News Corporation reveals $254m loss on sale of Myspace

RUPERT MURDOCH'S News Corporation revealed that it lost a whopping $254m on the sale of social network Myspace two months ago, lowering its fiscal fourth quarter net income by a massive 22 per cent.

The loss was revealed at a conference call regarding News Corporation's earnings for the three month period ending on 30 June, a period marked by intense comdemnation and investigation of a phone hacking scandal that engulfed its UK tabloids.

News Corporation bought Myspace for $580m in 2005 when it was the dominant social network. It was not long, however, before Facebook rose to popularity, stealing the majority of Myspace members and devaluing the social network considerably.

In fact, things became so bad for Myspace that News Corp couldn't even find a buyer for it earlier this year when it asked for a minimum bid of $100m, a fraction of the price it had paid. It also still valued Myspace at $300m, but clearly no one believed it was worth anywhere near that much.

Eventually News Corp sold the ailing social network to singer Justin Timberlake and Specific Media for a meagre $35m, which, while seemingly a bargain price, is probably more than it's really worth. Timberlake's interest in Myspace might seem strange at first, but it was a popular web site for musicians and bands to display their work and get noticed, an area which he will likely focus on.

There was more bad news for the company that traditionally focuses on other people's bad news. News Corporations' decision to withdraw its bid for the remaining shares of Bskyb, the owner of Sky News in the UK, after pressure from UK politicians over the phone hacking scandal, cost News Corporation a significant $63m in a "breakup fee".

News Corporation's revenue was up 11 per cent to $8.9bn compared to the same period last year, which shows that it can easily afford these losses. However, its net income was $683m, down 22 per cent from its last fiscal quarter of 2010, a huge decline that will not inspire investors.

Despite the troubling financial results, News Corporation shares rose close to 17 per cent today in response to a dividend increase and proposed stock buybacks, a ploy that is obviously designed to counter the poor performance in its fiscal fourth quarter. At the time of writing its shares are valued at $16.59, up $2.38 from yesterday morning. µ