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News Corp. earnings are disappointing

THE BALTIMORE SUN

SYDNEY, Australia -- Rupert Murdoch's News Corp. said full-year net earnings rose 2.3 percent to an equivalent of a record $1.01 billion in U.S. currency on increases at Fox television and its British newspapers.

Ansett Australia, an airline 50 percent owned by News Corp., performed poorly, halving its previous contribution to profit. British satellite operator BSkyB, in which News Corp. holds a 40 percent interest, showed a 44 percent gain in operating profit.

The result was on the lower end of forecasts by analysts, most of whom overestimated television and film earnings.

"It was a touch disappointing for most in the market," said Terry Povey, an analyst at James Capel Australia.

The company's American depositary receipts fell $1.25, to $22.75, on trading of 2.75 million shares, almost four times its three-month daily average of 717,500.

News Corp.'s profit after taxes rose 19 percent to $1.35 billion in Australian dollars, including a one-time gain of $17 million. Earnings per-share rose to 46 Australian cents from 42 cents. Earnings for each U.S. ADR rose to $1.36 a share from $1.29. Each ADR is the equivalent of four ordinary shares in Australia.

News Corp., which is based in Australia but generates about three-quarters of its income in the United States, reported results in both U.S. and Australian dollar terms for the first time.

Revenue rose 5 percent to $12.2 billion.

Operating profit from News Corp.'s television businesses, which are concentrated in the United States, rose 18 percent to $515 million.

"This increase was due to tremendous growth at Fox Television station group, which generated another record year in fiscal 1995," News Corp. said in a statement.

But television profits increased just 26 percent in the fourth quarter, down from 44 percent in the third.

"Reading between the lines, in the fourth quarter, to support TV ratings, they have thrown a lot of programming at the schedule," said John Bell, an analyst with ABN Amro Hoare Govett. "There were new programs that didn't work. They had to pay cancellation charges."

Mr. Bell said all the hyperbole and reporting surrounding News Corp.'s success in starting a fourth TV network in the United States "hasn't been translated yet to the bottom line."

But he said he remains positive on the outlook. "Next year, all things being equal, TV will be strong. They're talking about 50 percent margins in TV stations."

News Corp. reportedly believes it can squeeze a few more seasons out of the syndicated comedy "The Simpsons" but told analysts in a conference call that the show won't draw the same ratings in its twilight run.

Operating profit from the 20th Century Fox film unit rose 15 percent from a year earlier to $152.3 million.

"I overestimated video sales from movies such as 'Speed,' 'True Lies' and 'Mrs. Doubtfire,' " Mr. Bell said. "They haven't gotten their international act together."

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