News Corp Posts Loss on Writedown, Misses Forecasts

Rupert Murdoch's News Corp posted its first quarterly net loss in three years after taking an $8.4 billion writedown for the value of its Dow Jones acquisition, broadcasting licenses and other assets.

Excluding the charge, the media conglomerate's results also missed Wall Street expectations, as the recession exacerbated the decline in newspaper advertising revenue and hit its other media properties.

Murdoch, the company's chairman and chief executive, said News Corp. would slash costs and indicated layoffs were in store.

"The downturn is more severe and likely longer lasting than previously thought,'' Murdoch said in a statement. "We are implementing rigorous cost-cutting across all operations and reducing head count where appropriate.''

He added on a conference call with analysts, "It is the worst global economic crisis since News Corp was formed 50 years ago.''

In extended trading, shares of News Corp fluctuated just above and below their Nasdaq session close of $6.94.

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The company said its net loss was $6.41 billion, or $2.45 a share, for the fiscal second quarter ended Dec. 31. That compared with a profit of $832 million, or 27 cents a share, a year earlier.

Excluding the impairment charge, News Corp's December quarter profit was 12 cents per share, lower than the average analyst forecast of 19 cents, according to Reuters Estimates.

Revenue fell 8.4 percent to $7.87 billion, also below the average Wall Street forecast of $8.35 billion.

Unknown / Oliver P. Quillia for cnbc.com

News Corp wrote down $3.6 billion in goodwill, much of which is likely for Dow Jones, the owner of The Wall Street Journal business newspaper. Murdoch bought Dow Jones for $5.6 billion in 2007, a 65 percent premium to its then market value.

It wrote down $4.6 billion in broadcast licenses from the U.S. Federal Communications Commission and $185 million in newspaper assets, which include the New York Post.

News Corp also owns the Fox television network, 20th Century Fox movie studio, the MySpace online social network, satellite TV network Sky Italia, and newspapers throughout the United States, Britain and Australia.

"It's advertising and DVDs,'' said Miller Tabak + Co analyst David Joyce. "They're more exposed to advertising than you want to be in this kind of climate.''

Cable Bright Spot

News Corp's filmed entertainment unit saw operating profit fall to $112 million from $403 million a year ago, when it had a slate of strong films including "The Simpsons Movie'' and ''Live Free or Die Hard.'' The most recent quarter included the theatrical release of the hit film "Slumdog Millionaire.''

Newspaper and information services saw operating profit fall to $179 million from $196 million. The television segment saw operating profit fall to $18 million from $227 million.

One bright spot was cable network operating profit, which rose $91 million to $428 million on strength at the Fox News Channel, the Big Ten Network and Fox International Channels.

The unit that includes Fox Interactive Media posted an operating loss of $38 million, in part due to the launch of MySpace Music.

Murdoch said it was impossible to be completely prepared for an economic downturn of this magnitude but that the company hoped to recapture a large percentage of advertising revenue when it returns.

As expected, News Corp cut its fiscal 2009 operating income forecast, now seeing a decline of 30 percent versus its previous forecast for a fall in the mid-teen percentage.

This week, Time Warner posted a $16 billion quarterly net loss because of a writedown, and Walt Disney posted a sharply lower-than-expected profit in part because of poor TV ad and DVD sales.

—CNBC.com staff contributed to this report.

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