On Eve of Split, News Corp. Announces Major Write-Down of Publishing Unitby
Rupert Murdoch may have escaped the worst of the phone-hacking scandal at News Corp.’s newspapers in London. But he can’t dodge something more mundane—the sinking value of newspapers in general, even ones not breaking the law.
To wit: On the eve of the Memorial Day weekend, News Corp. announced it will be writing down the value of its publishing business by $1.2 billion to $1.4 billion this quarter. Atrophying cash flow from its U.S. and Australian newspapers are to blame, the company said.
The news of the write-down comes as News Corp. prepares to split into two companies, a move expected to take place on June 28, essentially separating its struggling newspaper- and book-publishing assets, which will retain the name News Corp., from its highly lucrative TV and film businesses, which will be called 21st Century Fox.
“Both Fox and the new News Corp. have some attractive qualities,” Michael Morris, an analyst with Davenport & Co., said in an interview with Bloomberg News. “With the new News Corp., investors will focus on whether there are opportunities to improve the economics of the publishing business.”
On Friday, among a bunch of new details about the spinoff, News Corp. announced that the board had approved a $500 million stock repurchasing program that the new publishing company can deploy after the split.
How Chairman and Chief Executive Officer Murdoch will spend the rest of the $2.6 billion in cash that the new News Corp. will have after the spinoff is sure to be a topic of speculation in the publishing world as the day of the split approaches. There is certainly no shortage of distressed news assets on the market for Murdoch to pick through, if he feels in the mood to go shopping. He usually does.
In the meantime, Murdoch continues to provide the world with pro bono media analysis on Twitter. “Look out Facebook! Hours spent participating per member dropping seriously,” he tweeted on May 16. “First really bad sign as seen by crappy MySpace years ago.”