News Corp. swings to a profit as advertising sales rise

News Corp., the media company run by Rupert Murdoch, posted a profit in its fiscal first quarter Wednesday as advertising sales climbed at its Fox broadcast and cable-television networks.

Net income was $843 million, or 27 cents a share, compared with a loss of $433 million, or 13 cents, a year earlier when the company had accounting costs. Sales rose 4.1% to $5.91 billion, New York-based News Corp. said.

Higher advertising at the Fox broadcast network and FX cable channel helped make up for a decline in home-video sales at News Corp.’s movie studios. Murdoch’s decisions to expand into the Italian satellite-TV market in 2003 and the purchase of Internet site MySpace.com last year also are starting to pay off.

“The weak DVD results, based on tough comparisons, were offset by strength at the cable networks and improvement at Sky Italia,” said Aryeh Bourkoff, an analyst at UBS.

Results for the period that ended Sept. 30 included a combined gain of $397 million before taxes from News Corp.’s sale of investments in Sky Brasil and China’s Phoenix Satellite Televisions Holdings Ltd., and unrealized changes in the value of debt securities.

Profit excluding one-time items was 18 cents a share, unchanged from a year earlier, Chief Financial Officer David Devoe said.

That missed the 20-cent average of a Thomson Financial survey on sales of $5.93 billion.

Class A shares of News Corp. gained 28 cents to $20.95. They have climbed 35% this year.

Devoe affirmed News Corp.’s fiscal 2007 target for operating income growth of 14% to 16%.

Operating income at News Corp.’s cable networks jumped 26% to $249 million on a 14.7% rise in sales to $889 million.

Profit at Fox News, which is part of the unit, was little changed as revenue growth from affiliate and licensing fees was eaten up by programming and marketing costs.

Television revenue rose 5.2% to $1.1 billion because of increased advertising on the Fox broadcast network and Fox television stations. Profit rose 20% to $192 million.

In the “other” category that includes Fox Interactive Media, revenue jumped 45% to $395 million, reflecting the contribution of MySpace, which Murdoch bought a year ago.

Fox Interactive will break even in fiscal 2007, Devoe said. Peter Chernin, News Corp.’s president and chief operating officer, reiterated Fox Interactive’s target revenue of more than $500 million for this fiscal year.

Revenue at the film division fell 15% to $1.21 billion. Profit at the unit declined 35% to $239 million as DVD releases such as “Just My Luck” failed to match sales of last year’s “Robots.”