Murdoch girds bird bid, disses Echostar
NEW YORK — Rupert Murdoch came out swinging Thursday, blasting the “desperate guesses” and “phantom debate” swirling around the battle for Hughes Electronics and assuring the press and Wall Street that News Corp.’s offer is far superior to a rival bid by EchoStar.
“Much of what you’ve read and heard has been wildly off the mark. Much has been based on the assumption that we are offering Hughes shareholders no premium and few synergies. These assumptions are dead wrong,” he insisted during a conference call to discuss his company’s latest financial results.
The numbers were mixed, as a powerful year-end finale for Fox Entertainment didn’t stop parent News Corp. from sliding into the red as a weak ad market squeezed TV and newspapers.
Filmed entertainment pulled Fox, which houses News Corp.’s U.S. showbiz assets, into the black with the subsid posting a surprise $174 million profit for the fiscal fourth quarter ended in June from an $11 million loss the year before. The Street had expected break even.
Company cited ancillary revenue from “Cast Away” and “X-Men,” plus easier comparisons, as last year’s figures included the flop “Titan A.E.” and charges from shuttering Fox Animation Studios. Summer theatrical releases “Moulin Rouge,” “Dr. Dolittle 2” and “Planet of the Apes” will help line the studio coffers in fiscal 2002.
Fox Entertainment revenue dipped to $2.2 billion from $2.5 billion. Parent News Corp. swung to a $265 million net loss for the quarter from a $71 million profit. Excluding one-time items, profit fell 22% to $145 million. Quarterly revenue eased 12% to $3.4 billion.
For the full year, News Corp. reported a loss of $445 million, vs. a $1.2 billion profit. Excluding one-time items, profit of $691 million was down 13%. Revenue slipped to $13.8 billion from $14.1 billion.
At Fox, a heavy accounting charge of nearly $500 million pulled the unit to a $288 million loss from a $145 million net profit for the prior year. Revenue narrowed to $8.5 billion from $8.6 billion.
It’s been a lively year for News Corp. as execs noted victories like the purchase of Chris-Craft, the lucrative sale of Fox Family, the success of Fox News and the ratings turnaround at the Fox broadcast net.
Hughes talks go on
But Murdoch also called the past year one “of necessary patience” as negotiations with Hughes drag on — and on.
Asked about the delay, Murdoch said, “They are a very large company with a very large number of lawyers.” News Corp. chief operating officer Peter Chernin said complex regulatory and tax issues take “a lot more than negotiations across a table. We’re hoping we’re near the end of the process.”
The execs said News Corp. is, in fact, offering a healthy premium for Hughes along with massive synergies that would come with combining Hughes satcaster DirecTV with News Corp.’s worldwide satellite service in Europe, Asia and Latin America. They see huge cost savings rolling out digital services and buying programming in bulk. “The majority of this wealth creation will flow directly to Hughes shareholders,” Murdoch promised.
He declined, however, to elaborate on the financial details of News Corp.’s offer, which has never been made public.
EchoStar, which was rebuffed by Hughes earlier in the year, made a highly public, unsolicited bid for Hughes several weeks ago worth about $30 billion in stock.
Murdoch acknowledged he’d approached EchoStar chairman and CEO Charlie Ergen months ago to float the idea of a merger of their two companies as an alternative to Hughes, but the EchoStar chief “made it very clear he had no plans to sell.”
Ergen’s latest move wasn’t a total surprise, he said.
“I have a friendly relationship with him. I asked him if he were lying in the weeds, waiting to strike. He made a joke that he was leaving all his options open. He didn’t make a secret of it.”
Ergen’s trouble spot in a DirecTV deal is likely to be regulators hesitant to greenlight a merger between the nation’s only two satellite providers of any heft. A deal would leave subscribers who can’t get cable with only one choice of provider. “That’s something we will be arguing fairly spiritedly,” Murdoch said.
Ergen wants regulators to consider the entire pay TV market.
As for News Corp.’s numbers:
- Quarterly losses in filmed entertainment fell sharply to $4 million from $53 million loss the year earlier. For the full year, operating profit jumped 78% to $271 million. Unit includes 20th Century Fox Television, which has 24 series being picked up for the fall season, including eight new shows. Later this year, “The Practice,” “King of the Hill,” “Buffy the Vampire Slayer” and “Ally McBeal” enter the lucrative syndication window.
- The TV group saw quarterly and full-year operating income fall, as higher ratings from the Fox broadcast network and lower series programming costs weren’t able to offset the falloff in advertising that has hit media companies across the board. Company also cited higher sports programming and marketing costs related to Fox’s inaugural season of NASCAR. Operating income fell 23% for the quarter to $185 million and was down 24% to $536 million.
The Fox station group saw operating income fall by 29% for the quarter and 15% for the year.
- In cable network programming, growth at the Fox News Channel helped boost operating income for the year to $30 million from $10 million. For the quarter, income was flat from the year before. Fox News’ subscribers jumped to 68 million by the end of June from 50 million a year ago.
In other businesses:
- Magazines and inserts: Operating income fell 6% for the quarter to $64 million. For the year, it eased 9% to $259 million.
- Newspapers: Operating income fell 25% to $121 million for the quarter and was off 11% for the year at $488 million.
- Book publishing: Upbeat numbers for HarperCollins saw operating income rise to $9 million from $7 million for the quarter. For the year, income rose 25% to $89 million.