News Corp. Reports $875 Million Profit After Year-Earlier Loss

News Corp., the owner of Fox News, reported a fourth-quarter profit of $875 million as advertising sales climbed at local television stations and cable networks.

Net income totaled 33 cents a share, compared with a loss of $203 million, or 8 cents, a year earlier, when News Corp. wrote down the value of its Internet unit, the New York-based company said today in a statement.

Local TV led the advance, with a 29 percent jump in advertising. Cable networks, including FX, benefited from higher advertising and subscriber fees. Revenue rose 5.7 percent to $8.11 billion in the quarter ended June 30, exceeding the $8 billion average of 11 analysts’ estimates compiled by Bloomberg.

“They’re taking some very solid steps to grow the profitability,” Chris Marangi, an analyst at Gabelli & Co. in Rye, New York, said in a Bloomberg Television interview. He recommends holding the shares. “Advertising is certainly back.”

Excluding asset sales, as well as impairment and restructuring costs, profit totaled 30 cents a share, Chief Financial Officer David DeVoe said on a conference call. That figure includes a 12-cent tax gain, he said. Analysts projected earnings of 20 cents, the average of estimates compiled by Bloomberg.

News Corp., which also owns the Wall Street Journal and the social network MySpace, gained 49 cents to $14.34 in late trading after U.S. markets closed. The stock rose 22 cents to $13.85 today in Nasdaq Stock Market trading. The shares have gained 1.2 percent this year.

Subscriber Revenue

Chairman and Chief Executive Officer Rupert Murdoch is increasing New York-based News Corp.’s subscription-based assets to add to its more economically sensitive ad revenue.

The company is bidding for the 61 percent of pay-TV operator British Sky Broadcasting Group Plc it doesn’t already own. Murdoch is also after so-called retransmission fees for his local TV signals from cable operators and is erecting paywalls online for his newspapers.

“They are trying to figure out how to turn advertising- related businesses into subscription businesses,” Marangi said.

News Corp. predicted adjusted operating profit will rise in the low double-digit percent range for the year ending June 30, 2011, DeVoe said on the call. The forecast is based on adjusted operating income of $4.46 billion for fiscal 2010. Analysts expect operating profit for fiscal 2011 of $4.86 billion, implying growth of 9 percent.

Operating Income

Fourth-quarter operating income slid 1.7 percent to $932 million as cable and local TV advertising gains were overshadowed by lower movie ticket sales, Sky Italia’s higher costs and negative currency impact. The euro fell 9.4 percent against the dollar last quarter.

Ad revenue at the cable networks rose 11 percent, boosting the unit’s operating profit by 31 percent to $563 million. David Joyce, an analyst with Miller Tabak & Co., expected operating income of $506 million. Cable affiliate revenue gained by a “double-digit” percentage, the company said.

Operating profit in broadcast TV rose 13 percent on the recovery in local TV station ad sales. That offset higher programming expenses at the Fox Broadcast Network, where sagging ratings reduced ad revenue.

BSkyB Battle

Film operating income dropped 33 percent to $137 million on lower box-office revenue for the Twentieth Century Fox studio.

In June, BSkyB, the biggest U.K. pay-TV operator, rejected News Corp.’s buyout offer of 700 pence a share, or 7.8 billion pounds ($12.4 billion). BSkyB’s independent directors are seeking more than 800 pence from News Corp.

BSkyB, based in Isleworth, England, last week reported higher annual profit and sales as more subscribers signed up for high-definition television service.

Chief Operating Officer Chase Carey said the company’s MySpace unit is “actively engaged” in reaching a new search advertising deal, which will likely be worth less than the current $300-million-a-year contract with Google Inc. that expires this month.

The new agreement will be performance based, Carey said on the call. MySpace’s traffic fell short of commitments to Google, and the site has struggled with management turnover since News Corp. purchased it for $580 million in 2005.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. and its Dow Jones division in providing financial news and data.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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