signs in some of our businesses that the days of precipitous decline are done and that revenues are beginning to look healthier," Murdoch, News Corp.'s chief executive, said on a conference call.

News Corp.'s net profit grew 1 percent $2.72 billion, or $1.04 per share, in the quarter through March. Most of that was due to one-time gains offsetting big drops at its Fox broadcast television and newspaper businesses, which include The Wall Street Journal.

Adjusted earnings per share were 61 cents, but 46 cents of that was due to a one-time non-cash tax benefit.

Excluding all the one-time items, News Corp. had first-quarter earnings of 15 cents a share, matching the average forecast of analysts polled by polled by Thomson Reuters. Analysts typically exclude one-time items from their estimates.

Revenue fell 16 percent to $7.37 billion, below analysts' expectations for $7.72 billion.

The New York-based company also maintained its outlook for the current fiscal year, which ends in June, saying operating profits will be down 30 percent from the $5.13 billion it posted in fiscal 2008.

Murdoch's relatively upbeat tone surprised several analysts.

Analyst Alan Gould of Natixis Bleichroeder Inc. said he was expecting the full-year operating profit forecast to factor in a larger 34 percent drop.

"We're pleasantly pleased to hear the outlook has not gotten any worse," Gould said. "What we're trying to determine is: Have things gotten better or have they just stopped going down? And it sounds like they've gotten a little bit better."

News Corp.'s shares rose 15 cents, or 1.4 percent, to $10.80 in after-hours trade after the earnings were released. Earlier Wednesday, shares rose 63 cents, or 6.3 percent, to close at $10.65.

News Corp. said the partial sale of its stake in digital technology company NDS Group Ltd. resulted in a $1.2 billion profit gain, and tax benefits added another $1.2 billion. The same quarter a year earlier had an offsetting $1.7 billion gain from trading News' stake in DirecTV for Liberty Media Corp.'s stake in News plus cash.

Adjusted operating income in the quarter through March fell 47 percent to $755 million.

The company also said it booked restructuring charges of about $55 million at its newspaper and book publishing divisions.

Operating profits at News' television segment, which includes its Fox broadcast network, plunged 99 percent to $4 million from $419 million a year ago amid a declining advertising market. Local TV ads fell 30 percent.

Profits at its newspaper division fell 97 percent to $7 million from $216 million a year earlier.

In a surprise success, operating profits from the filmed entertainment segment rose 8 percent to $282 million from $261 million, helped by rerun sales of TV productions such as "How I Met Your Mother" and "Boston Legal" and Fox Searchlight's distribution of "Slumdog Millionaire."

Murdoch declared the movie business was "anti-cyclical" and noted movie theater revenues are up more than 15 percent so far this year in the U.S. and Canada.

Profits at its cable segment grew 30 percent to $429 million from $330 million, driven by strong performance at the Fox News Channel.

Profits at the direct broadcast satellite division housing Sky Italia fell 35 percent to $63 million; magazine profits grew 4 percent to $97 million; while the book publishing unit HarperCollins posted a $38 million loss, compared to a $29 million profit a year ago.

The "other" segment, which houses the NDS investment and social networking site MySpace, posted a loss of $89 million, up from a $7 million loss a year ago. Fox Interactive Media, which contains MySpace, posted revenue of $187 million, down 11 percent from a year ago, as MySpace advertising revenue fell 16 percent and costs rose due to the continued rollout of the MySpace Music service.

Murdoch said he expected "major cost savings" at MySpace. He noted the hiring of former AOL CEO Jonathan Miller as News Corp.'s chief digital officer last month, and said he expected Miller to make changes that would foster growth, but declined to give specifics.

He also said he remained hopeful that consumers would start to pay for the company's journalism products online, where advertising revenue is smaller than for physical newspapers. The Wall Street Journal is one of the few papers to successfully charge for access to its Web site.

Murdoch noted that visitors to the Journal's Web site nearly doubled in April to 26.5 million from a year ago, and that 360,000 people downloaded its iPhone app in three weeks.

"As you can imagine, we will soon be making them pay for the privilege of accessing the world's best business news source," he said. "That it is possible to charge for content on the Web is obvious from the Journal's experience."