Wall Street unshaken by departure of Roth

The exit of Joe Roth as chairman of 20th Century Fox caused nary a stir of interest among investors at parent News Corp.

Wall Street analysts greeted the news–the second departure of a studio head in as many weeks– with a yawn. The move was somewhat expected since Roth was operating without a contract since July and there were constant rumblings he would leave.

Last week, Paramount chief Brandon Tartikoff resigned his post unexpectedly to care for his ailing daughter.

The quick action by News Corp. chairman Rupert Murdoch to name Peter Chernin as a replacement helped calm the market, say observers. The stock closed down 50 cents to $ 36.25, on lower trading volume.

“It wasn’t a real surprise,” said Jessica Reif, media analyst at Oppenheimer & Co. “Obviously, Rupert is well prepared and had a successor ready. This is different than Tartikoff. One, he resigned suddenly. With Roth, this has been expected. With Chernin coming in, it will be less disruptive.”

This is the second upset at Fox since last February’s resignation by Barry Diller as chairman-CEO of Fox Inc. That action, coupled with Roth’s ongoing contract negotiations, readied analysts for another management change.

The assumption that Roth and Murdoch couldn’t agree on a new compensation package reinforced the tough-on-costs message News Corp. has been giving Wall Street.

“Ever since Diller retired, Murdoch has had a hand in managing and the message has been telegraphed” to keep budgets down, said John Riedy at Smith Barney, Harris Upham & Co.

Analysts were swift to caution that Roth’s departure won’t shake the foundations of News Corp. In fiscal 1992, ended June 30, the diversified media company received only 24% of revenues and just 8% of operating income from filmed entertainment.

News Corp. is expected to report first-quarter results on Thursday. For the current fiscal year, Reif estimates the Fox film unit to contribute 9% of operating profits in 1993 and and 10% in 1994.

Still, Roth leaves a legacy of strong earnings and a healthy slate of films to carry the film unit into the next two quarters.

He made fiscal 1991 a record-setter, with “Home Alone.” For that year, 20th Fox increased its operating income to $ 185 million, according to Reif, from $ 85 million the year before. This past year’s results were more mixed, with low-budget winners like “My Cousin Vinny” and questionable extravaganzas like “Alien3.”

So far, though, analysts see Roth’s handiwork in Christmas and into calendar 1994, led by “Home Alone 2” and “Hoffa.”

The question, said one large institutional shareholder, is what happens next Christmas.

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