Pali Research analyst Rich Greenfield loves to tear into media companies — just ask the managers at Time Warner (TWX) or Warner Music Group (WMG). But he’s been a longtime advocate for News Corp. (NWS).
No more. Greenfield has cut his recommendation on the company from a “Buy” to a “Sell”. His logic: “While we have long viewed Rupert Murdoch as the most visionary CEO in the media sector…we are increasingly surprised/frustrated with his lack of strategic direction related to News Corp’s television station, newspaper and book publishing assets.”
To tease that out, Greenfield sees News Corp. as two different businesses: There are a group of “good” assets — its film studio, its cable networks, MySpace, etc — and a group of “bad” assets — its broadcast TV and newspaper units, including Dow Jones, which owns our site. (Uh-oh).
He’d previously argued that the “bad” businesses would wither away without pulling down the rest of the company; now he worries that Murdoch, who isn’t known as a sentimentalist but is known for his love of newspapers, will prop up his money-losers for too long:
Our fear is that News Corp. is so committed to its existing businesses that it will be willing to sustain businesses that slip into negative profitability for years, (similar to its approach to the NY Post). We believe several of its TV stations are or will shortly be “in the red,” with book publishing heading for losses, as well as a significant number of its Newspapers. In fact, on a reported operating income basis, Dow Jones will generate meaningful losses in its first full-year of News Corp. ownership following its $5.7 billion acquisition.
So perhaps this will cheer up Greenfield, though it won’t be good for me or my colleagues: Portfolio.com’s Jeff Bercovici is reporting that Dow Jones’ Wall Street Journal will be making newsroom cuts next week:
It’s unclear exactly how many employees will be affected, but two sources put the number of people being targeted at 50. (If, as seems likely, that is the number of people on the list to be offered buyouts, then the actual number of jobs eliminated could be substantially lower.) It’s also rumored that there will be parallel cuts at Dow Jones Newswires, and that one or more Journal bureaus may be eliminated as part of the cutbacks. A Dow Jones spokeswoman declined to comment.