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Thursday, February 5, 2009

WSJ NEWS ALERT: News Corp. Posts Loss on $8.4 Billion in Write-Downs


News Corp. posted a $6.42 billion loss for its fiscal second quarter, as it took a stiff charge to write down the value of its assets and as deteriorating advertising spending crimped its broadcast television and newspaper businesses.

The New York media company, which owns The Wall Street Journal, was dragged down by an $8.44 billion impairment charge to reflect the declining value of its TV licenses, acquisitions and other assets. Other media companies, including Time Warner Inc. and CBS Corp., have taken similar charges.

The dour results Thursday – coming on the heels of rocky earnings reports from Walt Disney Co. and Time Warner – underscore the accelerating pace of the ad downturn, particularly for traditional media. News Corp., which relies on ad sales for roughly one-third of its profits, saw earnings decline in all its major divisions except its cable-television networks, which continue to be a bright spot.

"While we anticipated a weakening, the downturn is more severe and likely longer lasting than previously thought," News Corp. Chief Executive Rupert Murdoch said in a statement. Mr. Murdoch said the company was working to cut jobs and restrain costs to withstand the tough operating climate. Among the reductions, The Wall Street Journal said about two dozen newsroom jobs were cut through layoffs, buyouts and elimination of open positions

News Corp.'s loss, which amounted to $2.45 a share for the quarter ended Dec. 31, compared to earnings of 27 cents a share, or $832 million, in the same quarter a year earlier. Excluding the impairment charge, operating income declined 42% as revenue fell 8.4% to $7.87 billion.

The results were released after the market closed. In 4 p.m. Nasdaq trading, News Corp. Class A shares were ahead 5% at $6.94. News Corp.'s stock price has fallen by two-thirds in the last year. Among the major U.S. media conglomerates, only CBS has faded more over the same period.

The biggest deadweight on operating income was a 72% decline at News Corp.'s TV-and-film production division, which produces TV hits such as "24," and "The Unit," and recent movies including "Marley and Me." News Corp. said the decline largely reflects tough comparisons to a year ago, when the company had strong DVD sales of "The Simpsons Movie" and the latest in the "Die Hard" series.

The television division – which includes the Fox broadcast network and local TV stations – posted less than one-tenth of the operating income of a year ago. Local television market has been a particular worry, with spiraling declines in ad spending from auto makers and dealers, and News Corp. said local TV station ad marketing slumped 19% in its second quarter.

Cable networks were a spot of strength, as they were for Time Warner on Wednesday. Operating income rose 27%, helped by higher licensing fees for Fox News Channel and the first profitable quarter for News Corp.'s startup Big Ten sports channel.

Operating income declined 9% at the unit that includes News Corp.'s newspapers, as ad spending dropped 10% at the company's U.K. newspapers and 4% as its Australian titles. News Corp. papers include the Times and News of the World in the U.K., and the Herald Sun in Australia. The downturns more than offset lower depreciation expenses and the inclusion of results from Journal publisher Dow Jones & Co., which News Corp. acquired in December 2007.

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