News Corp. Profit Rises on Cable, Sky Italia Sales (Update3)

By Gillian Wee

Aug. 8 (Bloomberg) -- News Corp., the media company controlled by Rupert Murdoch, said fourth-quarter profit rose 4.5 percent after Fox News collected more fees from cable providers and the Italian pay-television unit added customers.

Net income increased to $890 million, or 28 cents a share, from $852 million, or 27 cents, a year earlier, New York-based News Corp. said today in a statement. Profit beat the 27-cent average of 11 analysts' estimates compiled by Bloomberg. Sales rose 8.6 percent to $7.37 billion.

A 46 percent increase in earnings at the cable division helped make up for a decline at the film unit as Fox News renegotiated contracts with affiliates who carry the network. To expand the company's news business, Murdoch will start a business news channel in October and last week agreed to buy Dow Jones & Co. for $5.2 billion, adding the Wall Street Journal.

``News Corp. is showing the benefit of being a conglomerate,'' said Jason Helfstein, an analyst at CIBC World Markets who rates the shares ``outperform.'' ``It is now going to be about how they successfully integrate Dow Jones,'' he said.

Class A shares of News Corp., also the owner of 20th Century Fox and the MySpace social-networking site, rose 4 cents to $21 in extended trading after gaining 34 cents, or 1.7 percent, to $20.96 at 4:01 p.m. in New York Stock Exchange composite trading. They have fallen 2.4 percent this year.

Sales topped the $7.32 billion average of eight analysts' estimates compiled by Bloomberg.

Profit From Cable

Fiscal 2008 operating income growth will be in the ``low- teens,'' Chief Financial Officer David Devoe said on a conference call after results were released, without giving further details.

Profit at the cable network rose to $284 million in the period ended June 30, and revenue climbed 17 percent to $1.1 billion.

Fox News's 10-year contracts with cable providers ended in October, giving the network a chance to increase fees. Created in 1996, the channel overtook Time Warner's CNN as the most- watched news network in 2002 and now draws an audience twice as large as its rival in primetime.

Last week, a divided Bancroft family accepted Murdoch's $60-a-share offer for Dow Jones after more than three months of debate over his influence on news coverage at the Journal, which has a daily circulation of 2.06 million. Murdoch pledged to maintain editorial independence, winning enough support to complete the purchase when Bancroft family members controlling at least 37 percent of the company approved the deal.

Wall Street Journal

Murdoch said on the call today that the company plans to expand the Journal's non-business coverage to increase distribution in Europe and Asia and to compete with the New York Times. He said there are no plans to cut Dow Jones's workforce.

Pairing Dow Jones ``with the marketing power and global reach of News Corp. will vastly enhance its brand and extend its reach,'' Murdoch said of the publisher. He also said he plans to sell Dow Jones's local newspapers ``very quickly,'' without elaborating.

The purchase of Dow Jones, expected to be completed in the calendar fourth quarter, may bolster News Corp.'s planned financial news channel. The Fox Business Network will start broadcasting on Oct. 15, News Corp. said last month.

``They may need to use their vast resources around the world to help the Journal become a more general news gathering organization,'' said Richard Dorfman, managing director at Richard Alan Inc., an investment company in New York. ``Murdoch recognizes the real home run to be his is the Internet. It's why they put a new media type valuation on the Journal.''

Sky Italia, Movies

Profit rose at the Sky Italia satellite broadcast unit as it attracted more users. For the year ending June 30, the unit added a net 368,000 subscribers, for a total of 4.2 million. Profit rose 85 percent to $155 million after costs tied to soccer's World Cup dragged down earnings a year earlier. Sales at the satellite unit increased 15 percent to $865 million.

The television unit posted a 6.8 percent rise in sales to $1.43 billion, as higher revenue at the Fox network offset weaker results at MyNetworkTV and Star. Profit fell 4.5 percent to $385 million.

Sales and profit at News Corp.'s film division dropped as the quarter's releases ``Fantastic Four: Rise of the Silver Surfer'' and ``Live Free or Die Hard'' didn't match the ticket sales of last year's ``Ice Age: The Meltdown'' and the third installment of ``X-Men.'' Sales fell 19 percent to $1.45 billion and profit slumped 47 percent to $106 million.

The book unit had a profit of $21 million, compared with a loss of $6 million a year earlier. Sales rose 15 percent to $295 million.

Newspapers

The newspaper unit's profit rose 19 percent to $203 million. Earnings at News Corp.'s magazines and inserts units gained 25 percent to $81 million, as revenue rose 6.6 percent to $275 million.

Losses narrowed at the `Other' segment, which includes Fox Interactive Media, to $17 million from $82 million on growth in advertising and search revenue at MySpace. Revenue for the segment jumped 89 percent to $753 million.

Profit in the year-earlier period was boosted by a gain of $134 million related to the sale of Sky Radio Ltd. in the Netherlands and Germany.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net .

Last Updated: August 8, 2007 21:10 EDT

		Email this article Printer friendly format