News Corp.'s MySpace buy pleases analysts

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NEW YORK -- Rupert Murdoch's News Corp. may report a somewhat slow start into its new fiscal year, whose first quarter just came to an end Sept. 30, but the conglomerate remains on a strong growth track, analysts argued last week.

Together with a bullish Wall Street report on the company's MySpace online community, Murdoch's executive team must be pretty content with the positive reviews it continues to garner from analysts.

RBC Capital Markets analyst Jordan Rohan raised some eyebrows with his report following an investor meeting that his firm hosted with the management of News Corp.'s Fox Interactive Media unit. After all, he suggested that MySpace should "demonstrate value of $10 billion-$20 billion within a few years."

While the analyst admitted that this may be an "audacious claim," he argued it is justified if one agrees with him that MySpace provides unprecedented user and usage growth, strong international appeal, scale enough to "become an intellectual property distribution powerhouse" and an experienced management team.

Rohan's conclusion: "We believe media investors may not fully appreciate what has already been done with MySpace or what may lie ahead."

Among the growth opportunities, he cited continued international service launches and advertising gains. In addition, he said MySpace will launch an internally developed mobile application in three to four months with one of the bigger cell phone carriers in the U.S., which could further elevate the social networking site.

Other analysts last week focused on News Corp.'s financial momentum in its recently started new fiscal year.

Pali Research analyst Richard Greenfield said in a note that "investors should be aware that fiscal 2007 earnings will be heavily weighted toward the back nine months of the year," with fiscal first-quarter operating income likely to fall slightly.

However, he predicted "accelerating sequential earnings" partly due to the timing of film releases.

Greenfield also touched on MySpace a bit, estimating that the operation's monthly revenue is approaching $20 million. "With the benefit of the (recent) Google (search) deal, MySpace revenues should more than double on a monthly basis by next summer (before organic growth is factored into our estimates)," he said.

Merrill Lynch analyst Jessica Reif Cohen echoed Greenfield's warning over sluggish fiscal first-quarter trends for News Corp., but said she made no "meaningful" changes to her full-year estimates due to the conglomerate's "strong" fundamentals.
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