News Corp. Posts Strong Earnings, Extends Poison Pill

The board seeks to preserve its leverage with John Malone.
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Media conglomerate

News Corp.

(NWS) - Get Report

posted a solid fourth quarter and escalated its standoff with big shareholder

Liberty Media

(L) - Get Report

.

For the quarter ended June 30, News Corp. made $717 million, or 22 cents per share, up from the $429 million, or 15 cents per share, reported a year ago. Revenue rose 12% from a year ago to $6.1 billion, driven largely by gains at the movie and cable network operations.

"We are extremely pleased with the continued growth we achieved during fiscal 2005 -- our third consecutive year of record profits," CEO Rupert Murdoch said in a statement. "What is pleasing about this past year is not just that we once again delivered double-digit revenue and operating income growth across nearly all of our businesses but perhaps more significantly many of our developing businesses turned profitable."

What was less pleasing to Murdoch, however, was Liberty controlling shareholder John C. Malone's move last fall to double his News Corp. stake to 18%. In response to the move, News Corp. last year adopted a poison pill aimed at diluting further acquisitions by Liberty. On Wednesday, the company extended the so-called shareholder rights plan in an apparent bid to encourage a resolution.

"As Liberty continues to own approximately 18% of the Company's Class B Common Stock, and to prevent potential future acquisitions of significant amounts of News Corporation voting stock by Liberty without consultation with the Board, the Board has determined to extend the expiration of the stockholder rights plan until Liberty Media Corporation and the Company reach a favorable resolution with respect to Liberty's ownership stake," News Corp. said.

By segment, the results were strong pretty much across the board.

The filmed entertainment segment reported fourth-quarter operating income of $109 million, up $14 million from a year ago, largely driven by the home entertainment performances of films such as

Alien vs. Predator

,

Sideways

and

Napoleon Dynamite

. Additionally, the worldwide theatrical distribution of

Star Wars Episode 3: Revenge of the Sith

and

Mr. and Mrs. Smith

contributed to the strong quarterly results.

Fox Television Stations' fourth-quarter operating income declined 5% from the same period a year ago, hit by softness in the overall advertising market and what Fox called the negative impact of local people meters. The company has been strongly opposed to the introduction of Nielsen's local people meters, which it claims undercounts big families who watch programming on some Fox-owned UPN stations.

Cable Network Programming reported fourth-quarter operating income of $137 million, an increase of $17 million over the fourth quarter last year on the strength of networks like Fox News Channel and F/X.

CEO Murdoch noted on a postclose conference call how pleased he was with the performance of SkyItalia, the 2-year-old satellite service that has grown to some 3.3 million subscribers and is on track for full year profitability. From newspapers and magazines to cable and the company's stations group, Murdoch seemed pleased with the picture. He reserved the majority of his commentary, however, for "the coming ubiquity of the Internet." He said his company's commitment will constitute a "major driver" of future growth.

Murdoch envisions his "content" company blending with the "personal choice" vehicle that the Internet consitutues to "redefine Internet vertical."

Operating chief Peter Chernin said that the DVD business remains strong despite some naysayers. "We are not seeing any unusual shortfall in the number of copies we've sold," he said. Home video revenue at the company is up 32% so far this year, according to Chernin.

Late Wednesday, News Corp. rose 54 cents to $17.98.