Rupert Murdoch's News Corp on Wednesday reported higher quarterly revenue and profit on strong growth at its cable assets including its Regional Sports and FX networks.
But the rosy quarterly figures - revenue and profit beat expectations - masked troubles at three of News Corp's properties, most notably Fox.
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The "fourth network," as Fox is sometimes called, has seen ratings weaken, with more softness at "American Idol" and "X-Factor."
"It's no secret (Fox) had a tough fall," said News Corp President and Chief Operating Officer Chase Carey on a call with analysts, pinning the blame on both programming and a sports line up that fell short of expectations.
Carey, for instance, specifically cited the fact that the San Francisco Giants' World Series sweep of the Detroit Tigers deprived Fox of three high profile nights of live event programming.
News Corp's other trouble spots were overseas, with SKY Italia experiencing a drop off in subscribers because of that tough economy and declines at its Australian newspapers - the early seeds of the News Corp empire.
Carey said Sky Italia's performance so far this year is tracking $100 million below expectations and $150 million lower than last year's performance. He said News Corp plans to take $200 million out of the unit's cost base over the next two to three years.
Shares of News Corp, whose global assets also include The Wall Street Journal and film studio Twentieth Century Fox, fell 3 percent in after-hours trading after closing at $28.22 on Wednesday.
The media conglomerate said revenue rose 5 percent to $9.43 billion for the quarter that ended in December. Analysts were expecting revenue of $9.28 billion, according to Thomson Reuters I/B/E/S.
News Corp is preparing to separate its faster growing entertainment assets from its newspapers, a move that has been greeted with enthusiasm from investors who have driven up the stock almost 50 percent year-over-year.
Some details about the new publishing operations have been released, including naming Robert Thomson, a Murdoch confidant and the former top editor at The Wall Street Journal, as CEO. More financial information is expected to be released in the next month or so and the split is still on track to be completed by the end of the year, News Corp executives said on the call. Beyond that, however, no other information about the split was provided and analysts did not ask any questions about it.
Despite the problems in Australia, the division that operates the company's newspapers and book publishing assets reported an operating income increase to $234 million from $218 million in the same period a year ago, credited in part to the launch of the Sunday edition of its British tabloid The Sun.
ON MALONE, THE LA DODGERS
Murdoch was once again absent from the earnings call but his son James Murdoch, the company's deputy chief operating officer, fielded questions including the latest cable news out of Europe.
Rupert Murdoch's long-time rival John Malone on Tuesday inked a deal through his Liberty Global to buy British cable group Virgin Media - a potential threat to News Corp's dominance in pay-TV in Europe and its BSkyB network in the U.K.
But James, who also serves as a director at BSkyB, downplayed any competitive threat.
"Across Europe we compete as well as work with Liberty Global. I don't think there is really a big change to the landscape there. We're pretty pleased with momentum and pleased with the strategic position of the business," he said.
Indeed, News Corp's cable assets have turned in strong growth and this quarter was no exception. Operating income increased 7 percent to $945 million. Advertising revenue at its domestic cable channels rose 8 percent.
"You are getting a massive out performance of growth at the cable group and we think that is compelling," said RBC Capital Markets analyst David Bank.
Also attractive is News Corp's ambitions of expanding its sports programming. The company recently took a 49 percent stake in the network that airs the New York Yankees baseball team and snapped up a regional sports network in Ohio, Bank noted.
News Corp's moves to acquire sports programming rights is widely believed to be the prelude to its launching a national sports network to compete with Disney's ESPN.
On that point, Carey sheepishly said that while News Corp hasn't made an official announcement, "you could call it the world's worst kept secret."
"We think sports is in a huge arena that has room in it to build really attractive businesses," he added.
Carey also took the opportunity to take a shot at Time Warner Cable, saying that company's recent deal for the television rights to the LA Dodgers, reportedly valued at $6 billion-$7 billion, was "too rich for our blood."
News Corp said that net income was $2.38 billion or $1.01 per share, compared with $1.06 billion or 42 cents per share in the same period a year ago.
Excluding special items including costs related to the phone hacking scandal in the U.K., earnings per share was 44 cents, ahead of analysts' estimates by a penny.