Rupert Murdoch's media giant News Corp disappointed Wall Street forecasts, bringing in earnings of 12 cents per share on $7.87 billion in revenue, while analysts expected 19 cents and $8.4 billion in revenue.
The company took an $8.39 billion asset write down on the reduced value of its TV stations and newspaper assets in this bleak economic environment, giving the company a total loss of $6.4 billion in the quarter.
And the outlook for 2009 is bleak: the company expects operating income to drop 30 percent in 2009 from 2008.
Murdoch explains the weak results as the result of the recession saying "while we anticipated a weakening, the downturn is more severe and likely longer lasting than previously thought.... We are implementing rigorous cost-cutting across all operations." Murdoch must have done a good job preparing investors for the bad news -- the stock traded up slightly after the bell.
Performance at the various divisions reflected those lower asset values Murdoch's newspapers and TV stations now hold. Operating income at the television division dropped 93 percent to 18 million on lower ad sales and increased programming costs. The cable networks performed well, in line with results from Time Warner , stronger subscription fees and ads (cable ads have held up much better than broadcast) driving 27 percent operating income growth. The newspapers unit showed a nine percent income drop.
As expected, the movie and TV studio, suffered from tough comparisons to hits last year, and operating income fell 72 percent. And even online ads aren't growing.
Murdoch still hasn't been able to monetize MySpace's huge number of eyeballs -- the unnamed division that includes MySpace swung to a $38 million operating loss, down from a $23 million profit last year.
In the earnings conference call, News Corp's CFO was determined to reassure that there is no worry that the company won't be able to meet its debt obligations.
But Murdoch didn't mince words when it came to describing the weak state of the economy -- calling this "the worst global economic crisis since News Corp was created". But he of course says that the company is well-positioned to handle the crisis. And Murdoch pointed out that if their forecast is correct "we'll make $3.5 billion operating income this year."
We'll see how deep the ad recession really is.
- GE's Immelt: US Economy at Lowest Point Since '70s
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