News Corp stuns market with $10 billion second-quarter loss

News Corporation chief executive Rupert Murdoch has warned that the global economic downturn will last longer and be more severe than he first anticipated, after the company posted a $9.8 billion loss for the three months to 31 December 2008.

The result, a far cry from the $US832 million profit recorded in the previous corresponding period, was dragged down by $A12.8 billion worth of non-cash writedowns on the value of its Dow Jones business, its communications licences and other assets.

Earnings from the company’s Australian operations slumped 18% in the second quarter of the financial year, as advertising revenue fell 4%.

“Our results for the quarter are a direct reflection of the grim economic climate,” Murdoch said in a statement.

“While we anticipated a weakening, the downturn is more severe and likely longer lasting than previously thought.”

Murdoch will now start swinging the axe, declaring the company will implement “rigorous cost cutting across all operations and reducing head count where appropriate”.

This morning around two dozen jobs were cut in the newsroom of the Wall Street Journal and more jobs are likely to go at the company’s Australian newspapers, including The Australian, the Herald Sun and The Daily Telegraph.

The News Corp result will add further pressure to Australia’s media companies, which have taken a battering from investors in the last 12 months.

News Corp shares have fallen by about 50% in the last 12 months, while shares in Fairfax Media are down 71% and shares in APN Media have crashed 72%.

However, Murdoch has sounded a note of hope in a conference call with analysts.

“Historically, every time we’ve seen a recession, mild or major, we’ve endured this panic and come out better. Every time the economy rebounds, advertising comes back, usually stronger than before.”