NewsCorp: More Top-Level Changes

More Management Changes at NewsCorp

Since posting a weaker than expected 2Q09 financial result on February 5, 2009, the year so far for News Corporation (NWS) has been marked by a number of key personnel changes. Commencing with the stepping down of long-time employee, President and Chief Operating Officer and CEO of the Fox Group Peter Chernin, followed by the appointment of former AOL CEO Jonathan Miller to the position of Chairman and Chief Executive Officer, Digital Media Group and Chief Digital Officer for News Corporation.

Finally, on Tuesday of this week,  the company announced that MySpace CEO Chris DeWolfe would not be renewing his contract and stepping down in the near future. However, Mr. DeWolfe would remain on the board of MySpace China and continue to act as strategic advisor to the company.

In the company's 2Q09 conference call, Chairman and CEO Rupert Murdoch lowered FY09 guidance and operating income would decline by approximately 30% year on year, given an anticipated continuation of challenging macro-economic conditions and weakness in the advertising industry. On the same call, cost increases attributed largely to the development launch of MySpace Music -- and the addition of new MySpace features -- were cited as key factors in Fox Interactive Media reduced earnings contribution for the quarter.

We believe these recent management changes reflect the outcome of strategic reviews flagged by Mr. Murdoch in early February and are possibly part of larger restructuring initiative. We would expect further details to accompany the company's release of 3Q09 financial results on May 6, 2009 and maintain our Hold recommendation at current levels.

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