The Wall Street Journal-20080205-News Corp--s Earnings Edge Higher- Profit Outlook Raised As Ads Keep Coming- Not Bidding for Yahoo

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News Corp.'s Earnings Edge Higher; Profit Outlook Raised As Ads Keep Coming; Not Bidding for Yahoo

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News Corp. reported a marginal increase in net income in its fiscal second quarter and sweetened its full-year outlook, saying it wasn't seeing any sign of advertising malaise despite the slowing economy.

News Corp. Chairman Rupert Murdoch also said the company wasn't planning to make a bid for Yahoo Inc. to counter a $44.6 billion offer from Microsoft Corp. There has been speculation in recent days that News Corp. could be one of several media or technology companies to participate in a bid for Yahoo.

"We're not interested at this stage," Mr. Murdoch said in a conference call after the results were released. News Corp.'s Chief Financial Officer David DeVoe added: "We're not bidding, we're not looking at it." Mr. Murdoch also dismissed the idea that News Corp. might try to combine its MySpace social-networking business with Yahoo, an idea briefly floated last year, or turn his attentions to AOL instead.

Net income for the quarter ended Dec. 31 edged 1.2% higher as a decline in the 20th Century Fox film business dented strong gains at the Fox broadcast network, Fox News Channel and other television interests. The results -- the first for News Corp. since it acquired Dow Jones & Co., publisher of The Wall Street Journal, in December -- were released after the market closed. In 4 p.m. New York Stock Exchange composite trading, News Corp. shares were down six cents to $19.35.

The New York-based company's quarterly earnings and outlook are likely to be somewhat reassuring to investors worried about the impact of economic weakness on media stocks. "We here at Fox have not seen any weakness to date," said Peter Chernin, News Corp. president and Fox Group CEO. Operating income in the quarter rose 24%, and News Corp. raised its guidance for fiscal 2008 operating income growth to the "mid-teens" in percentage terms, from the "low teens."

The quarterly results were hurt by a 14% decline in operating income at News Corp.'s filmed entertainment division, the biggest contributor to revenue and operating income. While the film studio saw solid DVD sales of "The Simpsons Movie" and "Live Free or Die Hard," and the early success of theatrical releases such as "Alvin and the Chipmunks" and "Juno," its year-earlier quarter was even stronger, boosted by strong DVD sales of titles such as "Ice Age: The Meltdown" and "X-Men: The Last Stand."

News Corp.'s television division -- which includes the Fox broadcast network and TV-station group as well as Asian TV company Star -- more than doubled its operating income in the quarter. News Corp. credited the growth in part to increased advertising pricing on the back of network ratings gains at the Fox broadcast network.

Mr. Murdoch said Fox generated $250 million in gross revenue from the Super Bowl and other programming on the network Sunday.

News Corp. said a strike by the Writers Guild of America, which has largely brought television production to a halt, had no material impact on the company during the quarter. The writers guild and the major studios made major progress toward a resolution of the dispute late last week, setting the stage for a possible end to the strike. Mr. Chernin, one of the negotiators on the studio side of talks with the guild, told analysts he was "optimistic that we will get to some resolution."

High ad rates and ad volume also helped Fox News Channel, one of the engines of News Corp.'s cable-network programming division, where operating income rose 23%. Also contributing to the division's growth were higher contributions from Regional Sports Networks and Fox International Channels, offset by losses from launching the Fox Business Network and the Big Ten sports network, which totaled around $50 million.

News Corp.'s Italian satellite operation Sky Italia swung to an operating profit from a loss a year earlier, helped by subscriber additions. News Corp. is seen as better placed than many of its U.S.- focused media rivals to weather a recession, given its more extensive international businesses. Mr. Murdoch said News Corp.'s efforts to develop its subscription businesses and investment in high-growth media such as social networking have also helped the company have less exposure to the "vagaries" of the ad markets.

The Newspaper and Information Services division posted a 15% increase in operating income. Increased accelerated depreciation on new color printing operations in the United Kingdom chipped away at advertising revenue growth.

News Corp. said its Internet unit Fox Interactive Media, which houses MySpace, posted better results on the back of improved search revenue and advertising revenue growth. "These results add confidence to our $1 billion revenue and 20% margin targets for this business this year," said Mr. Murdoch.