News Corp. Board to Hear Phone Hacking Probe Update in LA Meeting Tuesday
The company, whose board meeting comes a day before quarterly results that are expected to be strong, is not expected to announce additional major personnel changes as a report casts doubts on the independence of board member Viet Dinh.
NEW YORK - Rupert Murdoch's News Corp. will finish the latest quarterly earnings season for entertainment conglomerates on Wednesday, and its results are expected to be strong.
But investors and analysts will be at least as interested in what chairman and CEO Murdoch and president, COO and deputy chairman Chase Carey will or will not say about the latest in the phone hacking scandal and how it may affect the company.
At a board meeting in Los Angeles on Tuesday, the first full in-person board gathering since the scandal re-erupted, the company will discuss the latest financials and hear an update from independent directors on the progress of an internal committee that has been investigating the phone hacking allegations, the Wall Street Journal reported Monday.
It said the entertainment giant isn't likely to announce any major deals or additional management changes soon.
One key topic for the board meeting though will be how News Corp. will use its growing amount of cash after recently dropping its bid to take full control of BSkyB amid the phone hacking scandal. The Journal said the board could look at raising the company's dividend.
There could be "possibly an increase in the dividend, but I am not counting on that," Evercore Partners analyst Alan Gould told the Hollywood Reporter. "I certainly don't expect any change/increase to the $5 billion share buyback plan before it even starts" this month.
The board update on the phone hacking probe is expected to come from Viet Dinh, the chairman of the board's nominating and corporate governance committee, who is considered an independent director and who is the point person for between independent directors and a committee working with authorities on hacking allegations.
But Bloomberg News on Monday highlighted his personal ties to the Murdoch family. Dinh, a 43-year-old Washington attorney and Georgetown University Law Center professor, has been a friend of Murdoch’s oldest son Lachlan since 2003 and is godfather to his second child, Bloomberg said.
“Usually it’s required that an investigation like this is undertaken by a committee of independent directors,” said Jay Lorsch, a Harvard Business School professor. “It’s very hard to be objective if you’re involved in any way - financially or emotionally - with the family of the chief executive you are supposed to be supervising.”
Meanwhile, News Corp.'s full fiscal year earnings on Wednesday are expected to put some investor focus back on the company's performance.
"This quarter is forecast to see the fastest quarterly operating income growth at News Corp. of the past fiscal year due to the easing of the tough Avatar [comparisons]," predicted Nomura analyst Michael Nathanson. "However, given all the recent events around News of the World, BSkyB and the recent $5 billion [stock] buyback announcement, these results will likely take a back seat for investor focus on the earnings call."
Nathanson forecasts a 46 percent increase in operating profit. Credit Suisse analyst Spencer Wang predicts "sustained strength at the cable networks and better film comparisons, partially offset by sluggish local television and publishing" results and losses for just-sold social network MySpace.