News Corp.’s ‘Titanic’ quarter

Operating profits up 10%

NEW YORK — “Titanic’s” boffo box office buoyed quarterly results at Rupert Murdoch’s News Corp., sending operating profits up 10% to $319 million as revenues climbed 11% to $3.2 billion.

Operating profits at lead division Fox Filmed Entertainment, benefiting directly from “Titanic’s” record-smashing $1.1 billion-and-counting in ticket sales, soared 127% during the quarter ended March 31 to total $145 million, while revenues rose 27% to $1.2 billion.

The studio’s performance was all the more impressive, in that year-earlier figures were buttressed by the theatrical re-release of the “Star Wars” trilogy and by a sales spike in video sales for “Independence Day.”

Although News Corp.’s earnings exceeded Wall Street’s expectations by about 17%, they weren’t nearly as sterling on a per-share basis. The number of additional shares issued over the past year to buy Heritage Media and New World Communications actually diluted earnings per ADR to 32¢, compared with 33¢ per ADR in the year-earlier quarter.

TV sector soft

Taking some of the luster from the film division, led by 20th Century Fox, was a soft performance by News Corp.’s U.S. television division. Whatever gains were posted by the division’s Fox Broadcasting Co. network and the Fox Television Station Group got dragged down by startup Fox News Channel.

Overall, the TV division posted a 3% decline in operating income to $102 million, as revenues dipped 2% to $732 million. But even here, the company beat expectations in that the network and the station group were competing against the Olympic broadcast on CBS during this quarter and against year-earlier numbers that benefited from a Fox-broadcast Super Bowl.

News Corp. was especially proud of FBC’s taking the February sweeps among the 18-to-34 set and finishing second among 18-to-49-year-olds, while its “Ally McBeal” broadcast weighed in as the season’s most successful new primetime show.

The TV division also noted that the production efforts of 20th Century Fox Television bode well for syndication not only for programs produced for FBC but for such hits as “Buffy the Vampire Slayer,” “Dharma & Greg” and “Two Guys, a Girl and A Pizza Place” that are carried by other networks.

Fox News big spender

Offsetting positive developments in the TV division, including an 8% earnings pop by the station group, was the Fox News Channel, which not only appeared on the income statement for the first time but spent heavily to bring its subscriber total to 31 million. A News Corp. executive nonetheless deemed FNC’s performance more than acceptable for not bringing down the entire division.

For investors worried about Murdoch’s acquisitive ways, even when financially stretched, the quarter still had room for improvement.

The share buyback program News Corp. committed itself to a half-year ago appears off to a slow start, for example, as only $60 million has been spent to take shares of the Australian-based company off the market — chump change compared with the $1 billion News Corp. said it would spend.

Newspapers down

In other areas, News Corp. posted a flat newspaper business, citing both pricing pressures in England and a 12% devaluation, for currency reasons, in an otherwise robust Australian newspaper market. By comparison, the magazine and insert division flourished, with operating income rising 15% to $114 million as revenues ratcheted up 34% to $456 million.

All said, as one insider put, “It was a ‘Titanic’ quarter” — one that raises the bar even for the three “Star Wars” prequels that 20th Century Fox recently agreed to distribute starting next year.

News Corp.’s announcement came out after the closing of the stock market, where the company’s shares fell 38¢, or 1.35%, to close Wednesday at $27.38.

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