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News Corp. tops estimates
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February 7, 2001: 3:00 p.m. ET
Worldwide media company says fiscal 2Q earnings rise; revenue remains flat
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NEW YORK (CNNfn) - Fox Network parent News Corp. reported a 7 percent increase Wednesday in fiscal second-quarter operating earnings, beating Wall Street estimates, a day after reports the company is close to forming a $70 billion company with the purchase of General's Motors' Hughes Electronics.
The Sydney, Australia-based media company reported a profit of $270 million, or 26 cents an American depository receipt (ADR), excluding special items for the quarter ended Dec. 31, as as sales of "X Men" videos offset declining ad sales at its television stations.
The results are up from $252 million, or 25 cents per ADR, a year earlier, as well as the 19-cent-per-ADR consensus forecast of analysts surveyed by earnings tracker First Call.
"We are very pleased with our results for the quarter, achieved as they were in a challenging economic climate, and encouraged by the turnaround we enjoyed at several of our key businesses," News Corp. Chairman and CEO Rupert Murdoch said.
 Revenue for the company, whose holdings range from the Fox Television network to a stake in British pay-TV company British Sky Broadcasting, the New York Post newspaper and the Los Angeles Dodgers baseball team, remained flat in the quarter at $3.8 billion.
News Corp. (NWS: Research, Estimates) ADRs gained $1.54 to $39.04 in trading Wednesday afternoon.
DirecTV deal close
News Corp. reported its results amid reports the company is close to a merger deal for satellite TV provider DirecTV, which it would merge with its existing satellite business to create a $70 billion satellite company.
News Corp. and No. 1 automaker General Motors, which controls DirecTV, have hashed out the main points of a deal that would value the GM unit containing DirecTV -- Hughes Electronics Corp. -- at about $45 billion, sources told Reuters Wednesday.
The deal would involve an $8 billion cash payment for Hughes (GMH: Research, Estimates), which would spin off its Panamsat business for $6.5 to $7 billion.
Microsoft Corp. (MSFT: Research, Estimates), anxious to gain customers for its set-top box, would invest $5 billion-to-$8 billion in the new company, while Liberty Media Chairman John Malone would also be strategic partner.
"(Murdoch) wants it very badly, he's made three attempts to come into the U.S. satellite television business," Armand Musey, satellite industry analyst at Banc of America Securities, told CNNfn. "As News Corp.'s stock price comes down it becomes harder and harder to structure something that works for everybody."
"News Corp. wants to expand its empire wants to have global coverage," Musey said. "It wants to have global coverage, get a larger subscriber base and an acquisition of Hughes allows it to do that -- allows it to essentially have approximately 60 (million)-to-70 million subscribers on a global basis."
Same old advertising blues
Like most other media companies, News Corp. was hurt by declining advertising sales at its television stations and Web sites, a situation that has eaten away at competitors' profitability.
The softening ad market prompted Fox to cut back on its Internet operations last month, as did General Electric's (GE: Research, Estimates) NBC, which announced in January it would lay off up to 10 percent of its work force, and AOL Time Warner's (AOL: Research, Estimates) CNN, which eliminated 400 jobs last month. AOL Time Warner is the parent company of CNNfn.com.
On Tuesday, Walt Disney Co. (DIS: Research, Estimates) reported a 77 percent drop in first-quarter earnings partly because of declining ad sales. Disney is folding its Go.com Internet network.
However, News Corp. managed to top estimates on the strength of filmed entertainment and cable network programming, though gains were hurt by losses associated with its broadcast of the Major League Baseball playoffs and World Series last fall.
Check out other media stocks
The company took a $293 million loss related to the restructuring of its partnership with the WebMD Web site.
Filmed Entertainment reported operating income of $128 million, down from $31 million a year earlier, chiefly on strong video sales of the "X-Men" movie.
Pre-release costs for "Men of Honor," "Quills," "Dude, Where's My Car?," and "Cast Away" partially offset those results.
Television segment declines
Television segment operating income declined $46 million to $175 million as a result of losses from post-season baseball broadcasts, which coincided with the fall season premieres of other shows, the company said.
However, ratings are on the rise, with viewership among adults 18-to-49 up 5 percent from a year ago thanks to such programs as "Dark Angel," "That '70s show," and "Titus."
Income from cable network operations -- which include the Fox News Channel, Fox Sports Networks, FX channel and the Los Angeles Dodgers baseball team -- increased by $20 million during the quarter to $44 million.
Higher ratings and advertising sales, combined with the addition of 12 million new subscribers over the past year, contributed to the gains.
Magazine group income declined 3 percent because of fewer inserts, while newspapers saw a more than 19 percent profit increase on growing ad revenue and stable operating costs.
The company's HarperCollins publishing unit reported a 5 percent profit increase in the quarter.
-- from staff and wire reports 
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