News Corp posts hefty loss


Rupert Murdoch

From Lisa Barron
CNN Correspondent

HONG KONG, China (CNN) -- It's been a rough 12 months for the world's fifth biggest media group.

Rupert Murdoch's News Corp posted a quarterly loss on Tuesday due to a $4.2 billion writedown of the value in its stake in Gemstar-TV Guide International Inc. but revenues jumped 18 percent on the box office success of movies "Ice Age" and "Moulin Rouge."

News Corp. reported a net loss of $4 billion, or $3.16 per American depositary receipt, for the third quarter ended March 31, compared with a year-earlier profit of $111 million, or 10 cents.

Excluding the charge, the company said earnings rose to $236 million, or 18 cents per ADR, from $127 million, or 12 cents per ADR, before special items a year earlier.

Revenues rose to $3.85 billion from $3.27 billion.

News Corp's third quarter earnings were dominated by hefty write-downs -- related to investments in Gemstar-TV Guide International, the value of its sports broadcasting rights and its exposure to failing German media group Kirch.

But analysts are looking beyond the dramatic losses.

All strong ahead

"The business I think you can say has bottomed out in film, in television production, in cable networks, all performance, all strong growth looking forward," says media advisor Peter Schloss.

News Corp's long time money loser, Pan Asian satellite broadcaster STAR-TV, reached a milestone in March when it posted its first-ever operating profit.

Headed by Murdoch's son James, STAR has expanded dramatically since 1993, when News Corp bought it from Hong Kong tycoon Richard Li for more than $800 million.

"I'm sure the satellite transmission agreements have all been renegotiated more favorably," says Henry Lee, managing director of Hendale Asia.

"I think the ad rates are also improving, since STAR is one of the few pan Asian platforms out there."

Mandarin channel

China gave STAR-TV permission to broadcast a mandarin channel in southern Guangdong province last year, along with AOL Time Warner, the parent company of CNN, and Phoenix satellite, 38 percent of which is owned by News Corp.

STAR also launched a new Mandarin language channel, Xingkong Weishi, in March.

But Schloss suggests that Murdoch may have benefited more from the deals he didn't do.

"He is now sitting, unlike a lot of other media companies, such as AOL, Vivendi Universal, in the position of not having during the dot.com euphoria gone out and acquired big media assets."

Still, News Corp faces the same challenge as companies in many industries in the current environment.

"It's back to basics," maintains Hendales' Lee.

"(They are) really focusing on operations, cleaning up their investment portfolio. And I think the share price, which is hovering in the 20s, is a good long-term buy."

It can't hurt that 20th Century Fox has global distribution rights to the second Star Wars prequel. With the release of the latest blockbuster, it's looking at $300 million in U.S. box office sales alone.