News Corp. bounces Back with Profits and Scandals in Tug O War

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News Corp. (NWSA)beat analysts estimates with a sudden increase in sales allowing it to raise its dividend 27%, thereby cushioning investor losses that followed a phone-hacking scandal which hurt the stock.

This Thursday owner of Fox TV and the Wall Street Journal, exceeded the average analyst estimate of $8.48 billion regarding its sales.

There was an increase of 8.9% to $982 million, (35 cents a share) in the operating income in the fourth quarter ended June 30, News Corp. said today in an e-mailed statement.

Excluding items, analysts were predicting profit of 30 cents, the average of estimates compiled by Bloomberg. Sales rose to $8.96 billion.

News Corp. benefited from the first increase in 2 years of its quarterly dividend to 9.5 cents a share from 7.5 cents previously.

Scandalous

Phone Hacking: Allegations of that phone hacking that took place in the U.K. News of the World tabloid had deterred investors from placing a foot in the company. The Chairman and Chief Executive Officer Rupert Murdoch,is seeking to convince investors that the issue would not affect the rest of the company.

The scandal was a major blow to the company. At least 12 people were arrested while, two News Corp. executives resigned. Inevitably, the 168-year-old tabloid was shut down and News Corp. had to terminate its bid to buy 61% of the British Sky Broadcasting Group Plc (BSY)for $12.6 billion.

In addition to these losses, News Corp. paid a $63 million breakup fee to BSkyB.

The companys stock had risen by 29 cents to $14 in extended trading. But soon after the ‘Guardian’ newspaperreported that the News of the World tabloid had accessed the voice mail of a murdered teenager, on July 4th, Class A stock declined 84 cents to $13.71 at 4 p.m. New Yorktime in Nasdaq Stock Market trading.

On a Slippery Slope

MySpace sold: With the speedy and steep climbs taken by Facebook Inc. it was not hard to see the decline in the traffic flow to other social networking site, such as MySpace. News Corp.s had to draw its ownership of the company to a close, this quarter at the end of June.

Reflecting a loss on the sale of the Myspace website, a 22% fall was seen in the net income bringing it to $683 million, or 26 cents a share.

The unit was sold for $35 million to Specific Media while it was bought for $580 million in 2005.

Dow Jones: Along with this, in 2009, News Corp. took a $ 2.8 million write-down, after paying Dow Jones, an American financial and publishing firm, $5.6 billion in 2007.

Solid Profits

Cable Networks: The biggest contributor to profit have been the cable networks, giving a 15% rise to the revenue to $2.15 billion, while operating income expanded 12% to $631 million, the company said.

Even in advertising, the U.S. networks grew 23% while affiliate fees were up 7 percent.

Broadcasting Strong: The companys broadcast unit, which includes the Fox network and local stations, saw revenue expand by 7% and resulting in a doubled profit to $233 million. News Corp. hands the credits to a stronger national ad market and retransmission fees.

Publishing: The publishing division, (including newspapers and books) revealed a 11% increase in sales, allowing the profit to jump by 38% to $270 million.

On Screen: From its filmed entertainment unit, the company obtained a 14% increase in revenue. News Corp.s profit from satellite TV rose to $145 million from $97 million.

Acting In Defense

The Lawsuit: James Murdoch, the son of Rupert Murdoch is News Corp.s deputy chief operating officer. He has had till this Friday to submit written replies to Parliament in Londonto defend this testimony regarding the hacking allegations. To his misfortune, and that of the companys former executives of News of the World have said some of his statements were mistaken.

In spite of the controversy, with the support of his son, Rupert Murdoch has vowed to remain as CEO of the company. To keep the price tag of each at around $1 billion or less and require annual returns on invested capital of about 15%, management has vowed to put new acquisition targets through a rigorous vetting process.

Buybacks:

The company also said it will begin stock repurchases under a new $5 billion authorization after August 15.

When trying to pick itself up, and make progress, despite certain losses, the last thing the company needs is a scandal.

Sources: Bloomberg, USA Today

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