News Corp. (NYSE: NWS) CEO Rupert Murdoch, at 77, has been around for a while. But it looks like that while may be too long after today's report on News Corp. earnings and outlook. That report suggests that Murdoch wildly overpaid for Dow Jones. But he wanted it and he got what he wanted. The questions for long-suffering shareholders is whether what Murdoch wants is good for them and whether he's the person to lead News Corp through the troubled waters ahead.
Prospects are for more pain. Analysts are estimating a 22% drop in News Corp.'s fiscal 2009 operating profit to almost $4 billion. And with its stock down 56% in the last year, what could Murdoch do to revive it? One possibility is to restructure the newspapers in a radical -- but obvious way -- put all the content online and sell search advertising to those who want access to all the readers. That would cut the cost of the newspapers tremendously.
Murdoch could also sell some of his assets -- such as its BSkyB or MySpace units. Such asset sales would probably generate significant capital gains which he could use to pay down the debt which looms large as News Corp's cash flows decline in the face of a declining advertising market. And there may be other opportunities to close down money losing operations -- Fox Business News reportedly has so few viewers that it must be hard for advertising revenues to offset its costs.
I am not sure that Murdoch would be willing to make such moves but I think shareholders would appreciate them so much that they might push him to find a CEO would make them happen.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in News Corp. securities.
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