Nov. 6 (Bloomberg) -- News Corp., the media company controlled by Rupert Murdoch, plunged as much as 16 percent in New York trading after cutting its 2009 profit forecast because of shrinking ad sales at its Fox stations and newspapers.

News Corp. sank $1.08, or 11 percent, to $8.71 at 9:34 a.m. on the New York Stock Exchange after earlier dropping to $8.25. The Class A shares had lost 52 percent this year before today.

Fiscal 2009 profit will drop in the ``low to mid teens'' in percentage terms, New York-based News Corp. said on a conference call yesterday after U.S. markets closed, citing falling advertising sales and the stronger dollar. The company previously forecast a gain of 4 percent to 6 percent.

The reversal comes after General Motors Corp., a top television marketer, cut spending by 50 percent, Murdoch, the company's chairman and chief executive, said. Profit from Fox television stations slid 70 percent to $54 million in the first quarter ended Sept. 30, less than half the forecast of David Joyce, an analyst with Miller Tabak & Co. in New York.

``Anything that is not subscription-related in the media business is at risk,'' Anthony DiClemente, an analyst at Barclays Capital Inc. in New York, said in an interview. He doesn't recommend buying the shares. ``For News Corp. you have the added calamity of these exchange-rate headwinds.''

TV Revenue

Total TV revenue, including the Fox network, fell 15 percent to $974 million, as automakers cut spending 40 percent and the network lost viewers to NBC's Olympics coverage. Fox will finish the current television season as the most-watched U.S. network, President Peter Chernin said, citing the return of shows including ``24'' and ``American Idol.''

The company's newspapers are experiencing similar advertising declines, Chief Financial Officer David DeVoe said on the call. The dollar's gain against foreign currencies diminished profit from non-U.S. operations, the company said.

``The revised guidance is a clear reflection of the fiscal environment,'' said Murdoch, 77. ``We expect that to continue through fiscal 2009 and be very challenging to the media sector.''

First-quarter net income dropped 30 percent to $515 million, or 20 cents a share, from $732 million, or 23 cents, a year earlier, New York-based News Corp. said yesterday. Profit missed the 22-cent average estimate of 16 analysts. Sales rose 6.3 percent to $7.51 billion with the purchase of Dow Jones, also missing estimates.

``Any asset that is heavily advertising dependent under- performed,'' Miller Tabak's Joyce said in an interview. He recommends the shares and doesn't own them.

Operating Income

Total operating income fell 9 percent to $953 million. Compared with its media peers, News Corp. has the biggest non- U.S. operations, DiClemente said.

Film profit dropped 31 percent to $251 million as revenue shrank 20 percent. ``Mirrors'' and ``Space Chimps,'' the biggest releases of the quarter, collected $114.6 million worldwide, according to film researcher Box Office Mojo LLC. That compares with $526.9 million for ``The Simpsons Movie'' a year ago.

Sales at the newspaper group rose 37 percent to $1.71 billion, buoyed by the $5.2 billion acquisition of Dow Jones and its flagship Wall Street Journal. Operating profit rose 44 percent to $134 million.

The company is consolidating clerical operations at its U.S. newspapers and will shutter 10 of 17 printing sites for the Wall Street Journal in the next 15 months, Murdoch said. There will also be ``across the board'' job cuts at U.K. and Australian newspapers, he said.

``You will see even leaner operations in both those places.'' Murdoch said. ``I am not prepared to say how many people. I know, but I don't want the headlines about it.''

Cable Profit

Cable network sales increased 19 percent to $1.31 billion on the higher fees collected by Fox News and F/X. Profit increased 31 percent to $379 million.

News Corp. reported a loss of $359 million from investments in affiliates, compared with a profit of $246 million a year earlier. The loss reflects results from the 25 percent stake in Premiere AG, Germany's biggest pay TV company, and the absence of income from DirecTV Group, now controlled by John Malone's Liberty Media Corp. Profit at BSkyB fell slightly.

Revenue from the unit that includes MySpace increased 17 percent. MySpace display advertising is ``softening,'' the company said.

``We are doing slightly better than the marketplace, but it's clear from everybody else that there's a lot of softening in the display advertising marketplace, and we are clearly beginning to feel some of that,'' Murdoch said.

Profit from Sky Italia more than tripled to $165 million as revenue increased 18 percent on a local currency basis with the addition of more soccer programming.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

Last Updated: November 6, 2008 09:46 EST