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News Corp sales rise on "Borat," "X-Men"
2007-02-07
News Corp. said on Wednesday that quarterly revenue rose 18 percent, helped by "Borat" movie ticket sales and "X-Men" DVDs, and it issued a very optimistic profit outlook for its Internet division next year. News Corp. (NYSE:NWSA) shares rose more than 2 percent after it announced it expected "dramatically" higher profits at its popular online social network MySpace in fiscal 2008 and repeated a forecast for double-digit profit growth this fiscal year. "The growth story is very much intact," Pali Capital analyst Richard Greenfield said. The company controlled by media entrepreneur Rupert Murdoch posted a fiscal second quarter profit of $822 million, or 26 cents per share, down from $1.075 billion, or 33 cents per share a year earlier when it included a $381 million gain for the sale of its education supplement publishing unit. Revenue rose to $7.8 billion for the quarter ending December 31, from $6.7 billion a year earlier. Wall Street analysts had expected profit per share of 25 cents and revenue of $7.4 billion, according to Reuters Estimates. Although overall operating income rose 18 percent, it was not enough to please some analysts who said some divisions, including cable networks and television, were weaker than expected. News Corp. said it had restructured the management of its new TV network, MyNetworkTV, which pushed the television segment's operating profit down nearly 40 percent. Murdoch said MyNetworkTV ratings were "far below expectations." Operating profit gains for the quarter were led by the film divisions, where profit rose 57 percent to $470 million on hit movies that also included international box office for "The Devil Wears Prada" and DVD sales of "Ice Age: The Meltdown." News Corp. said it would likely outpace the modest gain for the DVD retail market overall in 2007, countering Wall Street forecasts of a decline for the year. "DRAMATIC" MYSPACE GROWTH Internet revenue for the quarter was up 70 percent to $125 million, boosted by a $50 million revenue rise from MySpace. News Corp. executives were planning to boost profit margins at Internet businesses to the low 20 percent range. "We would expect to see profitability increase dramatically in fiscal '08," Chief Operating Officer Peter Chernin told analysts on a conference call. Chernin said the Internet group logged its first profitable month last December and expects to be "marginally" profitable in fiscal 2007, which ends on June 30, 2007. News Corp. shares have risen about 45 percent over the past 12 months, boosted in part by the view of investors that the company is ahead of its traditional media peers in forging a profitable new media business as viewers spend less time watching TV. MySpace is one of the fastest growing Internet sites. Company executives, who earlier said they expected to launch a MySpace outpost in China, gave scant details about developments. Murdoch admitted that China has historically been tough for all Western businesses, but he still saw opportunity to expand into the fast-growing market. "I challenge anyone to argue this: None of the American leading companies or British media companies have made any impact there," Murdoch said. News Corp. struck a deal in December to swap its controlling stake in top U.S. satellite television provider DirecTV Group Inc. (NYSE:DTV) for Liberty Media Holding Corp.'s (Nasdaq:LCAPA) stake in News Corp., which the companies expect to close in the second half of the year. The company also announced it will pay a 6 cents per share dividend for Class A shareholders and 5 cents per share for Class B holders on April 18, 2007. The company backed a previous forecast that fiscal 2007 operating profit would rise 14 percent to 16 percent. News Corp.'s widely held Class A shares were up 49 cents, or 2.5 percent, to $24.75, while Class B voting shares rose 59 cents, or 2.4 percent, to $24.74 in midday trading on the New York Stock Exchange.
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