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Murdoch’s Next Steps?

Posted on Friday, May 22nd 2009

Continuing our analysis of media companies’ results, today we discuss Rupert Murdoch’s News Corp (NASDAQ:NWS) and a potential acquisition for it, Monster (NYSE:MWW). For News Corp, revenue for the quarter fell 16% to $7.4 billion and was marginally short of analysts’ expectations of $7.71 billion. EPS of $1.04, however, was higher than the previous year’s $0.91.

Advertising was the big reason for the declining revenues. But Murdoch was surprisingly optimistic about the economy and believes that the worst is over as advertising spend slowly crept up towards the end of the quarter.

By segment, Film and Television revenues slipped 9% to $1.47 billion. Television revenues fell nearly 30% to $1.28 billion while Cable Network Programming revenues grew 11% to $1.42 billion. Newspaper and information services revenues fell 28% to $1.25 billion. Broadcasting revenues of $0.92 billion recorded a drop of 7% over the year, and Book Publishing revenues fell 20% to $0.24 billion. Magazines and Inserts revenues grew 6% to $0.32 billion.

While the rest of the journalism world is still debating revenue models, Murdoch remained clear on his intent to continue charging for content online. The Wall Street Journal has been successfully following that approach, and Murdoch expects to extend it to News Corp’s general interest newspapers in the coming year. For that to work, content better be damn good.

The company is also keeping away from Amazon’s Kindle service, which has been adopted by The New York Times and The Washington Post. News Corp isn’t too impressed that Kindle is proposing a 70% share in the revenue it generates from digital subscriptions and thus providing only 30% for the content. News Corp said, “We will control the prices for our content and we will control the relationship with our customers”. It will, though, become active in the mobile readership arena.

News Corp’s stock is currently trading at $9.83 but the company is sitting on a cash position of $6 billion. While they are investing in appliance makers to compete with Kindle, they could also look at M&A. Monster could be one good acquisition target.

As part of Monster’s strategic tie-ups, it entered into a joint venture with News Corp in Australia. The current site, CareerOne, remains the fastest-growing job board in Australia in terms of unique visitors. CareerOne hopes to offer customers a significantly improved site with the transition to Monster’s technology platform.

Meanwhile, Monster’s Q1 revenues of $254.4 million fell 31% over the year but managed to exceed the Street’s expectations of $252.7 million. Breakeven EPS was significantly better than the market’s expected loss of $0.11 per share.

Revenues from North America declined 35% to $119 million while the international businesses fell to $105 million. The strengthening US dollar impacted the segment negatively by approximately $26 million. On an organic basis, international revenues declined 22% over the year. The IAF business grew 6% over the year to generate $32 million in revenues in the quarter. Its growth was led by the Military.com and Affinity Labs properties.

The company’s previously initiated cost-cutting measures are to be expanded through closure of 401(k) contributions, cash incentives and merit incentives. Unlike others, though, Monster is not announcing layoffs and is managing its headcount by not refilling vacancies created through normal attrition. The company expects up to $200 million in annual savings through these measures.

Monster continued development of its website through various initiatives. In January it launched its new seeker experience on 30 sites covering 24 countries in 14 languages. In some key performance indicators, the company said that the Monster.com site has made it 73% easier to become a new member by reducing the number of steps to create a new account from 15 to 4. Similarly, the resume creation process has become 80% easier by reducing the number of steps from over 20 to 4 in virtually every country in which Monster has implemented the changes.

Monster also launched a program called Keep America Working, which is a nationwide tour of 140 state-of-the-art career fairs. As part of the initiative, they are allowing employers with available jobs to promote them free of charge. With only 10% of the tour over, they brought together 475 employers with 7,000 jobs and 15,000 job seekers.

The stock is currently trading at $12.75 with a market capitalization of $1.6 billion.

Jobs is one of the most important revenue sources for classified advertising, and NewsCorp could easily integrate it across its various media properties and drive huge traffic to the portal. There is, though, another company that NewsCorp has an investment in: SimplyHired, the job search engine. This too would serve the same purpose of giving Murdoch his foothold in jobs.

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