Earnings: News Corp. Operating Income Dropped 30 Percent In FY09—And Murdoch’s Pleased
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You read that right. News Corp (NYSE: NWS). reported full-year results showing a 30 percent drop in adjusted operating income for the year, down to $3.6 billion from $5.3 billion for the previous fiscal year. So why is Chairman and CEO Rupert Murdoch pleased? Because it wasn’t worse for a year he calls “the most difficult in recent history.” Murdoch’s statement in the earnings release: “I am pleased that we are reporting adjusted operating income right in line with the guidance we previously provided.”
SEE ALSO: Murdoch Sees Eventual ‘Break’ With Amazon Over Kindle; ‘Active’ Talks With Sony
Small solace for a big loss. But he can’t be very pleased about the $680 million in impairment and other operating charges in the quarter ending June 30, primarily related to Fox Interactive Media and its anchor tenant MySpace. Roughly $180 million of that was due to the Q4 layoffs of 700-plus employees, most from MySpace, with the bulk going to cover “excess office space” (ie the LA-area lease the company had to break). News Corp. company also wrote off $450 million of FIM’s value in terms of goodwill.
Earnings release | Webcast | Transcript (via SeekingAlpha)
| 2Q 2009 | 2Q 2008 | |
|---|---|---|
| EPS | - $0.08 | $0.43 |
| Net Income | -$203M | $1.1B |
| Revenue | $7.7B | $8.6B |
The “other” segment that includes FIM lost $136 million for the quarter and $363 million for the year due to what News Corp. calls lower contributions from FIM and NDS, compared with much smaller losses of $57 million and $84 million for the same time periods a year ago. Once again, FIM was hit by lower ad revenue for MySpace and the costs of starting MySpace Music.
Contrary to the suggestion of an analyst on the earnings call, the $450 million writedown doesn’t wipe out the value of MySpace. For one, FIM includes more than the social network it acquired in 2005 for $580 million. IGN, acquired soon after, ran about $650 million. SDC as much as $360 million; Photobucket, $300 million; and so on. It also doesn’t include revenue from the MySpace-Google deal or any other source. But it does reflect a significant change in expectations about the value of ad-supported properties in a post-boom market.
News Corp. reported both its full fiscal year and quarter results today—swinging to a loss for both. For FY09, the company showed a net loss of $3.4 billion, compared with net income of $5.4 billion in FY08. Revenues were down 8 percent, to $30 billion from $33 billion. News Corp. took a pre-tax impairment charge in FY09 of $8.9 billion for goodwill and intangibles. In Q4, News Corp. lost $203 million compared with last year’s Q4 profit of $1.1 billion.
—News International: Overall, the Newspapers and Information segment came in far below the same quarter in 2008 but still in the black, dropping to $96 million from $263 million. News Corp. blamed lower ad revenues and foreign currency rates for the decrease. In the UK. ad revenues declined 18 percent (in UK currency terms), while marketing and production costs were higher.
Posted In: Money, Earnings, Companies, News Corp., rupert murdoch
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