News Corp profit off 30%, slashes outlook3 min read . Updated: 06 Nov 2008, 01:35 PM IST
News Corp profit off 30%, slashes outlook
News Corp profit off 30%, slashes outlook
Los Angeles: News Corp. reported a 30% drop in quarterly profits on Wednesday and the media empire run by Rupert Murdoch said its operating profit for the current fiscal year will drop because of the U.S. dollar’s strength overseas and a slowdown in advertising revenue.
Company executives said they expected a “low to mid-teens" percentage drop in operating profits in the fiscal year that began in July. The forecast was a major departure from analysts’ expectations of profit growth.
Murdoch, the company’s chief executive who controls more than a third of its shares, said the forecast was a “clear reflection of the economic downturn, which we believe will persist through fiscal 2009."
He added that the company is now “intensely focused on cost reductions."
Cost cutting moves include outsourcing the work of 10 of 17 plants that print the Wall Street Journal within two years, saving $3 million per plant annually, and merge the back-office functions of the Journal and the New York Post.
The fiscal 2009 forecast was based on $5.13 billion in operating profits from continuing operations in 2008.
The gloomy news came after the company said net income for the first quarter that ended 30 September dropped to $515 million, or 20 cents per share, from $732 million, or 23 cents per share, a year ago.
Revenue rose 6.3% to $7.5 billion.
Murdoch said one-third of the fiscal 2009 profit downgrade was based on predictions of lower income from overseas operations when translated into U.S. dollars, and much of the rest was from a slowing ad market.
Chief Operating Officer Peter Chernin told analysts that there were even signs of weakness in the DVD market, where film studios, like its Twentieth Century Fox, derive most of their profits.
“In the last three or four weeks, we are beginning to see quite a bit of softening in the DVD business," he told analysts and reporters on a conference call.
Murdoch said the uncertainty meant he would put his appetite for dealmaking on hold, even with the $5.5 billion in cash on the books. He said the company had no talks to combine with Yahoo Inc., which was left without a new ad partner Wednesday when Google Inc. backed out of a deal in order to avoid an antitrust suit by the U.S. Justice Department.
“We don’t want to do anything until there is a great deal more visibility in the market," Murdoch said. “We’ll be ready for it if the right thing comes."
Analysts surveyed by Thomson Reuters had expected first-quarter earnings per share to fall two percent to 23 cents, on revenue of $7.7 billion, 8% higher than a year earlier. They had predicted fiscal 2009 earnings per share would increase two percent to $1.17 as revenues grew three percent to $33.9 billion.
Much of the first-quarter weakness had to do with a $447 million write-off associated with German pay TV operator Premiere AG.
Operating income fell nine percent to $953 million, compared to the $1.1 billion reported a year ago.
Movie revenue from Twentieth Century Fox and other studios fell 20% to $1.3 billion in the quarter and television revenue fell 15% to $974 million, partly affected by the sale of eight Fox-affiliated TV stations.
Ad revenue at the remaining TV stations declined 17%.
But cable network programming revenue rose 19% to $1.3 billion, on advertising and affiliate revenue gains at Fox News Channel, FX and the Big Ten Network.
Revenue from newspapers and information services rose 37% to $1.7 billion after the acquisition of Dow Jones & Co., which owns the Wall Street Journal. Dow Jones, which News acquired for $5 billion last December, had a $4 million operating loss, but the overall newspaper group’s operating profit rose 44% to $134 million due to lower depreciation expenses.
The Fox Interactive Media group, which owns MySpace, saw revenue grow 17% to $220 million, but the company said profits did not increase because of higher development spending. The “other" category that contains the MySpace group posted an operating loss of $101 million, compared to a $43 million loss a year ago.
Operating profit from Italian satellite TV unit Sky Italia tripled to $165 million from $48 million as it added 359,000 subscribers to more than 4.6 million.