$275 million restructuring charge mars earnings report
In reporting on earnings for a quarter in which News Corp. had to take $275 million charge related to restructuring at MySpace, prexy Chase Carey on Wednesday was as pointed as he has ever been in signalling that the site is headed to the sales block.Despite the gloomy news on MySpace, News Corp. overall posted a solid quarter, more than doubling profits on the strength of its cable and broadcast businesses. Net income rose to $642 million, or 24 cents a share, from $254 million, or 10 cents, a year earlier. Excluding restructuring and impairment charges, earnings were 29 cents a share. Revenues edged up by 1% to $8.8 billion. News Corp.’s movie business faced tough comparisons vs. last year’s second quarter, when the box office success of “Ice Age: Dawn of the Dinosaurs” drove results. Thus, operating profits were $189 million vs. $324 million last year. Highlights in the quarter included “Black Swan” and “The Chronicles of Narnia: The Voyage of the Dawn Treader,” with $370 million in worldwide box office. Film “is not having a year to remember,” said Carey, but described the ups and downs as the nature of the business. He did say the positives in the quarter were that Fox was able to renew its co-financing agreements with Dune Capital and New Regency. He also said director James Cameron has agreed that “Avatar 2” and “Avatar 3” will be his next movies. Cable nets continued to be stars in the News Corp. family, with operating profits rising 22% to $735 million. Ad revenues were up 12% in the period and affiliate fees grew 10%; 27% and 17% at international channels, respectively. The gains at U.S. channels were achieved despite a one- month blackout by Dish Network of regional sports nets, FX and Nat Geo channels over a carriage dispute. The dispute cost News Corp. $30 million in operating profits in the quarter, said chief financial officer David DeVoe. Fox Broadcasting posted its best quarterly profit in two and a half years with operating profits hitting $151 million vs. $29 million in the year ago period. Publishing took a dramatic swing into the black during the quarter, posting operating profits of $380 million vs. a loss of $90 million in the year ago period, attributable in part to a $500 lawsuit settlement at an integrated marketing services biz. Without the settlement, operating income decreased $30 million from last year’s quarter. Increases in advertising at newspapers were offset by sluggish peformance at publisher HarperCollins, startup costs at the new iPad-only newspaper The Daily, and the absence of earnings from Dow Jones index business, which was sold. The highlight on the international front was at Sky Italia, which added 71,000 subscribers in the quarter, 71,000, its most in two years, to 4.87 million. As for MySpace, Carey said the company is exploring “strategic options” for the business, adding that for MySpace to reach its potential it’s probably best done under “a new ownership structure.” News Corp. bought MySpace in 2005 for $580 million and the unit has struggled financially since. Earlier this year, the company cut its workforce in half by laying off 500. For the quarter ending Dec. 31, the unit housing MySpace continued to see losses grow, to $156 million, $31 million more than the same period last year. That is because of lower search and ad revenues. Carey said he didn’t expect MySpace’s performance to improve dramatically the rest of the year. He said interest in the property has ranged from “A to Z,” with industry players, financial players, both foreign and domestic, have expressed an interest. Carey said some decision could be made on MySpace before the second half of the year. News Corp. reported after the market closed. Its shares earlier closed up 3¢ to $17.54.