Markets: News  

News Corp. shares gain on possible split

CHICAGO (MarketWatch) -- Shares of media and entertainment conglomerate News Corp. rose more than 8% Tuesday after the company said it was considering spinning off its publishing businesses and emphasizing its larger, faster-growing television and film units.

News Corp.'s (NWSA) (NWS) (NWS) publishing entities include Dow Jones & Co., which owns The Wall Street Journal, Barron's, Dow Jones Newswires and MarketWatch, the publisher of this report; the New York Post; News International, publisher of The Sun, The Times and The Sunday Times in the U.K.; and several Australian newspapers, as well as the HarperCollins book publishing arm.

For more than a year, News International has been embroiled in a phone-hacking scandal that forced the company to shut down the 168-year-old News Of the World and back out of a planned buy of the shares it does not already own of satellite provider British Sky Broadcasting Group(BSY) .

Investors have long understood that TV and movies drive News Corp.'s profits. In the publishing unit's most recent fiscal third quarter, advertising revenue declines led to decreases in earnings at the company's U.K. and Australian newspapers, while earnings grew at Dow Jones and HarperCollins. Total operating income in publishing was $130 million.

Operating income at the cable networks rose 15% to $846 million on greater profits at the company's regional sports channels, along with FX and Fox News, while advertising revenue at the U.S. cable networks rose 10%, spurred by double-digit percentage increases at Fox News and the National Geographic channels. At the movie and TV studios, operating earnings rose to $272 million from $248 million.

Because of the dominance of visual media, News Corp. stock has risen more than 18% over the past year, even as British regulators declared Chairman Rupert Murdoch "unfit" to run the company and News Corp. has endured numerous additional embarrassments related to the phone-hacking scandal.

Marci Ryvicker of Wells Fargo Securities told clients Tuesday she believes "a potential spin makes sense and would be a significant positive catalyst for the stock." She reiterated her outperform rating on the shares.

Meanwhile, shares of several newspaper companies were up on the session, as the potential spinoff struck some as an affirmation of the value of newspapers. Gannett Co. (GCI) was up 6.4%; Lee Enterprises Inc. (LEE) stepped up 14%; Media General Inc. (MEG) added 4%; McClatchy Co.(MNI) rose 4%; and New York Times Co. (NYT) picked up 3%.