Friday, February 15, 2013

News Corp's publishing unit no longer useful 'as a cash cow'


Ahead of News Corp's break-up into two separate divisions, its publishing arm gets a big thumbs down from a US analyst. In a stinging comment the analyst writes:
"We believe that the publishing unit has outlived its usefulness as a cash cow."
The anonymous analyst, who works for The Boston-based Saibus Research, a research and advisory firm that provides advice to investors and money managers, was considering the current state of News Corp.
He/she praises Rupert Murdoch for the corporate restructure that will see his company split into a publishing (print) division and an entertainment (screen) division.
The analyst points to the particular success of Fox Cable, calling it a "star performer" that accounts for 28.5% of News Corp's revenues and 60% of its operating income, with an operating margin of 37%.

But turning to the publishing side - which includes News International, the Wall Street Journal, the New York Post, Australian papers and book publisher HarperCollins - the analyst considers that it has "poor growth prospects" and has held back the overall company's value.
Even so, he/she concedes that it is not only profitable but "more profitable than the New York Times and McClatchy combined."

The analyst writes: "We are bullish on News Corp. We are pleased to see… Murdoch take steps to unlock shareholder value, especially in the wake of the News International phone hacking scandal.
"We are impressed with the fact that News Corp's publishing business is still more profitable than other similar firms. However, we can admit that print media is at best a cash cow and at worst, a declining business."

And he/she concludes that, even without hacking, "it would make sense to sell or spin off the publishing division to allow shareholders direct exposure to News Corp's higher profit, higher growth entertainment properties…
"While the entertainment group assets… are more desirable to us than the publishing assets… we're not surprised that the publishing division is content to muddle along in the mediocre operating environment for publishing assets."
Then the analyst finishes by registering surprise at Murdoch's decision to include News Corp's Australian pay-TV assets in the new publishing division.

Source: Seeking Alpha

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