News Corp: We Don't Want To Buy Yahoo, AOL, Or Anything Else

After freaking out investors in their last earnings call, Rupert Murdoch and Peter Chernin presented a unified, cheery front during News Corp.'s Q2 call: All of their businesses are in great shape, and they have yet to see the effects of a recession. And a few days after Google said MySpace was now a drag on its performance, Rupert and Peter take great pains to talk up their Internet business: They both reiterate earlier goals for Fox Interactive Media (MySpace, others) for FY08: $1 billion revenue, 20% operating profit.

The only bad news they have to deliver is for Yahoo or Time Warner investors: They've got no interest in making any high-priced acquisitions in the near future. Asked repeatedly if he had interest in any kind of deal with Yahoo, Rupert dismissed the idea. And he was even more dismissive when asked about his interest in AOL.

Revenues: $8.59 Billion, up 9.5% y/y. Up 21% from last quarter. Beat conensus by 4%
Operating Income: $1.42 billion, up 24% y/y, driven by movies, cable. Up 35% from last quarter.
Earnings: $832 million, up 1.2% from last year. Up 13.6% from last quarter.
EPS of 27 cents misses consensus by a penny.
Guidance: Up. Raising operating income growth projection for FY 2008 to from "low teens" to "mid teens".

"Other" - which includes Fox Interactive Media (MySpace, Photobucket, et al):
Revenue of $798 million, up 54% y/y and up 22% from last quarter.
Operating income of $23 milion, up from $1 a year ago, and up from a operating loss of $43 million last quarter. "Strong operating income growth" at FIM  driven by guaranteed Google deal as well as ad rev growth tied to traffic. "The revenue growth was partially offset by increased costs associated with the larger audience, international expansion and new features."

Murdoch, via statement: "Our internet platform is now delivering real profits from locked in search revenues as well as from advertising revenue growth as a result of our hyper-targeting initiatives."

Earnings call begins:
CFO Dave Devoe: Writer's strike had "no material impact".
FIM: $233 million revenue; Google deal was $62M of that. Fim-sold ad revenue up 43% from last year, 41% from last quarter. (Apologies: Need to double check those numbers)
Raising Guidance: Raising operating income growth projection for FY 2008 to from "low teens" to "mid teens".

Murdoch, reading from script: Cheering on WSJ. Want to "attract more readers, more advertisers, at more attractive pricing" and outperform slumping industry. Concentrating primarily on online. Will add "more free content" to paper. But keeping pay wall, as discussed.

Comparing U.S. economy to NY Giants receiver David Tyree. They're both resilient! (Super Bowl generated $250 million gross revenue.) Economy is "ever-challenging", but NWS well-positioned.

FIM: 87% yevenue growth, $58 million profit improvement y/y
"Adds confidence to our $1 billion revenue, and 20% profit target for the year." --

Chernin: Ad sales, growth strong at Fox broadcast, cable.
FIM: "Real progress on the advertising front." Some concerns following first quarter call after slow start, but "we've unquestionably regained our momentum" both operationally and financially. Talking up targeting initiative: Over 100 advertisers using targeting. Click-throughs improving from 20% to 300%. Ecpms up close to 50%, advertisers who use targeting spend twice as much. "Fully on track to hit our targets".

Q&A:
Interested in Yahoo? Murdoch: "We are definitely not going to make a bid for Yahoo. We're not really interested in this stage."
What about Google blaming you for lousy monetization? Chernin: Google deal is guaranteed revenue for us, and Google knew deal would be slow at first, better later. "Their performance is no surprise." But we'll work with them to improve. Can Google back out of deal? "No."

What is mix between search and display revenues for MySpace? Chernin: Search is between about a quarter and a third of FIM revenues, and most FIM revenues are MySpace. Rest is display, performance ads.

Chernin: MySpace revenue 85% domestic ("at least", Murdoch chimes in). We see "Facebook growing in certain markets, but nearly as fast in monetization as we do."

Writer's strike update? Will you blow up upfronts, pilots, etc? Chernin: "Not much to add" re: negotiations. Under press blackout. "We are examining every part of our business" but "you are not going to see Fox abandon the upfront." Valuable for us, marketers. Prior to strike we were talking about making fewer pilots, and we're still talking about that.

Fox Business Channel: Chernin: "Right on track."  Personally, I think programming "stronger than I would have expected." Rupert: "We're losing a little bit less than we expected."

How can you increase engagement on MySpace for its veteran users? Not a problem, says Chernin.

Still waiting for recession/sub-prime effects to hit you guys. Maybe 2009? We've seen a little bit of exposure in some markets that have been particularly hard hit for sub-prime, but on a national basis we're not seeing the signs.

WSJ plans: Rupert: "Commodity" news will be free, but unique stuff very valuable, so that will stay behind wall. Also we're working on niche sites and that will be "extremely valuable". Talking with financial institutions who like this approach. Big possibilities with enterprise units. Cost-savings? Yes, but on prosaic stuff like printing plants.

Super Bowl dollars? That $250 million was just from network revenue, but included full day of programming, from pre-pre-pre-game, to "House" episode running after game.

German pay-tv investment? Rupert: "Going very carefully" so we can "study it without being pre-empted by somebody else"

Media Q&As (best part of call - Rupe generally gets both looser and testier as this progresses):
Any big M&A planned? Rupert: "Not considering anything of any significance at this moment. But we'll see what comes along... Historically we've done better with startups than with purchases."

Concerns about U.S. economy? Will rates cut help? Yes. "Extraordinarily resilient economy."

Are you really sure you don't want to do a Yahoo deal? No. Ok. What about AOL? Rupert: "That's an even easier question. No."

Are you positively sure you don't want to do a Yahoo deal? What about that MySpace/YHOO combo you talked about. Rupe: We talked but it wasn't serious, and that was when Terry was in charge.

Layoffs in advance of recession? Nope.

Jamba mobile unit plans? We'd like to evolve more in U.S.

Can you talk about the Judith Regan settlement? Are you serious?

See Also: Google: MySpace Deal Is Hurting Us
Murdoch Says News Corp. Q2 Ahead Of Guidance
News Corp. Q1: "Next Year Could Be Rough"
News Corp Internet Unit Missed July, August Revenue Goals
Bernstein Analyst Tries To Swift Boat Us!