Earnings: News Corp. Writes Down $680 Million, Most Of It Due To FIM

News Corp. (NYSE: NWS) took $680 million in impairment and other operating charges in the quarter ending June 30, primarily related to its digital holdings in Fox Interactive Media. Roughly $180 million of that was due to the Q4 layoffs of 700-plus employees, with the bulk going to cover “excess facility space” (ie the Playa Vista lease the company had to break). The company also wrote off $450 million of FIM’s value in terms of goodwill. Excluding the charges, adjusted operating income for the quarter dropped to $948 million, well below the $1.4 billion it produced a year ago.
The “other” segment that includes FIM lost $136 million for the quarter and $363 million for the year due to what News Corp. calls lower contributions from FIM and NDS, compared with much smaller losses of $57 million and $84 million for the same time periods a year ago. Once again, FIM was hit by lower ad revenue for MySpace and the costs of starting MySpace Music. During the earnings call, CFO Dave DeVoe provided a little more detail: FIM’s Q4 revenue of $192.0 million was down 15 percent over the previous year, while ad revenue declined 22 percent mostly due to My Space.
Contrary to the suggestion of an analyst on the earnings call, the $450 million writedown doesn’t wipe out the value of MySpace. For one, FIM includes more than the social network it acquired in 2005 for $580 million. IGN, acquired soon after, ran about $650 million. SDC as much as $360 million; Photobucket, $300 million; and so on. It also doesn’t include revenue from the MySpace-Google (NSDQ: GOOG) deal or any other source. But it does reflect a significant change in expectations about the value of ad-supported properties in a post-boom market.
News Corp. reported both its full fiscal year and quarter results today — swinging to a loss for both. For FY09, the company showed a net loss of $3.4 billion, compared with net income of $5.4 billion in FY08. Revenues were down 8 percent, to $30 billion from $33 billion. News Corp. took a pre-tax impairment charge in FY09 of $8.9 billion for goodwill and intangibles. In Q4, News Corp. lost $203 million compared with last year’s Q4 profit of $1.1 billion.
Earnings release | Webcast | Transcript (via SeekingAlpha)

2Q 2009 2Q 2008
EPS – $0.08 $0.43
Net Income -$203M $1.1B
Revenue $7.7B $8.6B