News Corp unveils £2.75bn loss

RUPERT Murdoch's News Corporation media empire today announced a record loss of $3.99bn (£2.75bn) for its third quarter. But the media mogul warned that he was ready flex his financial muscle with analysts suggesting Britain's Channel 5 could be high on his shopping list.

The loss reflected a record write-off by any Australian company as it took a $4.23bn non-cash write-down on its investment in Gemstar, the US onscreen television programme guide and publisher of TV Guide magazine.

Shares in Gemstar have lost more than two thirds of their value from just over $30 in December to $9.25 at last night's New York close. But Murdoch said: 'The substantial non-cash write-down of our Gemstar investment does nothing to alter our firm belief in the strategic value of this powerful asset. Moreover, our balance sheet is stronger than ever, providing us with greater financial flexibility in these uncertain times.'

Highlighting the attractions of films and television, Murdoch said: 'Our film sector nearly quadrupled the prior year's operating income, building on its positive momentum with exceptional DVD and video sales as well as the record breaking release of Ice Age. Our international television platforms bolstered their considerable success.'

News Corporation owns 42% of Gemstar, having sold it the TV Guide for shares and picked up John Mahoney's Liberty Media's 17% stake a year ago. It warned last month that its write-down could rise beyond the $2bn which was its share of Gemstar's own $5bn non-cash charge made in the quarter to March.

Before the write-down, News Corporation did considerably better than analysts expected and better than most global media players. Pre-exceptional earnings rose by 50% from 12 cents per American Depositary Receipt to 18 cents. Operating income rose by 54% to $549m on sales up by 18% at $3.85bn in the three months to the end of March.

In the home entertainment division, DVD and video sales of Moulin Rouge led the way. In newspapers, the group saw a 6% fall in worldwide income, but the UK business which includes the Sun and The Times managed to achieve flat operating income as higher circulations made up for a 16% fall in advertising revenues.

HarperCollins had two dozen hits in the UK including all three volumes of Lord of the Rings and the biography of Billy Connolly. Murdoch made no immediate comment on either Channel 5 or the group's interest in the German Kirch media group.