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Fox Unit Drives News Corp. Profit

Strong ratings for such shows as 'American Idol' are big boost for results at TV segment.

May 14, 2003|Sallie Hofmeister | Times Staff Writer

Rupert Murdoch's media conglomerate swung to a profit of $275 million in its fiscal third quarter from a year-earlier loss due to a strong showing by the film and television divisions at Fox Entertainment Group and its "American Idol" and "Joe Millionaire" franchises.

The earnings report Tuesday from News Corp. sent the company's U.S. shares up 86 cents on the New York Stock Exchange to $30.34 -- close to the 52-week high of $30.89 set almost a year ago.

The stock historically has traded at a discount to its media peers because of Murdoch's tendency to make acquisitions a higher priority than day-to-day operating results.

Right now, News Corp. is waiting for regulatory approval to acquire 34% of El Segundo-based Hughes Electronics Corp., owner of DirecTV, the nation's leading satellite TV provider.

That purchase would be the last major missing piece in Murdoch's global empire and would make News Corp. the only media giant with a broadcast outlet as well as a pay-TV distribution operation in the U.S.

"The company is operating more smoothly, more successfully, than at any time in its history," Murdoch, the chairman, said during a conference call with analysts.

For the quarter ended March 31, News Corp. earned 21 cents a U.S. share, contrasted with a loss of $4 billion, or $3.16 a share, a year earlier, when the company took a $4.1-billion write-down of its investment in Hollywood-based Gemstar-TV Guide International.

Revenue increased 14% to $4.4 billion from $3.8 billion.

Driving quarterly results was a strong showing from the Fox assets, including its film division, which enjoyed robust DVD sales of releases such as "Ice Age." The surging wartime ratings of the Fox News Channel, which ended the quarter as the top-rated cable channel, also helped the performance, despite the additional costs of covering the war.

TV hits including "Joe Millionaire" and "American Idol" pushed the Fox Network to the top of the charts during the period.

At Fox, profit of $276 million was more than double the year-earlier earnings of $108 million.

Solid ratings at its broadcast network, strong gains at its cable group, led by Fox News Channel and FX, and a powerfully profitable television station unit have in recent months propelled News Corp. stock to trade at higher values on Wall Street than other media stocks.

"News Corp. is in great shape," said Merrill Lynch analyst Jessica Reif Cohen. "The next big focus is completing the DirecTV deal by December."

Beyond the Hughes purchase, Murdoch said Tuesday that he cannot foresee any other major acquisitions on the horizon, despite efforts in Washington to allow broadcasters such as Fox to own more TV stations nationwide and newspapers in cities where they already own a station.

"We've got our hands full," he said.

"We do not see ourselves going out on a buying binge for TV stations. We do not have any plans to buy newspapers across the country. Rather than buying things, we look for organic growth."

Murdoch said he would rather put his resources into developing new channels from scratch -- a prospect that would be easier if he gains control of DirecTV.

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